Ideas for Streamlining Demonetization

For the last one week, everyone in India is occupied with trying to get their old 500 and 1000 rupee notes exchanged. The sheer size of the country and the extent of currency to be exchanged (86% by value) would have always been a logistical nightmare.

Most people have been debating about the efficacy of the move and the challenges in implementation. Can we in some way get around this problem of people queuing up outside banks and ATMs for hours only to find that there is no cash to dispense? What a waste of productive time at a national scale!

A while ago, I was watching RaGa cribbing about the inconvenience to people on the news with a couple of friends, when an interesting thought struck me to create a nationwide token system. Let me elaborate this in some detail.

Smartphone penetration in India is not high but mobile penetration is quite high. Individuals send an SMS to a predetermined number, say, “WITHDRAW <PINCODE> <AMOUNT>”. A central system aggregates the demand at a given pincode and allocates the individual to a specific bank/ATM in a specific 60-minute time window. The individual then turns up at the ATM at the given time and gets the moolah! Queues would at most be 1-hour long and people will be able to spend their productive time elsewhere.

The pincode part can be kept optional so that people who are not aware about these things are not inconvenienced. In those cases, the telecom operator helps to locate the pincode based on the tower sending the SMS. I am not too sure how easy it is for the telecom service providers to share this info on a real-time basis.

The system should operate on a FIFO basis and probably only run for a 2-day window (to keep the queue manageable and also because cash visibility beyond that period might not be accurately predictable). In case there’s no possibility to get adequate cash at your Pincode for next 2 days, there would be a regret SMS and the individual can try again at another location.

Another idea is to create a national IOU system through sms. So let’s say, I want to pay Rs. 20 to the rickshaw-wallah. I send an SMS “PAY <MOBILE> <AMOUNT>” to a designated number where <MOBILE> stands for the mobile number of the rickshaw-wallah. This is maintained by the government along with the telecom operators as a credit balance against each mobile (if we can send data to friends in this way, why not money?). The rickshaw-wallah can draw on this credit balance when he wishes to buy some daal on the way home, in turn transferring the amount to the kirana vendor. This goes on till the dust on this demonetization drive has settled. After this, any credit balance can be transferred to your account or withdrawn from an ATM (this will be to the nearest Rs. 100). A one-time password can be generated to secure such encashments.

I am sure there are several loopholes and areas of improvement in these suggestions. But it’s better to at least try and contribute to the solution than just bemoan the problem (like RaGa).

P.S.: The other ideators — Girish Mani and Rajkumar Alluka.