My Experience with Digital Payments, Cashless and Demonetization
It started with me taking my work online. I started an online business. Not e-commerce but custom developed elearning products. All I used was my laptop; Wi-Fi /internet connection; apps like skype; Bitrix (free version collaboration software like intranet); and email. I also purchased software to produce custom elearning solutions. I got clients through online networking. I got paid online via NEFT. Not PayPal. I hired vendors online via freelancer sites or personal networking. I paid my vendors online. Both via PayPal and NEFT.
I earn online. I purchase online. I shop at sites like Amazon and Big Basket or Zop Now. I pay via net banking or debit card. I get good delivered to my doorstep. I purchase health care products online. I can get milk, eggs, bread online.
I apply for utilities like LPG & MTNL online. I pay my electricity bill and other utility bills online. I recharge my pre-paid mobile numbers online. I pay the maid online.
I can even book taxi cabs online in case I need to travel. Now, Ola even has helicopter booking online!
I don’t even need to step out of the house.
If I am living my life with only digital transactions, why am I against cashlessness?
I am not against cashlessness, per se. I am against the process in which it has been imposed upon the country. I did not require a sudden jolt to switch to cashlessness. I did it gradually over the past two years. How many years will a person who leads a life like running a shop; going to market; eating panipuri or chat (which I miss) or buying veggies from the sabji mandi take to switch to digital payment modes. If he is in an area where merchants are switching to digital mode quickly, he is lucky. Else he will have to hunt for that panipuri guy who accepts PayTM.
Demonetization was a sudden ruthless move which left millions bereft of legal tender in fifteen minutes alone. Hard earned cash was declared illegal. Millions rushed to banks to exchange the old one thousand rupees notes and five hundred rupees notes with new notes of two thousand rupees and other denominations.
Did that help in switching to cashlessness? No, it didn’t. Shopkeepers were forced to invest in POS and in urban areas, they did. So that at least they get paid for goods. Or they switched to PayTM – a controversial platform. It suddenly had Chinese investors and some transaction issues.
What is the usage of PayTM is all digital transactions in India? Over 30.34 lakh rural users and a total of over 7 million transactions daily with a value of over 120 crore and growing.
Others are switching to mobile payment platforms, like Mobi Qwik; Airtel Wallet; Idea Money among others. Estimated users of cashless methods are over one crore. In a population of over 200 crore, that is not even a fraction of the population.
The sectors affected are mainly SME’s and rural agro based sectors. Millions of traders and small businesses in Mumbai pay meagre salaries in cash or cheque. Many were unable to pay cash salary. Those who got cheque were unable to withdraw. Transportation has taken the major toll. Autos and taxi drivers’ incomes nose-dived for a while. Their unions are actually mulling introducing POS or PayTM system in cabs and autos. The local grocer started giving credit. The food vendors were unable to return change. The newspaper guy had to take paper on credit. The milk man too had issues with milk token dispersal, usually done against cash.
The local paanwalas started having shortage of supplies. The STD-ISD booth guy reported loss of business. The domestic helps did not have bank accounts. The number of shop boys and delivery boys who were floundering for jobs, tips and cash is countless. Hotel business is suffering as well. These are the small support systems which form the lacy mosaic of our daily lives. They are interwoven threads, where if one breaks, the mosaic collapses. Hundreds of vendors and stall walas who come from rural areas or areas close to metros and operate a thela were left with extra stock and no way to sell stock. The daily labor in smaller construction houses; casual labor like carpenters and electricians were affected badly. Tourists were stuck across the country.
The PM claimed:
- Black money will be caught – Several IT raids took place and huge amounts were uncovered. But were these due to Demonetization? These were procedural raids, where information was with IT department, prior to Demonetization. In fact introduction of this policy made no difference to acquiring black money.
- Terrorism will subside – November alone saw four major attacks 2 in J& K and 2 in the north east, namely Assam and Manipur.
- Cashlessness will rise – It did. People were left without a choice. They had to switch to a little bit unsafe mode such as PayTM, and digital wallets. However, to use digital wallets, digital literacy is a must. Most people are barely able to use their mobiles, let alone transact with it. One village alone took more than three months to understand digital payments. There are six lakh villages in India, suddenly deprived of cash. What will they do? The government has adopted only one lakh villages with a population of over 10,000 to be given only two POS.
Meanwhile, the banking issues that took place when the notes were scrapped –
- Banks did not have enough alternative currency to replace the scrapped notes.
- Banks in number were far and fewer compared to number of customers.
- ATM’s had to be recalibrated.
- Withdrawal limits were imposed.
- Queues were unimaginably long with scores falling ill and over 100 dead due to queues or inability to get cash for medicine.
- To date there is complete confusion about exchange and deposits.
- Corruption in banks.
- Large number of fake accounts are opened to convert black to white.
- Banks have more money than they can handle.
- Banks quickly offer loans increasing indebtedness and creating the debt cycle. Can loans save a company which is unable to sell as customers are unable to buy? No, once again a cycle of bad loans will be created.
- 2000/- note was introduced without proper legislation. Not yet acceptable in foreign banks, such as Nepal Bank.
- Although withdrawal limit is increased individual banks give subjective amounts to customer as per their available savings.
- Rural banks don’t receive cash for days creating riots and stampedes.
- Cash gets over really fast
- RBI changes rules 150 times. An institution like RBI stands totally discredited as it bans its own legal tender. In turn, the other non-banned instruments get treated with suspicion. It loses all credibility when it agrees to print 2000/- note without proper legislative order. Or when the notes come out with different shades and sizes.
- Banks raked up bad debts and now manipulated the situation such as to create huge deposits and thus increase capital. This capital used by nationalized banks to create NPA’s. Also to give more loans. The cycle will only get more vicious.
- Digital transactions cost customers. Each transaction has a %charge. If all payment is via transactions, a customer stands to pay an unfair amount.
- Banks are opening accounts quickly without authenticating the KYC documents.
- All transactions via VISA/Mastercard attract foreign fees for the banks. RUPay cards help retain money in India. Awareness of this is nil.
What is the ideal process for introducing a policy which impacts lives of all, mind you, all citizens and NRI’s and foreign businesses as well as consulates?
- Ideally the government should consult with its cabinet and President. It should call for a meeting with the opposition to inform its decisions.
- The policy should further be opened to debate (even after enforcing) in the parliament. All related ordinances should be introduced as bills and ratified by both houses to be made into law.
- A government cannot and should not be working on the basis of ordinances.
In introducing this policy, Modi has circumvented norms and showed how high handed and despotic he can be. He has completely disregarded administrative and legal and parliamentary procedures. As per reports, he neither consulted his cabinet nor followed any advice to the contrary. Nor did the government debate the policy in the Lok Sabha. The government did not answer any questions so far. Government has not acknowledged deaths due to the policy. Government has made itself unaccountable to the people of the country, its citizens who voted it to power!
Modi has blinded the people into supporting Demonetization as a positive outlook and with attitude changing measures. It is an emotional appeal rather than an appeal to logic and reason. It is that kind of corporate approach that is brought out only by the likes of Trump. USA has never in 200 years, demonetized its currency. India in its 68 years has demonetized more than twice.
What are the welfare measures government undertook to compensate for the ill impact of the policy?
- Schemes for farmers, senior citizens and pregnant women (read weaker sections).
- Housing loans.
When were these announced?
- At the end of fifty days after cash crunch was still not over.
- PM had no real answers to the concerns and questions raised by opposition.
- Too much damage was done.
Petrol price has been raised thrice since Nov 8 when the Demonetization policy was announced. The inflated prices first sunk and then rose three times as much.
A hare brained scheme of BHIM app and Aadhar number to be used as EAAPOS has been introduced to enable digital payments. These have been done in a hurry without testing or checking loopholes.
The questions which remain are
- How much scamming will take place through mobile banking apps?
- How much money will be taken out as transaction charges by apps and banks, when previously cash transactions had none?
- How long will citizens be harassed for holding and exchanging cash which is a legal banking requirement? Cash transactions even the smallest amount are being viewed with suspicion.
- How many months till cash crunch is over and citizens are returned their property or money?
- Will the economy recover within six months as promised by the finance minister?
- Was the percentage of black money unearthed due to demonetization or prior knowledge? Also, how come only BJP had black money? In spite of prior information? Did BJP try to falsify numbers by declaring or getting caught in order to prove the scheme a success?
- Why has JIO scheme been extended to March 31st? Will the withdrawal limits also be extended to March 31st?
- Does the government have an economic measure of the amount of loss? How many jobs have been lost due to Demonetization?
- What about the fundamental rights to property which has been so blatantly violated as a policy of this kind has been brought into effect? This right cannot be suspended without declaration of emergency or by view of policy. What is the SC doing in this regard?
- The congress released a booklet of facts and demands –http://www.pci.inc.in/In-Focus/865/Demonetisation-is-Modi-made-disaster
- News articles published since Demonetization esp in HT and Indian Express
- Twitter thread @karunasanghvi (since Nov )