How India is coping with most of its cash becoming useless
Indians woke up to the surprise announcement from Prime Minister Narendra Modi about the withdrawal of bigger denomination currency notes. As they begin to come to term with the adjustment, things are not looking easy for many.
In an address to the nation late evening yesterday, Modi announced that Rs 500 and Rs 1,000 denomination currency notes won't be a legal tender starting Wednesday. The two denotations amount for more than two-thirds by value of all cash circulation in India (it amounted for over 80 percent in 2014-15, according to Reserve Bank of India).
In the aftermath of the announcement, many queued outside ATMs to withdraw Rs 100 (the biggest denomination available now) notes before midnight struck. The government has also closed the banks today while ATMs will remain closed tomorrow as well, which has caused a panic among millions in India as they struggle to function in India’s cash-dependent markets. People are flocking to petrol pumps to tank up their cars, for which they can still pay with the old currency. Government owned petrol pumps have been mandated to accept the older currency for the next couple of days.
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In the meanwhile, ecommerce businesses in India have either suspended or restricted "cash on delivery" (COD) as a payment option for any purchase in an attempt to smoothen the transition. Cash on delivery is a hugely popular payment option in India in which people are able to make a purchase online and pay for it in cash to the delivery boy when the package arrives.
"Currently, we have temporarily stopped cash as a payment option for new orders. Customers that had already placed COD orders before midnight 8/11 can pay for their orders using debit or credit cards or currency of valid denominations," an Amazon India spokesperson said.
"We are no longer accepting Cash-on-Delivery (CoD) payments in Rs 500 and Rs 1,000 currency notes. In order to enable customers to conserve smaller denomination notes for daily essential use, we are restricting CoD on orders below Rs 1,000," a spokesperson for Flipkart said.
"All Snapdeal users who have already placed Cash on Delivery orders can pay for their deliveries using any currency notes except the Rs 500 & Rs 1000 notes dis-continued by RBI. Users also have the option to defer the delivery by a few days till new currency notes become easily available," a Snapdeal spokesperson said.
Mobile payment, wallet and shopping app Paytm, food ordering app Zomato have also made similar changes to their service. Online businesses are however seeing growth in sales and are projecting positive changes from this announcement.
Paytm said it has seen a staggering 200 percent growth in the download of its mobile wallet app, and 250 percent growth in transactions and transaction value. Considering the low penetration of bank accounts, and by extension, credit and debit cards, this is an impressive milestone.
"This is the biggest and most ambitious step ever to crack down on black money and fake currency. We stand by the government in its efforts towards taking black money out of the equation and offering a major boost to the Indian economy. Since Paytm is fast becoming synonymous to all kinds of payments, we are happy to announce we have registered a strong surge in volume on our platform,” Madhur Deora, CFO of Paytm said.
Ola said its wallet app Ola Money has seen 1,500 percent increase in recharges in a span of about 15 hours. "This move marks the beginning of a significant step towards a cashless economy and Ola Money is at the forefront of our vision of a Digital India. We urge our customers to conserve cash and use Ola Money instead for their mobility needs and across other online and offline merchants," Pallav Singh, SVP & Head of Ola Money said.
Uber also welcomed Modi’s move. The company, which had to make changes to its payment methods especially for India, however requested the government to relax the two-step authentication requirement for a certain limit so that it becomes easier for people to make digital transactions.
Modi’s announcement comes as India bolsters its actions to fight corruption, money laundering, counterfeit, and terrorism activities, all of which typically see unreported stash of cashes used for transactions. Though Modi’s steps have been welcomed whole-heartedly by many, it has become apparent that lives of hundreds of millions of people will be affected for the next few weeks. Indian government will start issuing new notes in Rs 500 and Rs 2,000 denominations tomorrow.
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