100% No? 50-50? Or, Status Quo? What’s your stand on the future of Cash payments?


A multi-billion dollar or INR equivalent question that’s being asked, in the banking and financial circles today in the USA as much as here in India, is how much should go around as hard cash in circulation, on a daily basis.

While opinions differ as the stand of the people, central bank and the ministry of finance officials are on a continuous balancing act to either phase out or control or maintain a status quo, in the availability of this negotiable instrument, which has come to stay as second skin, on the country’s economy for centuries.

Whether it’s New Delhi or Washington or any global centre where fundamental financial policies are written, no one appears to have come up with a definite solution to the problem yet. There simply isn’t a working model. The emerging picture shows a socio-political conflict of building a strong legal framework to trap the black marketers, the corrupt and the money launderers on one hand, while not upstaging the daily life of the average citizen on the other, who has no choice but to resort to hard currency transactions to sustain his daily life.  A classic situation of being cautioned against throwing the baby with the bath water. Or, shall we say, being caught ‘twixt the devil and the deep sea’!

A study conducted in the US explored public opinion on the subject. People offered enough reasons to get rid of all cash transactions whatsoever, or at least most of the country’s cash, or just keep going as it is. Meanwhile, stats showed that the use of cash in daily transactions appeared to be rising across the country!
The ABA Banking Journal also carried an article recently, which threw light on an interesting aspect of this dilemma.  In the article, Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group, commented,  ‘where one stands on this issue often is determined by where one sits’.

In another take, Chris J. Waller, an economist at the Federal Reserve Bank of St. Louis, USA, opined that, ‘despite what one sees at a Starbucks line, that isn’t really happening—at least not yet.’ Citing Federal Reserve data, Waller says that the amount of U.S. currency in the economy is actually still increasing—in fact, ‘cash’s growth is tracking pretty closely to broader income gains in the U.S. economy.’
As for banks and governments, reducing or eliminating cash has tangible benefits. The pro-cash protagonists however, build up a case pivoted on the soft benefits for individuals, whose concerns are about their privacy and combating sudden emergencies in life.

The bottom-line is that the great debate about a cashless or cash-less or just plain ‘leave-it-as-it-is’ kind of arguments on this negotiable instrument in circulation, will continue to be in circulation.

At least, until the tongues become weary and the notes, dog-eared and dirty. Once more.


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