India is one of the largest cash dependent nations in the world. A majority of people in the world’s largest democracy have the tendency to use cash for most of the transactions. This has created a challenge for the Indian central bank —The Reserve Bank of India to maintain the liquidity in the country’s monetary system. In order to ensure there are enough bank notes to go around, the premier bank is forced to print more currency and constantly destroy the old banknotes that are either soiled or damaged.
The Reserve Bank of India, in order to reduce its expenses and to ensure better accountability has been actively promoting the transition to a cashless society by urging people to make use of electronic payments systems like credit and debit cards. But that is not enough, as the country with over 1.25 billion in population has only 643.19 million debit cards and 22.74 million credit cards in use (as on December 2015). Even though a majority of the population have debit cards, most of the debit card transactions happen on ATM machines, used to withdraw cash and only 10 percent of merchants across the country have PoS terminals. The low penetration of electronic payment systems and cash maintenance and operations is costing the Indian banking sector about $3.5 billion a year .
The Reserve Bank of India along with the National Payments Corporation of India has also introduced a domestic card payments scheme called RuPay, on par with MasterCard and Visa networks for domestic card usage. RuPay in collaboration with Discover Financial enables international payments using RuPay powered cards. However, the results have left much to be desired. In order to further streamline the process of migration from cash-dominant society to a cashless society, the Reserve Bank of India is now looking […]
