PROSPECTS AND CHALLENGES OF CASHLESS RURAL ECONOMY : AN ANALYSIS

Abstract

Government should assure basic necessities in rural areas and focus on developing infrastructure. Special drives through schools, colleges, Panchayats etc. can help create awareness about cashless/banking transactions. Financial Literacy is a must for bringing more and more people to digital platform. Digital payment or payment through banks, instead of paying cash should be encouraged. Linkage of all welfare activities with bank accounts is a very strategic step.

With cashless transactions, almost all transactions will leave a digital footprint. A system that encourages and incentivizes the 'buyer' to pay through cashless instruments (increasing use of bank to bank transactions without involving the physical currency) will have higher financial transparency. This is perhaps the most direct way of battling issues in corruption and black money in India. Digital footprints have other major advantages. It can make public delivery systems much more efficient. In 2009, the Planning Commission estimated that only 27 per cent of Public Distribution System (PDS) expenditure reached the targeted low-income groups. Digitalization of transactions is the best way to move towards cashless economy. Such a cashless economy may be achievable by promoting electronic money instruments, developing financial infrastructure and spreading digital transaction habits among people. Government's demonetization drive is also supposed to benefit cashless economy. Still there are several constraints as well as prospects in the journey towards cashless economy.

Semi-urban and rural markets are currently growing at a pace faster than the larger centers and, consequently, a large proportion of the recent branch expansion has been in these areas. The focus is to make the branches a single point interface for all services. Technology is a great enabler for financial inclusion, which includes Branch and Wheels, a mobile-van-based branch that aims at providing banking services to a cluster of remote unbanked villages.