Is paper money losing currency?

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Is paper money losing currency?

Is your wealth being rated in electronic calculus? Is it merely numbers and figures recorded in banks, share market displays and insurance databases? What is the physical form of your wealth? What actually does wealth mean these days?

CJ: Vaatupura A...

Sat, Feb 02, 2008 15:13:11 IST

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Indian Currency :

APART FROM a few currency notes you slip out from your purse to pay a few locally generated bills, like a restaurant bill, bill at a small provision shop or the money you tender for getting a ticket from a corporation bus or at railway booking counter, or the money you pay at a gas station for filling your car with diesel, petrol or gas. Where else do you find paper currency now?

Is your wealth being rated in electronic calculus? Is it merely numbers and figures recorded in banks, share market displays and insurance service providers’ databases? What is the physical form of your wealth? Real estate, cars, investments, bank balance your accounts show, your monthly earnings that gets added to your account, or the increasing turnover indices your business organisation posts every quarter? What actually does wealth mean these days? Have you ever put in a little thought into it?

I am increasingly prone to think that our wealth has no form at all. The feeling that we have wealth is a feeling generated by facts and figures. Fact that you have a property or a business, and figures that a huge chunk of your shares in the marked got appreciated as the stock indices went beyond 20,000 or 30,000 points. This is a state of mind, which is endorsed by a system called monetary regime. This monetary regime itself is a huge system, which is based on numbers and their fractions. Practically speaking of money or its existence is made less important and their being there in the form of something is more important.

My account tells me that Rs 1,32,000 are contained in it, and I can use it 24/7. When I issue a cheque to someone for, say, Rs 20,000, the same amount gets deducted from my account and the same amount gets added to the recipient of my cheque, which in turn makes his account turn Rs 20,000 stronger.

When my company transfers Rs 10,000 to my account, my bank updates my account with the same, and I feel that I have Rs10, 000 more in my account. I tender my ATM card to all shops to pay my bills. What they in turn get is financial data added on to their account. Are they going to withdraw cash at any point? They simply issue cheques to their suppliers and the process goes on and on. So how does my credit card service provider conduct business?

He guarantees me an amount according to my wealth and solvency and I am free to use that amount via my card for whatever purpose I want. Figures of money get transacted from one number to another and the process is chained into a network controlled by the RBI. Is not the space of hard currency getting shrunk everyday?

So it raises the question whether we need to print loads of currency notes? Is it possible to keep this paper currency in the form of numbers and figures? The amount of paper money involved in everyday transaction is much less than the amount that gets transferred in the form of monetary data. These data are guarantees and whoever is having whatever figures in their accounts are guaranteed that their amounts and their foreign currency equivalents will be honoured anywhere inside or outside the country.

In these times of plastic money and Internet banking, paper currency may not hold any sway. And as more and more people come to have bank accounts and cards of some sort, the amount of paper currency they are likely to transact in would tend to come down drastically in the coming years. ATM cards and credit cards of many dimensions and denominations are very much in vogue and great many companies are offering bank accounts and withdrawal cards right after new recruits come in.

The same way, more and more small and medium scale business firms are coming to terms with this play of plastic money, and they equip themselves with support systems to accept cards of all types. Therefore, many more people would accept this paperless monetary regime in the coming days, and the number of those who get obsessed with the sheen of currency too would come down.

See the advantages it offers. Theft can be controlled, theft related crimes and deaths could by stopped, risk of carrying big money can be avoided, money management in the accounts sections will be easier; counting machines, bundling and dispatching of currencies to banks, and the like could be minimised.

Printing currency involves a lot of security concerns and finally the scourge called fake currency and their rackets could be curbed to a great extent if we could do without too much paper currency. When major part of the transaction takes place digitally, monetary frauds could be curbed too. Less paper currency on the move leads to more monetary security in the national and individual levels.

Where are we going to be? A domain wherein everyone is rich or poor in his or her own monetary terms and their wealth will be recorded in numbers and figures, and the major share of their transactions, apart from the ones I mentioned in the opening of this article, will be carried out, guaranteed and honoured by the state owned monetary regime controlled by the Reserve Bank. I think it is good to have less currency and more peace of mind and security, both for the individual and for the country.

Is this possible? We have many complete banking districts in our country, and many districts are out to grab that position. Kottayam is a complete banking district, and all the families in this district have at least one bank account. This account network could be used to develop a paperless monetary regime. What if we try it in a phased manner? What do you say?

After all, it is the thought that ‘you are rich’ that makes you rich, not always the bundles of money you have in your shelf that give you that feeling. Your being rich is a matter of numbers, and when those numbers get honoured by the state machinery, you feel richer because your money is endorsed by the state.

The problem is you, as you have to have bank accounts, where all your transactions are digitally tracked. Finally, you cannot simply deny that you are richer or poorer than what you actually are. Would there be many takers for this last proposition in my country? Readers, please respond. Is paper money not losing currency?

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Posted comments (3)

	Mr.Jayaprakash your article was a good read. Interesting and informative and show how electronic money has saved time, money and effort spent on physical currency. However, I feel that physical currency will still exist, simply because plastic money transactions cannot be undertaken for small value transactions (the technology, network and other costs are high if you do electronic transaction for Rs.100 or less). But if what you say really happens, then Ill start collecting more currency so that in future it becomes a rare collection or antique. In India practically its time to get rid of coins below Re.1 denomination. Gradually note of Rs.5, Rs.1 and Rs.2 are getting phased out. So it would be wise to collect these so tomorrow it becomes a valuable asset. The future is definitely of smart and efficient currency management, where the central bank has to plan issuing the right denominations at right values and phase out obsolete ones.
	\| 14 March 2008 Reply to Comment \| New Comment \| Report Abuse

	Very interesting. Really plastic money reduces paper money. That is the need of the hour. As said in the article, it reduces many burdens to the state and finance dept. More safer than paper money. There will be exact calcultions for measuring the growth of the economy. At the same time if there are some tax-concessions for using plastic money, it will be still encouraging. THANQ
	\| 04 February 2008 Reply to Comment \| New Comment \| Report Abuse

Thank you yelraj for the that positive comment. if india could adopt this new monetary regime, it would do away with a lot of maladies it is suffering from. thanks for the comment. jaypeesukham@yahoo.c om

jaypee | 04 February 2008

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