Ban Cash to Reduce Corruption - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 21 September 2013
Ban Cash to Reduce Corruption A  A  A

- By Asad Dossani, Author, The Lucrative Derivative Report

Asad Dossani
How can we reduce corruption? This is one of the most important issues we face as a nation. We are all aware of the negative impacts that corruption has on society. So what are we going to do to fix it? Here is one idea: Ban all large cash transactions.

Cash transactions are a fuel for corruption. Since cash transactions cannot be traced, it is very easy for two parties to exchange cash without anyone finding out. It means that a business that earns cash can evade tax. It means that a politician can accept a large bribe. Without cash, accepting a bribe becomes much more difficult.

This would work as follows: All transactions above a certain amount cannot be made in cash. Instead, they must be made using debit cards, credit cards, checks, or bank transfers. This means that any large transaction can be traced. Further, large cash withdrawals or deposits should be disallowed. This means that one cannot draw large amounts of cash to make a dodgy transaction. And further, and if someone accepts a large cash bribe, it can't be deposited in a bank or used anywhere.

While banning large cash transactions would not affect petty corruption, it could have a major impact on high level corruption. Cash will still be useful for making small transactions, and this protects those on lower incomes while fighting corruption at the top level.

A solution such as this one will take time to implement. Right now, we do not have the infrastructure for everyone to make transactions using a card or their bank. It is estimated that around 50% of Indians do not even have bank accounts. However, this is something we can change. As more banks open in rural areas, a greater proportion of the population will have access to banks and financial services over time.

Corruption is a long term problem, and it requires a long term solution. Cash is the biggest tool used for corrupt activities. By taking away large cash transactions, we can make it much tougher for anyone to give or accept a bribe. This is something can definitely work towards over time.

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is a financial analyst and columnist. He actively trades his own and others' funds, investing primarily in currency, commodity, and stock index derivative products. Prior to this, he worked at Deutsche Bank as an analyst in the FX derivatives team. He is a graduate of the London School of Economics. Asad is a keen observer of macroeconomic trends and their effects on global financial markets. He is deeply passionate about educating investors, and encouraging individuals to take part in and profit from financial markets. To put it colloquially, he wishes to take Wall Street products and turn them into Main Street profits!

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41 Responses to "Ban Cash to Reduce Corruption"

Sameer khan

Sep 29, 2013

This looks easier said than done. In a population of 100cross we have only about 2-3 crore unique account holders. How will this be done. RBI is doing it bit to account for unaccounted money such as kiosk banking, mobile payment gateways Etc. But still a long way to go. ..Any curb to cash transactions will hurt common man more than the corrupt. As corruption will simply change its methods. ..



Sep 29, 2013

The root cause of corruption is government and the bigger the govt bigger the corruption. We have to remember what Thomas Jefferson said 'least governance is best governance'. If govt is the owner of BSNL corruption in appointment, spares, bids, contracts are inevitable and will not change even if death penalty is introduced. If there is no BSNL then there is no worry about corruption. So the best way to reduce corruption is privatization of BSNL, Railways, Air India, NDMC, ONGC and all govt companies which interfere in the economy which is anyway illegal, immoral and evil. The duty of govt is to protect the lives of its citizens and not to run companies. This way we shall not see all the lumpen elements competing for power as well.

Like (1)


Sep 26, 2013

Well said. Any steps to make this happen? My suggestion is that RBI can make a condition that a company can with draw 100% of the revenue as cash from their bank account today and has to gradually change to 0% in 100 months @ 1%/month rate. so the business have time to switch to 100% electronic over time less than a decade.

Like (1)

Y Chackochan

Sep 25, 2013

While I would like to agree with the author that all transactions involving large amounts should be in forms other than cash for the reason that they can be traced, I wonder how on earth are we not able to trace millions and crores of rupees stashed away by cyber criminals and it seems unending. I feel we need to rework the genes within us. In a nutshall, we are born to live with it, in the absence of a political will, and that will is nowhere inthe vicinity!

Like (1)


Sep 23, 2013

Guillermo's one liner “is Assani working for a totalitarian state?” needs some consideration.
Moving towards a more cashless system as early as possible is in no way a move towards a totalitarian state. In fact, it is the opposite. Totalitarians actually need an oligarchic system where flow of wealth is controlled by them. In a democratic system a cashless structure to the extent possible actually helps prevent money power leading to opaque and totalitarian politics. There is every reason to believe that Indian politics now is actually sought to be controlled not so secretly by near-totalitarian political forces depending largely on money power. It can also be argued that many polities across the world are controlled by money power, with varying degrees of sophistication and opacity.
Winds of change are blowing across India and across many parts of the world. Corruption, sleaze, tax frauds and other crimes are being increasingly exposed and the wrongdoers brought to book, with the justice systems playing active roles in many cases. In India could we have imagined a Union Minister being jailed some years back? Or the Prime Minister himself being rigourously questioned about coal block allotments? Or the CBI seeking freedom from the stranglehold of the bureaucrats and their political bosses? Has not our Parliament promised a fasting Anna Hazare that a Lok Pal Bill meeting his and people's expectations will be enacted?
An ex-IMF Chief now has to defend himself against aggravated pimping charges in France. An ex-German President has been charged with accepting bribes from a film producer to peddle his influence. If one 'googles' or 'bings' the words “corruption charges against prominent people” or ploughs the internet in a variety of ways one gets a lot of information that points to the fact that this millennium is well on its way to an unprecedented groundswell of action against corruption, sleaze, tax evasion and avoidance, money laundering and many such ills afflicting governance and directly contributing to poverty and inequality all over the world. World bodies like the UN, OECD, Group of Eight and G-20 are addressing the problems with some urgency, though not to the desired extent. The United Nations Convention Against Corruption has been ratified by a majority of countries. The G-20 have agreed this month in St. Petersburg to exchange information about tax cheats, to put it colloquially. G-20 and OECD are set to eventually bring on board many developing countries in tackling corruption, tax evasion and tax avoidance in a collective ambiance. The Millennium Development Goals will certainly be more achievable with synergy in this area from more and more countries.
A generation of evidence-based activists, the “Millennial Factivists” will discuss at UN Headquarters today ways technology and data can be used to turbocharge development by making governments more transparent, accountable and better providers of public services. They will also explore the ways technology encourages greater public participation in decisions that affect their daily lives and how 'Factivism' can help meet the current Millennium Development Goals and be used for framing a post-2015 agenda focused on eradicating extreme poverty by 2030. This discussion will be Webcast live 5:30 PM ET USA. (5:00 AM IST 24th). (Quoted from news/event in Transparency International website)
Against this backdrop, any, repeat, any idea or suggestion that aims at curbing corruption needs to be looked at in a mature and analytical manner.
When thus viewed, moving towards a more and more cashless system along with tracking large cash transactions is eminently desirable.
There is a very human predicament here we need to address. Many spirited individuals who have fought corruption and other crimes have paid a heavy price, sometimes with their lives and limbs. Many have lost career growth and well deserved prosperity. Many have been blackmailed and coerced into becoming conduits of bribe and influence peddling that trace back to powerful people. Many have become corrupt under the dynamic of “if you can't lick 'em, join 'em.” We should empathize with these individuals when they make cynical and sarcastic remarks against ideas that address the problems of corruption, sleaze and so on. It is the duty of those among us who are serious in putting in some effort, however small, in fighting corruption and so on to help them see the big picture that is now emerging in this millennium as explained above. Cynicism is natural. But cynicism is never life sustaining. Hope, vision and courage also come naturally and spread naturally and guide the destiny of man. Choose the latter and your life gets depth and purpose and fulfillment.

Like (1)

r v iyengar

Sep 23, 2013

Not a single Political Party, save may be the AAM AADMI Party , is willing to divulge the source of donations they receive. As on today There is a limit of Rs. 20,000/- on cash donations made. All parties, see to it that all donations are of a denomination of less than Rs. 20000, to avoid disclosure of source. If our leaders , who are entrusted with the task of bringing in honesty and openness in governance are not upto it,probity in Public Life will remain a pipe dream.
Even today, in spite of the Vigilance Commissions, ACB and Lokayuktas, corruption in Govt departments is rampant. If the implementation remains non functional, rules do not matter.

Like (1)

Ajay Gupta

Sep 23, 2013

As I know most of the transactions have cash limits, and secondly who has to bell the cat?
It is difficult question? Decision making is difficult job.

Like (1)

sathyanarayana TS

Sep 23, 2013

An excellent idea. The GOI is toying with small cash transactions like gas/kerosine subsidy, so that the large ones can escape and fund them for elections. Perhsps, AAP can take it up as an election manifesto and RBI to reduce supply of currency and make it mandatory for all transactions above Rs.10000/- by cheque/electronic transfer and make it a law to declare currency holdings above Rs.1 lakh.

Like (1)


Sep 23, 2013

Good idea but who will make the policies and laws to implement it .The people who have spent crores of rupees to win the election and came in power to multiply there assets Do you think that politicians in power do not have ideas to curb the corruption and are fools and will be ready to stop there business and modus operendi on your suggestions in the interest of nation and common people !!!!

Like (1)

Mallya M V

Sep 23, 2013

Any one may insist cash as bribe and it can not be controlled. But while spending the amount, if there is proper mechanism to oversee by a regulatory authority, then coruption can be controlled. Towards this end, first of all, Aadhar ID should be made mandatory for all in the country and for any spending, say, above Rs.10000(Revenue expenditure) and Rs.50000(Capital expenditure), Aadhar number is to be produced/linked, which can be tracked in Central server of Aadhar, which should be accessible to Tax authorities.

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