Modi government may soon ban cheque books to boost digital transactions

In its push towards a less cash society and to boost digital transactions, the next in line on Modi government's agenda could be banning of a cheque book. This was indicated by a senior functionary of a prominent trade body. "In all probability, the Centre may withdraw the cheque book facility in the near future to encourage digital transactions," Praveen Khandelwal, secretary general of Confederation of All India Traders (CAIT).

Talking to the reporters at the launch of 'Digital Rath', a joint initiative of the CAIT and Mastercard, Khandelwal said the government  needs to encourage the use of debit and credit cards, "The government spends Rs 25,000 crore on printing of currency notes and another Rs 6,000 crore on their security and logistics. Moreover, banks charge 1 per cent on payments through debit and 2 per cent through credit cards. The government needs to incentivise this process by providing subsidy directly to the banks so these charges can be waived."

Following demonetisation digital wallets, quick response (QR) codes, near field communication (NFC) technology, sound wave systems, virtual cards, unified payment interface (UPI) and Aadhaar Pay  have given much needed push to cashless transactions. However, more than 95% transactions happen via cash and cheques.

In fact, most of the business transactions are carried out through cheques. The latter is used by businesses against the delivery of goods where the supplier secures payments due in future from its customer by a cheque. It is also common in dealing with the purchasing and selling of land.
 
Landlords too prefer taking rent from tenants via cheque. But cash usage is still strong. "Only 5 per cent of the total 80-crore ATM-cum-debit cards are used for cashless transactions, while 95 per cent of them are used for cash withdrawals," added Khandelwal.

But digital transactions have shown mixed trends after government decided to outlaw Rs 500 and Rs 1000 notes last November. It rose 31 per cent from November last year to September this year. However, it is still down from the last year's December level after note ban. Digital transactions in September reached 877 million, down from the peak of almost 1 billion in December last year, according to reports.