[Opinion] End of the Mighty Pen | Digital Financial Transactions

[2022] 139 taxmann.com 61 (Article)

Synopsis

When English author Edward Bulwer Lytton said in 1839 that, “The pen is mightier than the sword” he only meant that the written word is more effective than violence as a tool for communicating one’s opinion on any issue. In 2025 the written word will continue to be effective as before but will not be conveyed through a pen but through the digital mode, through a digital pen or a direct digital message.

Introduction

The other day there was a visitor to my office after many years and as he was ushered into my cabin, he remarked “You have a nice collection of pens!!”. I was surprised as I realized only then that I did have a decent collection of pens. It also dawned on me that I had not used a pen for months. The digitization in our lives has increased in the wake of lock downs because of COVID-19. In the IT hub of Bengaluru where I stay, on my way to office and back, I see several ATMs of banks, and I never see a soul inside or outside. Even I have never been to an ATM in the last 6 months as my maid and driver accept digital payments and when I go for walk and have coconut water, I make payments through my mobile. A colleague of mine even got his shoes polished in Mumbai and paid for it digitally. I do not need to carry my wallet any more except to ensure its safe custody till the time Iam able to give up the numerous credit and debit cards and remaining cash. It is often lamented that, while a couple of decades back, India and China were in the same stage of development, but today in most indices of development, China is ahead. However, as far as digital payments are concerned, it is India, which has surpassed China.

Growth in digital financial transactions

I think many of us had similar experiences wherein every financial transaction is being done through the digital mode. However, when we go to a bank in India to avail a loan or even when we apply online for a loan, how is it that we still need to take our pens to make that rare signature to get access to certain services. All that is now changing, and it has already changed for many of the banks and financial institutions who have already availed the Digital Document Execution (DDE) services of NeSL. More than three lac transactions have now been carried out on the DDE platform and these are valued at hundreds of thousands of crores. Everyday thousands of transactions are taking place on the NeSL DDE platform, and it is estimated that 20% of these transactions are happening outside of banking hours. And we have not even scratched the surface, if we consider the total number of financial transactions done by the banks and financial institutions.

Even before the launch of DDE, banks were sanctioning and disbursing loans online but in the absence of a mechanism for online procurement of stamp duty or authentication, they were doing so by way of a click wrap agreement. This is like the acceptance of terms and conditions, which one would do when installation of the latest version of software on our phone. As the law of the land earlier did not permit payment of stamp duty for loan documentation through the digital mode, the click wrap agreement served a useful purpose in ensuring loan sanctions and disbursements happened in a fully digital mode. The banks and other lending institutions were also happy with this arrangement especially as the delinquency rate in such loans was very low.

During the last couple of years, the number loans disbursed through the digital mode has increased exponentially, it is also possible that the delinquency rate would increase because of external events like the outbreak of COVID-19. The time has probably come to reconsider if the documentation for such loan products needs to be more robust. To meet the requirements of banks, NeSL has also launched its Digital Documentation Execution (DDE) platform which ensures that documentation and disbursement happens through the digital mode. The banks are now able to secure themselves with documentation, which is fully digi

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