
Cash Ban the Best Thing to Happen to Indian Digital Payments - smaddali
https://www.bloomberg.com/news/articles/2016-11-23/cash-ban-the-best-thing-to-happen-to-indian-digital-payments
======
fiatjaf
I bet some people will think this is good news. Of course it is good news for
digital payments providers. For all the other 99,99999999% of the population,
including the users of digital payments, it is horrible news.

~~~
statictype
Why is it horrible news?

The whole thing seems like a clear win to me.

~~~
notahacker
When most of a country doesn't have access to digital payments, lack of cash
is a problem. Although to be fair, the poor aren't the ones trying to buy
things with large denomination notes anyway.

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pavanky
I am assuming a lot of people are coming into the thread reading the title and
not the article. All cash is not banned in India. Only a couple of
denominations have been demonetized and are being replaced by their newer
counterparts.

This has happened in India before without issues. The current problems exist
because of the scale at which it is being done and the short period of notice
given.

Digital payments are taking off because there is a shortage of currency for
the amount of money being demonetized. This is not a move made by the Indian
government to push surveillance or other nefarious purposes.

~~~
gruez
>This is not a move made by the Indian government to push surveillance or
other nefarious purposes.

what makes you think that?

~~~
Ar-Curunir
Because they are not banning cash? Only replacing certain variants with newer
denominations.

~~~
234dd57d2c8db
You mean less useful and smaller denominations, not "newer". They are trying
to make cash unappealing to use by requiring more bills to carry out a
transaction.

If the government came and said "Because terrorists drive cars between the
hours of 1pm-3pm, we are banning all car use between those times." You
wouldn't say they replaced the current driving rules with newer ones, you'd be
upset you couldn't drive between 1pm-3pm and instead had to use a less
efficient means to carry out your business.

The government is unjustly punishing the whole class because some individuals
made the decision to break the rules, and as punishment, it is now harder to
maintain financial privacy. Yay. Just what I wanted, less privacy in the age
of everything is in a database and everyone is on a list.

~~~
whowalrus
>You mean less useful and smaller denominations, not "newer". They are trying
to make cash unappealing to use by requiring more bills to carry out a
transaction.

They removed Rs500 and Rs1000 from circulation, yes. A newer _Rs2000_ is
already in circulation and a newer Rs500 soon to follow. So this statement is
inherently wrong.

> If the government came and said "Because terrorists drive cars between the
> hours of 1pm-3pm, we are banning all car use between those times."

The govt actually said "Because terrorists drive fake cars of model A and B,
we're making it illegal to drive A and B on the roads. Anyone who has a legit
model can take it to the manufacturer to get it replaced by a newer model."
I'd still be upset about the discomfort, but at least the example used would
be more accurate.

> The government is unjustly punishing the whole class because some
> individuals made the decision to break the rules, and as punishment, it is
> now harder to maintain financial privacy. Yay. Just what I wanted, less
> privacy in the age of everything is in a database and everyone is on a list.

It is currently estimated that just 1% of Indians pay their taxes [1]. I don't
have any views on whether there will be a drop in financial privacy (since I
see the govt tracking bank accounts, which they were always able to do), but
I'll be glad to see that number rise from a paltry 1%. Also, cash transactions
aren't outlawed, so you're more than welcome to keep you transaction "private"
if you please. There are talks of a cap to cash transactions, but nothing has
really materialized yet.

And finally, I'm not for or against the measures the govt is following. I'm
glad _something_ is being done, but am also skeptical about how effective it
will be in the long run. It will depend on what additional measures the govt.
brings to curb further accumulation of black money with the new denominations,
and the ability to buy and hoard assets bought by said black money.

[1] [http://www.cnbc.com/2016/05/03/guess-how-many-people-pay-
tax...](http://www.cnbc.com/2016/05/03/guess-how-many-people-pay-taxes-in-
india.html)

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stuart78
There was a great introduction to this story on yesterday's The World [1].
Sounds like a pretty massive disaster all around.

[1] [http://www.pri.org/stories/2016-11-23/indias-crisis-over-
ban...](http://www.pri.org/stories/2016-11-23/indias-crisis-over-bank-notes-
hits-women-especially-hard)

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t3soro
"Hemp Ban the Best Thing to Happen to American Paper Industry"

~~~
duskwuff
"Cooking Ban the Best Thing to Happen to American Fast Food Industry"

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sirius87
Just to set the stage: India is highly polarized on this issue. A lot of
discussions around govt policies right now end up in heated debates. Loosely
speaking, liberals aren't very much in favour of the right-wing govt in power
and often criticize every major policy announcement, not always based on
merit.

The majority of working-class people in India are going through a phase of
love and adulation for the ruling party and the Prime Minister, so any public
opinion on social media against the establishment is met with intense
opposition.

The news media aren't helping decipher the actual state of reality. Much like
the US elections, Indian media fuels the polarized population with provocative
news stories, and "alt-media" outlets publish opinions and fake news as facts.
Many accuse major media houses of unfairly favouring the right-wing govt (much
like Fox News in the US) due to connections of the govt with business houses
that run them.

The demonetization move comes at a time when political parties are gearing up
for elections in major states. From extravagant political rallies to feasts, a
lot of aspects are funded by _cash_. Politicians have a history of hoarding
cash for elections and "buying" votes from the poor. The demonetization issue
was also promoted as a way to deal with a fake-currency printing industry
allegedly being run in arch-rival Pakistan. This bodes well with the
"Nationalism Wave" promoted in recent years.

~~~
Ar-Curunir
> The news media aren't helping decipher the actual state of reality. Much
> like the US elections, Indian media fuels the polarized population with
> provocative news stories, and "alt-media" outlets publish opinions and fake
> news as facts. Many accuse major media houses of unfairly favouring the
> right-wing govt (much like Fox News in the US) due to connections of the
> govt with business houses that run them.

Is this really true? The mainstream media houses are all helmed by pseudo-
liberals that have in the past been very biased towards the Congress Party.

~~~
sirius87
Shall we say we have left-leaning and right-leaning news channels, and
depending on your personal inclination (read: echochamber), you could be
accusing the _liberals_ on left-wing newsmedia as "pseudo-liberals" (often
accused of being anti-national too!), and disagreeable newsmedia as favouring
the govt?

~~~
swatkat
So, can you edit your original post to be politically correct (read: non-
echochamber)? Instead of just mentioning a certain inclination that you may
not agree with, you can just say left-wing/communist media hasn't been in
favour whereas right-wing media is in favour of this move?

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freddyc
This is certainly a promising sign. A few years back I consulted for a company
trying to make a push into the Indian market and the payments piece pretty
much killed us. Dealing with HDFC became a daily nightmare and the amount of
bureaucracy and red tape involved was soul-destroying. Based on my (very)
limited knowledge of Indian payments, my guess is HDFC probably still sits
behind these new solutions but if they can somehow streamline the process and
shield customers from most of the BS I really hope they flourish.

~~~
rajeshp1986
This is true. I worked briefly on a startup idea to disrupt the payment
services in India but gave up after the amount of red tape involved. In India
banks want to control everything that is related to/about money. Banking is
full of red-tape controlled by big banking houses in India. Company like
Airtel & Vodafone couldn't push their mobile based payment systems for larger
adoption. It is amazing to see how paytm got wider adoption and lobbied the
bureaucracy and government to pave way for payment banks. But still the amount
of investment that is required to get into payment services in India even as a
payment bank is enormous. Startups in no way can compete with this without
having VC's backing them right from the beginning.

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ppurka
This may have been a good idea, but it is terribly implemented. Especially,
notes of denomination 500 should not have been banned with immediate effect.

In general many poor people, even in cities, do not have bank accounts and
face lot of issues when opening such accounts. Sometimes bank require a
"reference" from an existing customer to open an account. Sometimes many such
poor families (say 20 families - think of it as a big landed area with 20
small houses) live together at a single address, paying rent for a single
room, and the banks will refuse to open so many accounts under a single
address. Their are several such smaller issues that crop up when trying to
open an account that are not well known and that only the people in a
particular city or locality face.

These people cannot deposit their savings since they don't have a bank account
to begin with. And they definitely have savings in Rs 500 denomination since
500 is nowadays often used in the markets. Essentially, this ban has hit hard
the common people. The very rich are hiring others to do the transactions and
exchange of money. The lower middle class and poorer sections are left wanting
for cash. Hence, good idea, but bad implementation.

~~~
abhishivsaxena

       In general many poor people, even in cities, 
       do not have bank accounts and face lot of 
       issues when opening such accounts. 
    

Sorry, but I absolutely can't stand when I see these kinds of arguments,
because everyone reading this would believe this to be true apriori.

Check this article from Feb 2015. Only 23k families were without a bank
account. In a country of 250m families! In the last two years I think they
opened 200m - or something like that - accounts. [http://www.business-
standard.com/article/current-affairs/nea...](http://www.business-
standard.com/article/current-affairs/nearly-every-indian-household-has-a-bank-
account-115021101677_1.html)

Agree about it not being very well managed, specially the ATM calibration
issue.

But I have no doubt, it would massively help in making digital payments
mainstream. Already since 9 Nov, digital payments have overtaken credit/debit
cards as stated in this article. Possibly it would even make India an even
bigger market than China.

It would also fight tax evasion - right now India borrows 60b$-70b$ every year
- when coupled with tax reforms like GST which is set to kickoff next year.
Btw, since last few years you need to supply an Tax Id whenever making
transactions of more than 1k$ in cash, so this step fits in perfectly with
that as well.

There's some short term pain, but the medium/long term gains massively
outweigh it.

~~~
ppurka
I don't know where they get those statistics? Do they include the daily wage
working families? I have several near my own home (in a city) and none of them
are able to open bank accounts.

~~~
abhishivsaxena
RBI + MoF it seems.

Not sure. The only explanation I can think of is that they don't have Aadhar
being illegal migrants or something like that. Or that the bank they are
visiting is mismanaged - for which someone should file a complaint.

Btw, you can tell them that they get a full savings account at post offices as
well. If they have some savings, it's better for them since interest is higher
for families with BPL cards.

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whowalrus
I see a lot of commenters bring up privacy viz. tracking transactions and tax
avoidance. Now I'm all for respecting people's privacy; but I also don't see
why the govt. shouldn't be able to detect and extract what is legally owed to
them.

Raghuram Rajan, the ex-RBI governor was in favor of tracking transaction data
too (and wasn't in favor of demonetization), especially since he felt that the
tax rate in India is already reasonable compared to other Industrial nations.
[1]

So instead of ending the discussion at "It invades people's privacy, full
stop", can we talk about ways of ensuring greater chance of collecting taxes?
Maybe examples of how other countries have successfully tackled it?

[1] [http://www.newindianexpress.com/business/2016/nov/10/the-
cle...](http://www.newindianexpress.com/business/2016/nov/10/the-clever-find-
ways-around-demonetisation-raghuram-rajan-said-two-years-ago-1537108.html)

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jtchang
This is a huge move and in the end will benefit India in a big way. Basically
by banning cash you are making transactions much easier to track. In turn this
kills a lot of black market activity and stamps out corruption. By doing this
India is making a move toward creating stronger protections toward businesses
in the way of contract law and and intellectual property. This makes it much
more favorable to innovation (your IP is more protected because the government
is stronger)

~~~
jaypaulynice
But what happens when there is a major disaster? How will people pay if there
is no internet/electricity etc.? At least with cash you can plan ahead...also
what are the poor people to do?

~~~
swatkat
I guess the linked Bloomberg article doesn't make it clear?

Cash hasn't been banned in India. Only ₹500 and ₹1000 denomination currency
notes have been scrapped. Replacement currency notes (₹₹500 and ₹2000) with
new design are being disbursed at banks and ATMs. It would take few more days
to stabilize, that's all.

~~~
jaypaulynice
Thanks! I was responding to the comment by saying that banning all cash
wouldn't be necessarily good...but yeah the article does make it sound like
all cash would be banned...

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notahacker
tbh I'm reading the opening anecdote about soda hawkers and roadside egg
vendors accepting PayTm and thinking _last time I was in India and R500 and
R1000 notes were legal tender, I wouldn 't have expected those guys to have
accepted the large denomination notes (no change), never mind digital
payments_...

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wnevets
misleading title, cash hasn't been banned just ₹500 and ₹1000 denominations.

~~~
swatkat
True. Even ₹500 and ₹1000 aren't banned per se. They are being replaced with
new currency notes (of 500 and 2000 denomination).

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megous
> This is not a move made by the Indian government to push surveillance or
> other nefarious purposes.

So why do you need ID when changing the notes? It looks like move to
approximately sum up who had how much money in cash.

~~~
pavanky
I assume you were trying to reply to me. Yes that is the case because India
does have a huge problem with people not paying taxes, taking bribes and other
illegal activities. So this may be a necessary step taken to acheive that.

There are more clear cut cases of the Indian government trying to create a
surveillance state. Trying to group this under the same category just creates
unnecessary noise.

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matt_wulfeck
I pray that this never happens in the United States. Money is the most
powerful thing in any modern society. When transactions are controlled and
surveilled then what can stop total control by a determined government?

The black market is a bogeyman. I hope others see this as well.

~~~
swatkat
No offense, but do you think your transactions are not surveilled by your
government or any of those three lettered agencies? ;)

~~~
nothrabannosir
That's his point. Yes they are, when they can be. You can't track cash
transactions.

~~~
swatkat
So is the case in India. Cash transactions aren't banned. The linked article
title is misleading. Existing ₹500 and ₹1000 currency notes are being replaced
with new ₹500 and ₹2000 ones.

~~~
matt_wulfeck
I didn't know that. Was the motivation simply to get everyone to turn around
their cash?

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kylebenzle
Is this going to be today's "bitcoin" article?

