Amid the government’s push for digital money after demonetisation, banks have flagged before a parliamentary panel issues such as “low internet penetration” and “lack of adequate electronic payments infrastructure” as roadblocks and called for improvising legal provisions to check cyber fraud. The Parliamentary Committee on Finance headed by senior Congress leader M Veerappa Moily, which met on Thursday, also saw bankers calling for massive investment to develop a digital infrastructure. The panel had called a meeting of bankers on the issue of demonetisation and transformation towards digital economy, and banking sector’ challenges and the way forward.
In its background note, Indian Banks’ Association (IBA) said that for banks, preventing cyber crime is a challenge because as more transactions are going digital, the incidences of cyber crime and fraud are increasing. The IBA said, “Legal provisions could be improvised to punish the guilty in the case of attempted cyber fraud” and that “there is a need to beef up security aspects of digital transactions, which are prone to cyber attacks regularly”.
In a comprehensive-written submission before the panel, Punjab National Bank noted that the Centre demonetised Rs 500 and Rs 1,000 currency notes with effect from November 8 last year to put check on the corruption and financial terrorism but also flagged that the sudden removal of the 86 percent currency from circulation without having an adequate supply of new notes ready to take their place “disrupted” the economy temporarily.
“Suddenly hundreds of millions of people were left without the means to engage economically, to buy the thing they wanted and needed, and myriad businesses were left without a readily available mechanism to receive payments for their goods, to buy supplies, to pay their staffs,” it said.
Noting that more than half of the population in the country still does not have access to formal banking and only a small percentage of the population uses credit to debit cards, the PNB told the panel that the average number of card transactions per inhabitant in India is a mere 6.7 per cent, compared with 14.7 per cent of China, 54.8 per cent of Brazil and 201.7 per cent of the UK. “Only 15 per cent of online or point of sale transactions take place using credit or debit cards. This compares with the 88 percent that use cards to withdraw cash at ATMs,” the PNB said in the background note submitted to the panel.
While noting that with a major proportion of cash being pulled out, millions of new users were pushed on to the country’s digital economic grid and after demonetisation, the drive towards a cashless economy gained momentum, the bank flagged that though note ban has created a passage for less-cash economy through digitalisation in India, “however, the road is not smooth for the complete digitalisation as lot many challenges are present.”
The panel is again meeting on June 8.