This article gives an innovative solution for accelerated self-sustained growth, post the great loss created by Covid-19 and also covering up various impediments by losses created by Natural disasters, Cybercrimes, Non-Performing Assets (NPAs), Mismanaged fallouts etc., by deducting 0.01% (i.e. Rs. 1 in Rs.10,000) out of all transactions as Secured Insurance Cess. This creates a large fund planning with miniscule outflow (Secure Cess) to insure loss to citizens, exchequer and others, and provide for much needed fund for national growth and development.
A sound infrastructural foundation is the key to the overall socioeconomic development of India.As per Reserve Bank of India (RBI)’s data of daily transaction, this gives a phenomenal amount which would not only take care of the above, but also fund all development needs of Post Covid19. This would go a long a way in not only getting the economy back on track but also in achieving the dream of US $5 Trillion economy as envisioned. This paper uses materials available in public sources, to build supportive arguments wherever it is found required.
Introduction
With rapid advancement of technology and advent of new developments, and innovations in the payments ecosystem,the Governmenthas enhanced its focus on safety and security of payment systems. In addition, itcontinued its efforts to nurture efficiency, innovation, competition, customer protection and financial inclusion.Going ahead, the Government’s endeavor would be to promote innovation in the financial sector by leveragingon technology for a sustainable Information and Communication Technology (ICT) infrastructure designed foroperational excellence with focus on resilience, reliability, security, integrity and cost efficiency.
In the recent past, the payments ecosystem in India haswitnessed many developments, resulting in a bouquetof payment systems and platforms, payment productsand services, which are available for consumers forundertaking digital payments, be they individuals, firms,corporates, governments, or other economic agents. This has facilitated creation of an Open Banking Ecosystem and FinTech Startups, Incubators and Accelerators in the Country. In sum, the Reserve Bank of India (RBI) has continuedits efforts to develop the state-of-the-art paymentand settlement systems in the country andenhance the digital payment experience of theconsumers, while ensuring adequate securitymeasures. These initiatives have facilitatedsmooth transition towards a less cash society withimproved transaction efficiency and a delightfuldigital experience. Amidst difficulties arisingfrom the COVID-19 pandemic, efforts were alsomade for smooth functioning of the paymentsystem.
Charging “facilitation fee” for Customer Transaction and Citizen’s Concern
Further, the Reserve Bank focused onenhancements in the ICT infrastructure for internalusers,who are also contributing to improved efficiency.It also helped expand coverage for government transactions using digital technologies.Goingahead, strengthening the payments ecosystem,enhancing awareness, and ensuring facilitation ofdigital payments across the length and breadth ofthe country have been the key areas of focus of theReserve Bank. In the process, charging “facilitation fee” to the tune of 1 per cent of the amount to be transacted by the customers is increasing and is a paramount concern for further penetration of digital payment in Rural India. India’s journey of creating a robust digital financial infrastructure has been characterized by collaboration between the Government, the Regulator, Banks, and FinTechs. This has helped in advancing the country’s goal of enabling financial inclusion and also providing rapid payment digitization for the citizens. The Covid-19 pandemic has further accelerated the adoption of digital payments with many first-time users adopting digital payments and significant uplift by merchants.
The New Normal for Payments
The last few years have witnessed tremendous growth in digital payments in the country. Digital modes like electronic fundtransfer (EFT) have seen greater adoption, along with increased use of payment (credit / debit) cards backed by customer propositions around loyaltyand privilege programmes, exclusivity, etc., and an increase in the merchant base aided by a proliferation of e-Commercesites and apps.Over the years, the successive Governments, and the Reserve Bank of India (RBI) have issued enabling guidelines that have been instrumental in driving the growth of digital payments in India.Key outcomes, due to the efforts of multiple stakeholders, over the years are:
- Moving from cash to a less cash society
- Enhancing customer convenience while making daily transaction
- Making the transaction trail transparent
- Attaining global leadership in digital transaction
The RBI Ombudsman Scheme for Digital Transactions (2019) defines digital transactions as “a payment transaction in a seamless system effected without the need for cash at least in one of the two legs, if not in both. This includes transactions made through digital/electronic modes wherein both the originator and the beneficiary use digital/electronic medium to send or receive money.”In fact, one of the objectives of the demonetization exercise in November 2016 was to build a less-cash society and encourage people to use digital platforms.
Aadhaar Enabled Payment System (AePS), BHIM UPI, Credit and Debit Cards, IMPS, Internet Banking, Mobile Banking, National Automated Clearing House (NACH), National Electronic Funds Transfer (NEFT), NETC, Prepaid payment instruments (PPIs), and Real-Time Gross Settlement (RTGS) are some of the popularly used modes of digital transactions in India.
To boost digital transactions and enhance security as well as customer convenience, the RBI has taken numerous stepssuch as the adoption of the National Common Mobility Card (NCMC), licenses to White Label ATM operators, issuance ofEuropay, Rupay, MasterCard and Visa (EMV) and Near Field Communication (NFC) based cards, and customer grievance redressal system.The Government played an active role in popularizing digital payment instruments by organizing Digi-Dhan Melas acrossthe country and incentivizing customers and merchants through the Lucky Grahak Yojana and Digi-Dhan Vyapari Yojanaand cashback offers at fuel stations on payments through digital modes.
The growth and potential of digital payments have allowed numerous FinTech and Payment Companies to flourishin recent years.The Payment companies have leveraged investor funding to diversify their existing product portfolio andbecome full-stack financial service providers, with a lot of them venturing into lending, wealth management andinsuranceaggregator platforms. Customers are now offered a one-stop solution for all their financial needs, and this has significantlyboosted the customer experience.The Open Credit Enablement network (OCEN)& Account Aggregators will change digital lending in India (www.sahamati.org.in) and their architectural designs are depicted in the adjoin diagrams.
There has been a shift in the consumer mindset, during the COVID-19 crisis and the subsequent lockdown, asthey have started using digital modes of payment even in sectors like education.As per the published reports available in open domain, the COVID-19 affected the growth trajectory of payments and reduced economic activity across the nation. Falteringconsumer spending led to a decline in digital payments in the short term. As per the data published by the National Payments Corporation of India (NPCI) in April2020, saw a drop of 20% in the volume of Unified Payment Interface (UPI) transactions. However, the transaction volumes have started recovering andalready reached pre-COVID-19 levels. The increase in UPI transactions was, it was seen, due to increased consumer interestin making bill payments and recharging mobile phones online, and purchase of non-essential goods on e-commerceplatforms.
Future of top payment modes
From cash as the primary mode of payment and usage of debit cards being limited to cash withdrawals at the beginningof the century, the Indian payment landscape has evolved to widespread adoption of multiple payment products andsystems like Prepaid Payment Instruments (PPIs), Immediate Payment Service(IMPS)– Instant Fund Transfer, UPI, National Electronic Toll Collection (NETC), Bharat Bill Payment System (BBPS) and Aadhaar enabled Payment Service (AePS). Use cases of cards for e-commerce transactions have expanded and form factors havechanged through tokenisation. IMPS and UPI have provided faster mobile-based payment options to customers. Lowvalue transactions are increasingly being made through these modes, and prepaid wallets and cards are also emerging asother preferred options.
These instruments have helped acquirers (banks) deepen their merchant base.The BBPS has provided an organised platform for bill payments. Similarly, the National Electronic Toll Collection (NETC) and National Common Mobility Card (NCMC) have allowed digitization ofpayments at toll gates on highways and public transport respectively. In addition, Remittance Service Providers are offering remittance servicesto the migrant population (www.gfrid.org).The COVID-19 pandemic, which brought the global economy to a standstill, triggered a transformation in payments, andcustomers are expected to increasingly opt for contactless, Quick Response (QR) code and mobile/wearable-based digital payment modes.In addition, wallet providers have received an impetus after the RBI announced a new Prepaid Payment Instruments (PPI) category, and Wallets are likely to seegreater adoption soon.
According to Neil Smullian, in his blog dated 7th September 2020 (www.blog.dataart.com), the financial services sector is undergoing a massive transformation, and one area which is reporting accelerated, growth is payment systems, and AI-embedded tools (e.g. voice activated transactions), Smart Car (with integrated payment system) etc. define the future of payments.Digital-only banks (neobanks) – Mobile only bank, App only bank – will soon become more of a reality viz., Digibank by DBS, Freo Money, Instant Pay, NiYo, Open biz, SaveIn, Walrus and Yono by SBI.
Impact of Lockdown Measures on Digital Transactions
Based on RBI’s annual report, it was observed that currency in circulation has more than doubled in the last five years, despite an increase in digital transactions (www.timesofindia.indiatimes.com dated Jun 11, 2018). Pavithra (2021) says, “According to RBI, in the year 2020-21, a higher-than-average increase in banknotes in circulation was observed due to precautionary holding of cash by the public because of the pandemic and its prolonged continuance. Restricted mobility due to lockdowns and the need to reduce physical contact to avoid infection could have encouraged more people into resorting to online platforms for financial transactions instead of cash. At the same time, severe lockdowns may have had an impact on digital transactions as most businesses except the essential ones were completely shut down. In other words, the lockdown measures while pushing people to hoard more cash also might have impacted digital transactions”.
Since the beginning of its COVID-19 lockdown in late March, India has distributed around $5 billion in cash benefits to its citizens who need assistance the most, entirely through payments made via digital platforms (Ankita Sharma and HindolSengupta, 2020)
Secured Cess to Insure – Secured Insurance
We define “Secured Cess to Insure” as “Secured Insurance” as a single-point system to be levied by commercial banks on all bank transactions, and is complement to all direct and indirect taxes levied by the Union Government, the various State Governments, and all local bodies across the country, except for customs and import duties that function as international trade balancers. Simplifying banking procedures and improving the quality of and access to other support services should help achieve this. It would be simple to implement at negligible cost. As the velocity of the payment system and banking transactions increase, the Secured Revenue (Insurance) Raising Strategy would also be good enough to provide a huge surplus as well, even after the economy stabilizes post COVID-19.
This Secured Insurance Strategy is a fair system to create a revenue source of government, without burdening the common person. It will bring into its fold, almost everyone, in the country from a tax perspective (currently, less than 10% of India is part of the direct tax system) and generate huge tax revenue to the Government, and most importantly, without inconvenience to the common man. A mere 0.01% of total banking transactions will be more than GST or GDP of India as per RBI data. If we calculate only outward transaction of NEFT and RTGS, this would bring many folds of revenue to the Government, and this amount would be enough to offset any losses due to Natural disasters, Cybercrimes, NPAs, Mismanaged fallouts etc., and also enhance GST and GDP of India to offer the needed funds for national infrastructure growth and reduce the debts. The Tables,given below, show that the Secured Insurance, if 0.1% of Total Transaction is levied, of could be in the order of INR 184845.88 Crore (2019-20) and INR 50,350.70 Lakh Crore (2020-21). This is a huge generation of revenue for secure infrastructure growth.
Year-wise NEFT, RTGS & Mobile Transaction in India (in INR. Lakh Crores)
Secured Insurance will be (If 0.1%& 0.01% of Total Transaction)
Average Per day Transaction
| Year | NEFT
Outward & Inward(in INR. Lakh Crores) |
RTGS
Outward & Inward (in INR. Lakh Crores) |
Mobile Transaction
(in INR. Lakh Crores) |
Total
(in INR. Lakh Crores) |
| FY 2020 – 21 | 137,703.61 | 5.78 | 237.73 | 137,947.12 |
| FY 2019 – 20 | 506,261.50 | 7.19 | 158.40 | 506,427.09 |
(Source: RBI Reports…)
Anticipated Benefits
To revive the Indian Economy from massive blow of COVID – 19 Pandemic, Secured Insurance is putting a Pragmatic Solution for serious consideration. It is required to make necessary changes in the Banking Software to deduct Secured Insurance amount from the transactions outward of all NEFT, RTGS and Mobile mode both in Public and Private banking system, and credit it to the Central Government and the Banks.The anticipated benefits will be as follows: –
- Banks as a critical cess collecting agency, in addition to their usual services, would get a service charge on every bank transaction,say @ 0.01% of Transacted Amount. This will provide banks an additional source of Revenue and employment growth. Banks then will not need an otherwise certain bailout package from the Central Government in the given circumstances.
- Reduced Fuel prices will drastically reduce Transportation and Energy Costs making goods and services cheaper, benefitting the entire society.
- Reduced Transportation and Energy input costs will help industries revive and become globally competitive in a considerably short time.
- Social sectors such as Education and Healthcare will be totally free for all citizens of our country due to surplus of fund available in the Government System.
Developing and implementing tighter cyber and information security guidelines to makethe payment ecosystem more secure will help in ensuring that users are able to trust digital payment modes.In the future, all participants in the digital payment ecosystem – regulators, payment system operators, financialinstitutions, banks, FinTechs and service providers – will be required to continue collaborating amongst themselves tosustain the growth achieved in the digital payment space over the last few years.
Sustained Economic Growth Through Secured Governance
The role of infrastructure in spearheading economic development of a country and setting its pace can hardly be over emphasized. Like a foundation in an edifice, the place of infrastructure as well as its soundness, are crucial to the nation’s total development (Jadhav and Desai, 2019). The economic growth of a country has evidently happened, hand in hand, with the development of its infrastructure. A sound infrastructural foundation is the key to the overall socioeconomic development of the Country (Assocham, 2016). This acts as a magnet for attracting additional investment into a State and thus provides a competitive edge to it over other states. Availability of adequate and efficient infrastructural set up, not only promotes rapid industrialization but also improves the quality of life of the people.
Secured Governance offers a strategy for the government to get all the basic infrastructure development with a negligible investment by the Government. It is a concept of developing Techno Economic Corridors connecting HUBs which will act as growth centre for individual sectors. The very concept of “Secured’’ here implies a secured convergence or knitting with various sectors defining a growth for an economy:
- Harnessing theUntapped Potential of the Nation
- Defining Growth through Convergence of Multiple Sectors
- InfrastructureDevelopment with minimal Government investment
- Setting up Huns, Mini Hubs and Nano Hubs Nationally.
Abolition of direct taxes and indirect taxes, and introduction of a simple SI should help in building a more competitive industrial base in India, especially among the micro, small and medium enterprises (MSMEs), and in manufacturing in general. Various manufacturing clusters that are doing badly should now be able to do better and without a doubt, exports will pick up.The move to SI (with additional reforms in the real estate and other sectors) should also enhance the overall size of the economy, especially given that the informal sector and the parallel (black) economy in the real estate sector would have been fully absorbed into the mainstream.
Secured Governance is a concept that is catching the attention of many as a holistic approach to infrastructure needs, promising a great deal. It professes taking advantage of valuation of assets created and delivering at negligible cost to the government. It aims at balanced growth in all sectors in need of better facilities, in a more holistic manner, rather than focusing only on, say, expressways, or power or any one of numerous other sectors. While addressing any one of them, the others also get due attention ensuring all round development. It promises more societal participation and benefit sharing with transparency. Underlying this is a strategy of developing techno-economic corridors connecting urban areas across the country.
Secured Governance advocates a pragmatic approach of taking advantage of valuation of the Assets Created.
This is not new. We all know when development takes place, there is valuation in property. Who benefits from this? Often, it is incidental and taken advantage off by land and property sharks. Imagine a model where this valuation can be ploughed back into the project and benefit the people around. First the cost of the project is reduced and can be at negligible cost to the government if carefully planned. Next the population sees it as benefitting them and so, they participate more enthusiastically, helping with early completion of the project rather than being an impediment.
Conclusion
The suggested structure for the Secured Cess to insure any Natural disasters, Cybercrimes, NPAs, Mismanaged fallouts etc. would giveInfrastructure growth, huge investment towards a greater formalization of the economy. This is bound to lead to acceleration in per capita income of the people and large-scale employment. The Government clearly holds the key to realizing this potential and taking a proactive stance.Growth of digital payments needs to be supported by robust and scalable infrastructure, strong regulations, andparticipation of diverse players.
Once these suggested measures aredone, it is expected that the various pillars of economic growth will automatically start to move and move at an increased pace. Over time, the shift to a Secured Insurance approach should greatly enhance domestic consumption, increase domestic savings, further reduce interest rates for lending and make exports competitive, apart from helping to generate surplus funds for development (including infrastructure), enhance investment, eliminate poverty, and transform India into a rapidly growing, stable and inclusive economy.
Much has been tried for the past 72 years (with varying degrees of success) about building a vibrant economy It is a now or never situation for the Indian economy today. Here is a great opportunity to create a vibrant and dynamic economy and that should be utilized. That is what India needs today and that is what will cure our ailing age-old system of economic governance and drive us into an era of dynamic and vibrant entrepreneurship based on sound fundamentals into a period of long-lasting,a double digit economy growth.
Secured Cess to Insure and Accelerate National Growth is the New Way Forward to achieve the missionary goal of “StandUp India”.
By,
Dr. P. Sekhar, Chairman,
Unleashing India
Global Smart City Panel,
MTGF
By,
Prof Moni Madaswamy,
Professor Emeritus & Chairman (CIDSA & CITSA),
Shobhit Institute of Engineering and Technology
(Deemed To Be University)
Meerut & Former Director-General,
National Informatics Centre, GOI, New Delhi.
