1. Death of cheque book facility? Sorry, Modi government, not possible yet

Death of cheque book facility? Sorry, Modi government, not possible yet

Rumours have it that the government may withdraw bank cheque book facility in the near future to encourage digital transactions, but would it really be feasible?

By: and | Updated: November 22, 2017 11:52 AM
bank cheque book facility, Death of cheque book facility, modi government, digital push, digital economy, CAIT Secretary General Praveen Khandelwal Even after all the above infrastructural changes have been made, use of cheques cannot be completely stopped.

Post demonetisation of high-value currency notes, the Modi government has taken a number of initiatives to give a push to the digital economy such as discouraging cash transactions, making NEFT, RTGS and IMPS transactions cheaper, giving a push to mobile apps, among others. Now, industry sources say that the government may even withdraw the bank cheque book facility in the “near future” to encourage digital transactions.

Confederation of All India Traders (CAIT) Secretary General Praveen Khandelwal recently said that the Centre may withdraw the bank cheque book facility in the near future to encourage digital transactions. Now the question arises, is withdrawing this facility in the near future possible for the government and what will happen if that happens?

Financial experts rule out the possibility of the phasing out of cheque books. However, they admit that it will be beneficial for people, in case it happens. “The phasing out of cheque books, in my view, is imminently possible. From a personal finance perspective, especially for investments, it would be beneficial as it would prevent delays in the transaction and help protect both parties better,” says Dhirendra Kumar, CEO, Value Research, adding that “the way digital transactions are moving forward, in the days to come, the use of cheques would reduce further. So, yes, it is possible in the near future, but to make it mandatory and withdraw cheque books as of now is a bit premature. Maybe a year down the line, the system would be better placed to take this step.”

Digital transactions, in fact, have seen a significant rise post demonitisation and GST. This trend will continue as the Internet penetration increases and use of cash in business transactions keeps getting diminished. Digital transactions encourage both transparency and compliance and are also convenient to use.

Moreover, “the government has continuously been encouraging use of digital mode for various payments. Currently it is mulling giving a 2 per cent rebate on the applicable GST rate for digital payments. If this step does go through, it will certainly be a very positive one. In the same context, the President of CAIT has suggested that cheque books may be done away with to further facilitate the shift towards digitalisation. While this step would certainly result in a Great Leap forward for digitalisation as well as compliance, it would have to be preceded by a number of steps to prevent disruption of business and economy,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.

For example, lnternet penetration would have to reach the remotest village and a large majority of the population would have to get comfortable using the digital mode to make payments. Also, the online payment portals would have to increase their bandwidth significantly. POS machines would have to proliferate in a big way.

Pinky Khanna, Personal Tax expert at EY India, says, “Cybersecurity risks, protection against frauds and removing transaction charges from digital transactions are some of the most important steps that need to be taken before cheque books can be phased out. Investments in PPF, post offices etc, all these things need to go digital in every aspect if such a move has to be taken. Plus, educating the older generation and people in smaller cities remains key to make this a success.”

Even after all the above infrastructural changes have been made, use of cheques cannot be completely stopped as certain transactions like issuing of post-dated cheques as security would continue. However, “digital payments can be incentivised by tax and some other incentives as well as removal of all charges from debit and credit cards. Also, use of cheques can be simultaneously discouraged by levying some charges or taxes on their use. However, imposing a complete ban on cheques is not feasible in the near future, in my opinion. At the same time, digital payments should be certainly encouraged by the above-mentioned as well as any other pragmatic ideas,” says Kapur.

Kuldip Kumar, Partner and Leader for Personal Tax at PwC, says that phasing out cheque books would require a massive overhaul in terms of mindsets and processes. Even now, people in Tier-I and Tier-II cities are wary of performing digital transactions. Small traders and businesses will need to be educated better before such a step can be taken. Also, “many processes require the use of cancelled cheques and post-dated cheques. These will need to be changed to introduce other methods of verifications and post-dated digital transactions respectively. More importantly, the transaction charges on debit and credit cards need to be removed. An incentive system needs to be brought in place to get people to make the switch. In a country as big as India, it will be a mammoth task,” he says.

Thus, to facilitate movement towards a cashless and paperless financial market, all ideas for encouraging digital mode should be accompanied by requisite infrastructure backing. Once digital transactions have a robust infrastructure support and favourable incentives backing them, cheques payments will slowly and steadily keep ebbing on their own. In that way we will achieve our goal of Digital India in a gradual and painless way.

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  1. J
    Nov 22, 2017 at 6:24 am
    1. Saibal Nandy
      Nov 21, 2017 at 10:09 pm
      all the good thinking people suggestions must be appreciated. but all the comments have come on Nov 2017 after demonetization and less cash initiative done one year back. mentality of Indian public is if we are not forced to do even for good things, we never adopt. cheque should be banned immediately beyond rs 10000. rest will come immediately like infrastructure etc.
      1. Narendra Bharti
        Nov 21, 2017 at 9:53 pm
        This is a good idea. But, as suggested in the news article, some reforms are necessary before completely banning use of cheques. First of all, digital payments should be made free of any sort of transaction charges and secondly, some sort of incentives should be brought in for digital payment. In case of issuing cancelled cheque for verification of iden y, the same may be done via e-CKYC Registry,or UID as all Bank accounts are required to be linked with Aadhaar Card. A nominal charge may be levied for use of cheques, where banning is not possible or desirable for special reasons. Lastly, it is important to educate the public on benefits of digital payments Vs cheque payment so that digital payment is adopted voluntarily as a primary option instead of something forced on them.
        1. S
          Nov 21, 2017 at 9:48 pm
          There have been lot of cheque bounce cases in various courts. How Govt helps on settlement. It is imperative cheque txns post dated cheques for guaranteed payment are very important for businesses
          1. A
            Nov 21, 2017 at 9:25 pm
            In USA still we use Check books.
            1. Balakrishnan Gurumurti
              Nov 21, 2017 at 8:57 pm
              foolishness has some limitation too.
              1. p
                Nov 21, 2017 at 8:56 pm
                Are we educated enough to use NET BANKING/DIGITAL BANKING in near future? Govt should not will not take such suicidal decision for Indian people and Indian Economics. Consider an worst situation when our SYSTEM FAILS ( SO MANY POSSIBILITIES) , WHAT WILL HAPPEN THEN ?
                1. Niraj Kumar
                  Nov 21, 2017 at 8:50 pm
                  This is quite possible and agree it should be done in phases. High volume transactions like property buying in cities are happening through cheques can be easily tracked using digital transactions. Small city and towns this can be achieved easily their current favorite mode of transactions is cash or ATM or Direct Bank transactions. So cheque can be killed easily. Transacting through cheque is so time consuming specially outstanding cheques. This will be eventually a benefit for Indians only. Hope they understand and support the government.
                  1. S
                    S .Krishna
                    Nov 21, 2017 at 8:45 pm
                    Let us remember that every new invention or innovation has come through opposition and apathy. With digitalisation we can see the farmer get instant payment traders and suppliers and manufacturers get paid at once and the government raises taxes without any illegal hassles. That day our faces will be our fortune for we carry our horoscopes (Aadhaar cards) with us and will be free of worries about ready money.Pray for that day soon.
                    1. Y
                      Yash Pal
                      Nov 21, 2017 at 8:45 pm
                      It appears that cheque book facility is available in all those countries where digital transaction are high. It means that cheque book facility cannot be done away with completely. When a cheque is issued, the transaction can be traced very easily. If the advanced countries were not able to do away with cheque book facility, why implement this hare brained idea here.
                      1. S
                        S .Krishna
                        Nov 21, 2017 at 8:26 pm
                        A day will come sooner than we think it possible when our faces will be our fortune and our Aadhaar cards will be our horoscopes which we shall carry with us for making any digital transactions for transfering or receiving money in our everyday lives.All this is made possible by digitalisation in every sphere of our lives.Digitalisation now may appear to be complex and too technical to master. But the complex difficulties of Cyber security and risk against frauds as also the reduction and elimination of digital transaction costs will be carefully sorted out in time . Digitalisation when implemented carefully means for the farmer instant money for purchase of seeds and fertilisers,instant money for the manufacturer and supplier and service providers as all transaction is instantaneous and error free.A rebate of 2 rebate on GST rates are proposed. When that day comes there will be no need for checkbooks and long queues at banks and reams of paper work. Let us hope for that day.
                        1. D
                          Nov 21, 2017 at 8:05 pm
                          I had read a joke some 50 years back It is - In a news paper some space was still lying vacant after putting all that news Printing department people asked the editor -what to do? Editor- write : There was an accident in such and such town. One person died. one and one got injuries.amd asked printing staff- is space still available? Yes sir. -for one semtence only. Editor: Later it was found that it was a rumour.
                          1. B
                            Nov 21, 2017 at 8:03 pm
                            The Govt should start with cheque for only transactions between 50,000 and 200,000. For all transactions below 50,000 usage of UPI, cards, or mobile payments and for value above two lakhs only RTGS and NEFT.
                            1. Shahid Ullah
                              Nov 21, 2017 at 7:46 pm
                              Come what May. Cheque book withdrawl, demonetization, boosting digital payements etc etc is fine.STILL CORRUPTION N BLACK MONEY STOPPING IS NOT POSSIBLE FOR MODI TO ERADICATE THIS MEANCE.IT WILL TAKE DECADES . MEANTIME NEW N UPGRADED METHODS WILL B INVENTED.
                              1. p
                                Nov 21, 2017 at 7:41 pm
                                at present amount limitation of cheque issuance can be possible like big amount must be stoped through ch.payment but small amount can be continued because big amount must be small in number of clients small amount is large in number of people gradually amount limitation can come dowen.
                                1. K
                                  Nov 21, 2017 at 7:40 pm
                                  Why the govt wont go digital in the first place to make timely payments to its vendors which could have 200 plus new born lives in UP.
                                  1. Raghu Ramprasad Pulijala
                                    Nov 21, 2017 at 7:32 pm
                                    This ischequewithdrawal possible only when cybersecurity is ensured and internet should penetrate at village level.Even advanced economies like USA IS still usi usi ng the cheque system.
                                    1. R
                                      Nov 21, 2017 at 7:31 pm
                                      This is too much of digitization.
                                      1. R
                                        Nov 21, 2017 at 7:24 pm
                                        This is called 'Tughlaq Darbar' ! A bunch of i diots are ruling now
                                        1. shank sisodia
                                          Nov 21, 2017 at 7:10 pm
                                          if he stays in power for 20years..i am sure we would only be an inch away from surpassing china...as this government putting in really incredible ideas... of course, the change will take time...but hopefully Indians understand that.
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