Black Money in India – ePayments tricks to reduce it

Today’s Post is with reference to the White Paper presented to Indian Parliament by Finance Minister, Mr.Pranab Mukherjee.

This report has been prepared by Ministry of Finance, Department of Revenue-Central Board of Direct Taxes.

To Safe ePayments professionals, the Black Money-White Paper holds lot of promise. Some suggestions in the White Paper have the potential to boost the ePayments volumes.

The following are noteworthy from the epayments angle.

QUOTE

Para No 5.2.27- Page No 55

Another important measure in this regard could be the promotion of banking channels including use of credit and debit cards, since they leave adequate audit trails and hence disincentivise black money generation.

The opposite is true of trade practices that block the audit trail, such as cheque discounting, which can be discouraged applying the same logic. With electronic transfer facilities being available to trade, one can foresee this as one of the major thrusts towards strengthening accountability and discouraging unaccounted activities.

Towards this end, some important initiatives have already being taken which include the reduction of the validity period of cheques and demand drafts from six to three months with effect from 1April 2012, which will discourage discounting of negotiable instruments.

Payments by debit and credit cards through Indian e-service intermediaries like 'RuPay'2 can further bring down the costs of using such cards, improve their acceptability, and thereby encourage payments in these modes and reduce the cash economy.

It is imperative that payment of wages and salaries in the private sector should also be through banking channels and should become cashless, in line with the government objective of financial inclusion.

Government can also deliberate providing tax incentives for use of credit/debit cards as practiced in Republic of Korea.

Provisions for collection of tax at source at a low level on cash purchases may also be considered as a possible policy option.

UNQUOTE

Once Rupay is up and running, the transaction cost to all the participants will reduce drastically. As of now, in small/medium shops 2% excess is charged, if the customer desires to pay via Credit/Debit Card. Hence, customers do no tend to opt for the Credit/Debit card payment option.

Plus industry wide push is not still not very much visible. Continuous campaigns to educate the customers the benefits of Credit/Debit Cards will aid in increasing the volumes.

In the recent past, State Bank of India was running a TV Campaign and AXIS a Print/TV Campaign. Visa/Mastercard too run campaigns.

However, ways should be found out, to reduce the Credit/Debit fraudulent transactions. Otherwise, with the increase in the volumes, the fraudulent transactions too will increase.