Feb 06, 2013, 08.20 AM | Source: Personalfn.com
With many of us engaged in an economic activity to earn a livelihood, we have bank accounts; and deposits and withdrawals are the core activities which we perform.
, PersonalFN | Capital Expertise: Mutual Funds ,Fixed Income
Recently, the RBI floated a discussion paper on 'Disincentivising Issuance and Usage of Cheques' thereby seeking to discourage usage of cheques and cash withdrawal, by levying a charge on such transactions. “In order to avoid increased dependence or slippage to cash-based transactions, high (both in amount and frequency) cash withdrawals and deposits of cash by individuals may also be charged,” said the discussion paper.
The other major suggestions enunciated in the discussion paper include:
According to RBI, corporates and institutional customers are the largest users of cheques across all value bands (accounting for 54% - 64% of the cheques processed), and thus for them access to cheque books should be made costlier, no free cheques books should be issued to them and steep charge should be levied by all banks on cash deposits/withdrawals by current account holders into/from their accounts. It is also said that for payment of dividend through cheques, an additional charge should be levied.
We are of the view that, the aforesaid discussion paper, on which the RBI has invited comments from public by February 28, seeks to establish a "less-cash" society and encourage greater adoption of electronic mode(s) of payment. But we think that, it is vital for the central bank to recognize that there may be several small businesses (in nature of proprietorship and partnership concerns) or even older individuals who may be affected as they may not be very technologically savvy to perform their banking transaction via the electronic mode of payment or even pay their utility bills online. Such a proposal if goes through may also impede in the Government’s agenda of financial inclusion, since many aren’t very well-versed with electronic mode(s) of payment.
PersonalFN is a Mumbai based Financial Planning and Mutual Fund Research Firm
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