IMPACT OF DEMONISATION ON DIGITAL PAYMENT

Abstract

On 8 November 2016, the Government of India announced the demonetization of all ₹500 and ₹1,000 notes of the Mahatma Gandhi Series. The government claimed that the action would curtail the shadow economy and crack down on the use of illicit and counterfeit cash to fund illegal activity and terrorism. Prime Minister of India Narendra Modi announced the demonetization in an unscheduled live televised address at 20:00 Indian Standard Time (IST) on 8 November. In the announcement, Modi declared that use of all ₹500 and ₹1000 banknotes of the Mahatma Gandhi Series would be invalid past midnight, and announced the issuance of new ₹500 and ₹2000 banknotes of the Mahatma Gandhi New Series in exchange for the old banknotes. After demonetization, the Prime Minister of India Mr. Narendra Modi has dreamt of cashless economy. To promote digital payments and to reduce the use of cash in the economy, RBI and government both are making several efforts. The attempt made by the government to use digital payment system and avoid cash payment by people as possible as. So by this way government giving pushback to people towards cashless economy. This study also going to analyses the rapid increase in digital payment transactions post demonetization. 

Cashless transaction economy doesn’t mean shortage of cash rather it indicates a culture of people settling transactions digitally. In a modern economy, money moves electronically. Hence the spread of digital payment culture along with the expansion of infrastructure facilities is needed to achieve the goal. The RBI and the Government are making several efforts to reduce the use of cash in the economy by promoting the digital/payment devices including prepaid instruments and cards. RBI’s effort to encourage these new varieties of payment and settlement facilities aims to achieve the goal of a ‘less cash’ society. Here, the term less cash society and cashless transaction economy indicate the same thing of reducing cash transactions and settlement rather doing transactions digitally. The RBI and government have launched several measures for the spread of electronic and other non-cash settlement culture. The Vision-2018 for Payment and Settlement Systems in India brought by the RBI in June 2016 reiterates the commitment to encourage greater use of electronic payments by all sections of society so as to achieve a “less-cash” society. “The broad contours of Vision-2018 revolve around five Cs coverage, convenience, confidence, convergence, and cost. To achieve these, Vision-2018 will focus on four strategic initiatives such as responsive regulation, robust infrastructure, effective supervision and customer-centricity,” – RBI.