Sunday, November 13, 2016

A Solution To The Current Cash Crisis

The Government of India has started a demonetisation policy to curb black money. The higher denomination notes of Rs.500 and Rs.1000 are invalid now. Because the policy was announced without warning, people are finding it impossible to do daily transactions.

Tragic stories

The public is losing patience with this new scheme, having to stand in queue at ATMs for long hours.

Horror stories are also breaking:

The hardest hit are the lower class who do not have credit, debit cards, or internet banking. As business slows down. the economy is taking a huge hit.

I got a first hand experience while eating out with family at Connaught Place yesterday. Shockingly, the underground parking lot did not accept credit cards or mobile cash. Luckily, we had one rupee coins totalling ten Rupees, the parking charge for one hour.

In that one hour we had to shop, eat, and come back. CP is huge and I had to walk 20 minutes to find that shop. We couldn't take a rickshaw to speed up the transits because of the same crisis above.

Somehow managed to shop and get the food packed and rush back to the car! My wife wanted a bag, but couldn't buy as the credit card servers had crashed.

Needless to say, most people will not be venturing out for some time,

To avoid making this scheme into a modern day Tughlaqian reform, the Government should act and act fast.

The 50 % Solution- Mobile currency

India has 616 million unique mobile users as of June 2016. This is 56% of the population. 53% of the population has a bank account as of 2014. 

Enabling Mobile money transfer will solve the problem for at least half of the population, if not more--many family members share a single bank account.

Mobile to mobile transfer of money is already available with almost all the leading operators such as Vodafone, Airtel, Idea Cellular etc.

However, there are many restrictions on mobile to mobile cash transfer:
  • In the multiples of cash that you can send
  • The number of transfers allowed per day
  • The cost--Vodafone for example charges Rs.38 for sending Rs. 2,000 to a bank account. (1.9%!)

What the Govt. needs to do

The Government needs to make all mobile cash transfers completely free. The revenue losses will have been compensated by the black money that is coming in.

In addition:
  • Educative campaign over the media on mobile-to-mobile transfer
  • Encourage mobile cash transfer at all levels
  • Any one with a mobile number (prepaid or post paid) should be able to send and receive cash as many times as needed.
There you have it-- a currency less economy.

It's nothing new. Sweden, Somali land, South Korea, Canada, Kenya and others are already doing it.

Please share this article if you feel it will help.

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