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Write the meaning of cashless transaction, while discussing its advantages in detail. Write down its limitations.

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Its simple meaning can be drawn from the term ‘cashless transaction’. This type of transaction is made between buyer and seller without exchange of money. It is possible by transferring of money directly into the bank accounts. It is a part of e-commerce which started in India a decade ago.

Advantages of Cashless transactions : Cashless transactions are the need of time and are also essential, convenient and safe for the economy. In present time, this mode provides a better alternative. Witnessing the fast-developing economies of present time, it is a simple and convenient alternative.

Following are the important benefits of cashless transactions –

(i) Saving of wealth and time : Customer class is benefited the most from cashless transactions. Many types of bills have to be physically deposited on the counter. This involves time and money in travelling. Today, many types of discounts are available on online shopping.

(ii) Freedom from keeping money in cash: For big purchases on special occasions, one has to keep money in cash in heavy quantity either in purse or in pocket, which is very inconvenient, risky and unsafe. By adopting cashless transaction, one gets freedom from keeping cash.

(iii) Reduction of pressure on bank: By cultivating the habit of cashless transactions, unnecessary burden on banks is reduced. People often go to bank for the need of cash. Apart from this, bank has to keep less record of cash transactions. Due to computerization of banks, the money is automatically credited and debited in the account of the customer.

(iv) Increase in revenue : Due to cashless transaction, the money paid by customers is directly transferred into the account of the sellers. This has increased transparency in income declaration and has resulted in increase of tax revenue.

(v) Reduction in black marketing: If transaction becomes cashless, then it becomes easier for the government to assess the quantum of goods purchased and sold. This helps in identifying the stocks of different parties and in reduction of black marketing.

(vi) Restrictions on illegal activities : There are various transactions which are done with the objective of speculation. These transactions are not disclosed to the government. Major illegal activities are common in land and real estate. Registry is made for lesser amount and rest of the amount is paid in cash. This results in heavy loss of tax revenue to the government.

Limitations of Cashless Transaction:

(i) Problem for illiterate class : The largest problem in proceeding ahead towards a cashless economy is the existence of a big illiterate and less educated class. This limits its advantages. Less educated class tries to avoid cashless transactions.

(ii) Lack of banking habits : It is a big problem of developing countries. People do not have banking habits. In a large country like India, under Prime Minister Jan Dhan Yojna, crores of bank accounts have been opened free of cost. But due to non-banking habits, these accounts are non-operative.

(iii) Apprehension of fraud : Due to apprehension of fraud, people avoid cashless transactions. If they keep their password confidential, fraud is almost impossible. This type of fraud is due to negligence and carelessness.

(iv) Useless in many transactions : There are many trades where cashless transaction are not useful such as small businesses, workers, cobblers, washermen, vegetable vendors, milk vendors, daily workers, mechanics, cleaners, etc. Due to small amounts involved, they prefer taking money in cash.

(v) Limited expansion of banking facilities : In a large economy like India, limited expansion of banking facilities is also a great hurdle in the implementation of cashless transactions. In India, banking facilities are absent in several villages. In such state of affairs, cashless transactions become limited to the urban areas only.

(vi) Lack of effective laws to control cyber crimes: In India, presently, we lack effective rules and regulations for the protection of customers dealing in cashless transactions. In the absence of effective laws, cyber crimes take place during cashless transactions, and with ordinary laws it takes a long time and customers suffer.

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