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SMEs in the Post-Demonetisation Era - Changing Times Warrant a Change in Mindset -Mr. K.V.Srinivasan


The decision of the Government on the 8th of November to demonetise a substantial stock of India’s currency is potentially, a game changer. We have been very comfortable with a cash oriented economy and a large part of the business conducted especially by the small and medium enterprises (“SME”) has been in cash.


The real message being given out by the Government is that they want the economy to graduate to non-cash methods (such as cheques/electronic payments) for better tracking, greater tax compliance and hopefully as a benefit, lower tax rates. There is no escape from better compliance and honest reporting of business income. Once GST is implemented, possibilities of under-reporting of income will become more difficult. The choice before us, especially the SMEs is therefore to ignore the change and suffer in the long run or embrace the change and benefit from greater transparency.Ideally, the SMEs should avail of the opportunity and welcome electronic modes of payments. Abandoning the attitude towards cash and accepting banking/electronic modes of payments will require a complete change in mindset.


SMEs transforming into entities that transact largely through electronic modes will have multiple benefits:

  • A large part of the informal economy will get mainstreamed.
  • SMEs can benefit from greater control on their finances.
  • Newer markets could open up for them – for example a large part of e-commerce works on cashless payment models and the SMEs can easily tap into this segment.
  • Banks and financial institutions will be more open to lending to such SMEs that report authentic business numbers – this will increase growth rates for such SMEs.
  • They can report their true growth and thereby attract external investors to their businesses.

SMEs traditionally, have been slow in adopting to new technology and changes and many a time this has created road blocks for their growth. Perhaps it is now the best time to move away from a traditional mindset and go digital for SMEs to manage their business collections and payments.


One can make a start in a small way – say by helping workers to open bank accounts & crediting their salaries in their account, or by giving them prepaid cards instead of cash; or by ensuring suppliers are paid through NEFT/RTGS. There may be initial resistance, but over a period acceptance will happen. After all, changing mindsets is a slow process, isn’t it?


The world is moving digital – can SMEs lag behind? Going cashless is not just the need of the hour, but also could be a tool towards greater self-reliance!