BENGALURU: The demonetisation move marks a shift to digital economy in the country, even though there have been short-term repercussions. India will have to look at growth by enhancing its domestic services and this move could give a push for the same, said technocrat Nandan Nilekani.
However, he warned that this had to be done carefully as it could create private oligopoly in the payment sector. He was speaking at the Global Tech Summit here on Wednesday on ‘Road to Cashless Economy’.
“India’s growth model cannot be like South Korea or China, which are export-oriented. India’s growth has to be in domestic services,” he said. Going towards a cashless economy involves government, technology, markets and innovation. “All these have to come together. If we do not do this migration properly, we will head towards creating private oligopoly. When we make this transition, we have to make sure it’s planned properly,” he added. In India’s case where the government is the owner of 70 per cent of banking, the government has a dual role to play, both as a policy maker and a regulator, he said.
Speaking about strengthening digital transactions, the former chairman of the Unique Identification Authority of India opined that now is the time to set up micro ATMs across the country. Micro ATMs are devices that are connected to central banking servers through GPRS. These can enable the unbanked rural people to access micro banking services.
Every village needs one or two micro ATMs, he said. With the help of Aadhaar number, a person can make use of a micro ATM to open bank accounts quickly.
While the heart of accelerating digital financial services is making merchant payments cashless, security is something which we needed to keep working on, he said.
Further, banks will now have to redesign their lending business. While banking historically has been high value and low volume business, mobile wallet is high volume, low cost and low fee. The new financial institutions make money from data. That’s why services such as Paytm do not have transaction fee. Suddenly, the old and the new worlds are colliding, he added.