Demonetization is the act of stripping a currency unit of its status as legal tender. Demonetization is needed whenever there is a change of national currency.
Demonetization was implemented in India for the third time on the 8th November 2016 removing 500 rupees and 1000 rupees notes from its status of legal tender leaving the residents of India in shock. The permitted amount of exchange of the old currency notes with the new 500 rupees and 2000 rupees notes was 4000 rupees earlier and gradually increased to 4500 rupees. The withdrawal limit from the banks was initially 20,000 rupees and now its 24,000 rupees.Due to demonetization the economy has seen a reduction in inflation.
Demonetization encourages cashless transactions as when transactions via digital or means increase the amount of money printed decreases and thus reducing the cost of printing as well as black money circulation.
Cashless transaction means financial transaction handled by means of credit cards,bank transfers,checks with no bills and coins handed from one person to another. Cashless transactions can be done by three modes:
MOBILE WALLET:Mobile wallets are essentially digital versions of traditional wallets that a person would carry. While there are many variations, usually they can hold digital information about credit and debit cards for making payments, store coupons and loyalty programs, specific information about personal identity and more.A lot of companies have started to prefer this mode of cashless transaction for both receiving as well paying.A few examples mobile wallet are paytm,USSD etc,.
PLASTIC MONEY:Plastic money is used to refer to credit cards, debit cards and forms of prepaid cards.It is easy to use plastic money as a huge amount of money is not needed to carried around. Here transactions take place on the basis of credit and debit. In case of credit cards payment is made after the purchase of goods. In case of debit cards payment is made by debiting amount from one’s bank account directly .In case of other prepaid cards the amount is already paid in the card before purchase or use of the card for usage.
Read our other articles on digital transactions
NET BANKING:Internet banking is a convenient way to do banking from ones home or office.It avoids the queue and delay in the banks. It saves a lot of time and energy. It is a secure way of banking. Various methods of net or electronic banking are, National Electronic Fund Transfer(NEFT) ,Real Time Gross Settlement(RTGS) , Immediate Payment Service(IMPS) etc,.
There are various misconceptions on cashless transactions on account of personal information being misused.There are various laws which prevent cyber contravention. Cyber contravention deals primarily with unauthorized access to computer ,computer system or computer network. Cyber Contravention is subject to civil prosecution and proceedings. Penalty of cyber contravention is to pay for the damages and compensation not exceeding one crore rupees.
TRANSACTIONS WITHOUT CASH:
UNSTRUCTURED SUPPLEMENTARY SERVICE DATA (USSD):
How to use USSD?
Link your mobile number to your bank account.
Dial *99# from your phone.
Fill in the first 3 letters of your bank against Short Name or first 4 letters of Indian Financial System Code (IFSC).
Choose ‘Fund-Transfer Mobile Money Identification Number (MMID)’ option.
Enter the payee’s mobile number and MMID.
Enter the amount and your Mobile Banking Personal Identification Number (MPIN), leave a space and enter the last 4 digits of your account number.
The USSD is an initiative by the Government of India. It is a form of Mobile Wallet.It makes cashless transaction easy for all sectors of people.
IMMEDIATE PAYMENT SERVICE (IMPS) :
Immediate Payment Service is a real time inter bank electronic fund transfer system of India. IMPS offers an interbank electronic fund transfer service through mobile phones. Unlike NEFT and RTGS it is available all through the year 24/7 including bank holidays. It is managed National Payments Corporation of India (NPCI).
UNIFIED PAYMENTS INTERFACE (UPI) :
Unified Payments Interface is a system that powers multiple bank accounts, several banking services features like fund transfer (P2P), and merchant payments in a single mobile application. UPI was launched by NPCI with the Reserve Bank of India’s (RBI) vision of migrating towards ‘less-cash’ and more digital society. UPI was built on IMPS platform.