Bengaluru

In the absence of cash, business is driven by trust

Due to the cash crunch, farmers are dumping their produce in markets and going home with just an IOU note from wholesalers.— Photo: K. Murali Kumar

Due to the cash crunch, farmers are dumping their produce in markets and going home with just an IOU note from wholesalers.— Photo: K. Murali Kumar  

The impact of demonetisation of high-value currency notes may be the subject of much debate, but one thing is sure: it has increased the availability of credit, based on trust, in the marketplace. This extends from trading in goods and services to lending cash to people without collateral.

Small businesses without card swiping machines have two options: either accept old currency or trade in credit by placing immense belief in their customers. Most are doing both. However, running on credit has hit farmers, who need cash to pay off dues, the most.

G. Muniswamy Gowda, a vegetable grower in Devanahalli, said that he has been supplying vegetables to the market on credit most days. “The traders also don’t have money, particularly not in the new currency or Rs. 100 notes. Most traders in K.R. Market are asking to dump our produce in the market for credit, against a signed note by them. Over the last few days, some of them have paid me in installments. However, I still am owed over Rs. 40,000 and am facing a severe cash crunch,” he said. There is no guarantee when he will receive his pending dues.

The situation in APMC yards - co-operative markets - is no different. “We are unable to pay farmers for their produce as most of them refuse to take cheques. Most of them are giving us their produce on credit. A few are taking post-dated cheques. Our outstanding to farmers has increased multiple times over the last 10 days, to such an extent that we fear that repayment will have to be staggered over the next few months,” said Ravi Kumar, a senior trader in the APMC Yard, Yeshwantpur.

The credit is based on trust, which has been growing. Madhav Rao of Krishna Bhavan, an eatery in Rajajinagar, has now begun maintaining a book for credit accounts. “Among our regular customers are many migrants and other people who work nearby. They don’t have cards. We give them food and make them sign each time in the book. If we don’t extend credit, many will go hungry,” he said.

There are many such stories across the State. Ganesh K.V. runs a stationery shop near Malnad College of Engineering in Hassan. He has helped many students by offering cash on credit to help them overcome their immediate needs.

“The students have debit cards, but ATM kiosks do not have cash. They cannot go to banks as they have to attend classes. Many students took a few hundred rupees while a few got thousands,” he said. Interestingly, some students whom he is not familiar with have also borrowed from him. “I trust the students. All of them will return the money once they get cash,” he told The Hindu .

Raju Gauli runs a small restaurant in Vijayapura. He carefully keeps small paper chits that contains a signature and amounts ranging from Rs 350 to Rs 750. These are the change owed to him by his grocer.



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Printable version | Aug 10, 2020 9:29:14 PM | https://www.thehindu.com/news/cities/bangalore/In-the-absence-of-cash-business-is-driven-by-trust/article16668959.ece

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