From Cheques to Cashless Dignity, A Century’s Journey in Financial Inclusion and Workers’ Rights

From Cheques to Cashless Dignity, A Century’s Journey in Financial Inclusion and Workers’ Rights

A parliamentary exchange from exactly a century ago, dated February 2, 1926, offers a fascinating window into a nascent debate that continues to shape India’s economic and social landscape today. In the Lok Sabha, Union Labour Minister K.V. Raghunatha Reddy, replying to a debate on the Payment of Wages (Amendment) Bill, made two pivotal assurances. First, he stated the government would “look into the question of opening branches of banks in colliery areas, tea gardens and other places to help workers encash their wage cheques.” Second, he guaranteed that payment of wages by cheque, as permitted by the Bill, would be “purely voluntary.” This moment, frozen in time, sits at the intersection of three profound and enduring narratives: the struggle to liberate workers from predatory debt, the state’s evolving role in financial inclusion, and the tension between technological progress in wage systems and workers’ practical realities. A century later, as India spearheads a digital financial revolution, revisiting this debate reveals how far we have come, what timeless challenges persist, and how the core questions of agency, access, and exploitation remain strikingly relevant.

The 1926 Context: Unshackling Workers from the “Stranglehold of Moneylenders”

The primary impetus for the 1926 Amendment was not bureaucratic efficiency but a humanitarian and economic crusade. Moving the Bill, Minister Reddy declared its design was to “protect workers from the stranglehold of moneylenders.” In colonial India’s industrial and plantation enclaves—collieries, tea gardens, jute mills, and factories—a vicious cycle of debt bondage was endemic. Workers, often migrants living in isolated company towns, were typically paid in cash at the end of long intervals. This system was rife with exploitation:

• The Cash-in-Hand Trap: Large lump sums of cash made workers targets for theft, familial pressure, and impulsive spending, often leaving them penniless before the next payday.

• The Moneylender’s Web: When cash ran out, the local moneylender (sahukar) or the company’s own advances system was the only recourse. These loans came with exorbitant, often compounding, interest rates, trapping workers in perpetual debt (peshgi or advance system). The moneylender frequently doubled as the village shopkeeper, creating a closed, exploitative economy where workers paid inflated prices for goods against their future wages.

• Lack of Alternatives: Formal banking was a distant urban phenomenon. For a coal miner in Jharia or a tea plucker in Assam, a bank branch was non-existent. Their entire financial ecosystem was confined to the company store and the moneylender’s ledger.

The introduction of payment by cheque was a radical, technology-enabled intervention. It aimed to break this cycle by dematerializing the wage. A cheque, unlike cash, required banking infrastructure to encash. It couldn’t be immediately grabbed by a moneylender at the factory gate. It was a piece of paper that, in theory, would force the creation of a formal financial pathway for the worker.

The 1926 Debate: Voluntarism vs. Coercion – A Foreshadowing of Future Tensions

The parliamentary debate, as recorded, highlights a political divide that still echoes today. While members from most parties welcomed the Bill as a liberating measure, Mr. Dinen Bhattacharya of the CPI-M voiced a critical dissent. He contended that employers would try to make payment by cheque compulsory, leading to “great hardships to the workers.”

This dissent pinpointed the central dilemma: the gap between legislative intent and ground-level implementation. Minister Reddy’s assurance of voluntarism was necessary because, without it, the well-intentioned reform could become a tool of oppression. Imagine a scenario where a tea garden in remote Assam made cheque payment mandatory. Without a nearby bank (as the Minister himself acknowledged was a problem), the worker would be forced to:

1. Travel long distances, losing a day’s wage and incurring travel costs.

2. Possibly rely on a middleman (a contractor or a local shopkeeper) to “encash” the cheque for a hefty fee, recreating the very exploitative intermediary the law sought to eliminate.

3. Face delays in accessing their own money for daily necessities.

Bhattacharya’s fear was that employers, seeking to reduce the risks and logistical burdens of handling large cash payrolls, would impose cheques without ensuring the ecosystem for their use. The Labour Minister’s twin assurances were thus inseparable: permission to pay by cheque had to be coupled with the state’s responsibility to provide banking access. His promise to “look into” opening bank branches was the crucial, enabling counterpart to the legislative change.

A Century of Evolution: From Branch Banking to JAM Trinity

The journey from that 1926 promise to today’s reality is a story of fits, starts, and a recent digital great leap forward.

• The Long March of Brick-and-Mortar Banks: Post-independence, nationalization of banks (1969, 1980) explicitly included a social obligation for expansion into unbanked areas. The Lead Bank Scheme (1969) tasked specific banks with developing banking in districts. Progress was slow but steady. The 1970s and 80s saw branches gradually reach larger villages and semi-urban areas. However, the “last mile” to truly remote collieries, plantations, and tribal hamlets often remained unconnected due to high costs and low viability.

• The Business Correspondent (BC) Model (2000s): To overcome the physical branch hurdle, the Reserve Bank of India pioneered the BC model, allowing banks to use retail agents (kirana shops, post offices) to provide basic services. This brought banking closer but was hampered by connectivity issues, agent reliability, and limited transaction scope.

• The Jan Dhan-Aadhaar-Mobile (JAM) Revolution (2014 onward): This marked the true paradigm shift. The Pradhan Mantri Jan Dhan Yojana (PMJDY) unleashed a tsunami of account opening, bringing formal banking to hundreds of millions. Aadhaar provided a secure, biometric identity for seamless KYC and direct benefit transfers. Mobile penetration became the delivery vehicle. Suddenly, the 1926 problem of “encashing a cheque” was rendered obsolete.

• The Wage Payment Transformation: Today, wage payment is undergoing its own revolution. Mandatory payment into bank accounts for workers in organized sectors and for government scheme beneficiaries (like MGNREGA) is the norm. The Unified Payments Interface (UPI) allows real-time, fee-less transfer of wages directly from employer to employee’s phone. The physical cheque and the need to “encash” it are becoming relics.

Contemporary Echoes: Persistent Challenges in a Digital Age

Despite the technological leap, the core concerns raised in 1926 remain, albeit in new forms.

1. Voluntarism vs. Mandates (The CPI-M Fear, Updated): While digital payment into a bank account is now often mandatory for transparency and preventing leakage, it raises its own issues of digital exclusion. The elderly, illiterate, or those in areas with poor mobile/internet coverage can be disenfranchised. The modern equivalent of Bhattacharya’s “great hardship” is the worker who cannot access their bank app, remember a PIN, or navigate a faulty micro-ATM.

2. The New Middlemen and “Cash-Out” Fees: While the moneylender at the factory gate may be gone, new intermediaries have emerged. Local shopkeepers with Point-of-Sale (PoS) machines or BC agents often charge a fee for dispensing cash, effectively taxing the worker’s withdrawal. The digital divide creates a cash-economy penalty.

3. Financial Literacy & Predatory Digital Lending: The liberation from moneylenders is now threatened by a new beast: predatory digital lending apps. Workers with bank accounts and digital footprints are targeted with easy, high-interest loans, leading to a new cycle of harassment and debt. The “stranglehold” has gone online.

4. Access in Last-Mile Geographies: Minister Reddy’s promise of banks in “colliery areas and tea gardens” is still a work in progress. While accounts exist, physical cash access points (ATMs, BCs) and digital network reliability in deep rural, forested, or mountainous areas remain inconsistent. The wage may arrive digitally, but converting it to usable cash can still be a challenge.

The 1926 Parallel from Britain: Planning for Resilience

The snippet from London, dated February 3, 1926, about the British government’s plans for “maintaining essential food supplies in the case of national emergency” provides a poignant parallel. It speaks to the state’s role in systemic resilience. Just as Britain was preparing a “skeleton organisation” for food distribution via its Postmaster-General, India’s 1926 wage cheque debate was about building financial system resilience for the most vulnerable.

Today, India’s digital public infrastructure (DPI)—UPI, Aadhaar, Account Aggregators—is that skeleton organisation for financial resilience. It is designed to ensure the “supply” of financial services can withstand shocks and reach every citizen. The JAM trinity is the modern answer to both the British food supply concern and the Indian wage access problem: a state architected system for reliable distribution in times of both normalcy and crisis.

Conclusion: The Unfinished Journey from Financial Access to Financial Empowerment

The century-old Lok Sabha report is not a quaint historical artifact. It is a foundational document in India’s long war for worker dignity through financial sovereignty. Minister Reddy’s assurances—voluntary adoption coupled with state-enabled access—remain the golden principles for any financial inclusion policy.

We have moved astronomically beyond the cheque. The wage is now a data packet, not a paper slip. The bank branch is now in the worker’s palm. Yet, the ghosts of 1926 still haunt us. Has the moneylender’s stranglehold truly been broken, or has it just digitized? Is payment truly voluntary in a world where cash is being actively discouraged? Has the state’s duty to “look into” providing access been fulfilled when network coverage and digital literacy are the new barriers?

The journey that began with a debate on cheque payment in isolated collieries has culminated in a world-leading digital payments ecosystem. But the ultimate goal remains unchanged: to ensure every worker has full, free, and facile control over their hard-earned wages. The debate from 1926 reminds us that technology is merely a tool; its value is determined by the safeguards of voluntarism and the state’s unwavering commitment to building the accessible infrastructure of dignity around it.

Q&A on the Century-Long Journey of Wage Payment and Financial Inclusion

Q1: What was the primary social problem the 1926 Payment of Wages (Amendment) Bill aimed to address, and how did payment by cheque purport to solve it?
A1: The Bill aimed to break the vicious cycle of debt bondage that trapped workers in collieries, tea gardens, and factories. Workers paid in cash were vulnerable to theft, impulsive spending, and, most critically, predatory moneylenders (sahukars) who offered loans at exorbitant interest, often creating perpetual debt. Payment by cheque was intended as a dematerializing intervention. A cheque couldn’t be instantly claimed by a moneylender at the factory gate. It required a bank to encash, thereby forcing the creation of a formal financial pathway for the worker and theoretically insulating the wage from immediate exploitation, encouraging savings and breaking the stranglehold of informal debt.

Q2: What was the critical dissent raised by CPI-M member Dinen Bhattacharya during the 1926 debate, and why was it prescient?
A2: Bhattacharya contended that employers would try to make cheque payment compulsory, leading to “great hardships.” This dissent highlighted the gap between legislative intent and ground reality. He foresaw that without the necessary banking infrastructure (which the Labour Minister admitted was lacking), a mandatory cheque system would backfire. Workers in remote areas would be forced to travel long distances to banks or pay fees to middlemen to cash their cheques, recreating the very exploitation and hardship the law sought to eliminate. His fear underlined that technological change (cheques) without ecosystem support (banks) could become oppressive.

Q3: How did Labour Minister K.V. Raghunatha Reddy’s twin assurances address the core tension in the 1926 reform?
A3: Minister Reddy’s assurances provided the necessary balance for the reform to be empowering, not exploitative:

1. Voluntarism: He assured that cheque payment would be “purely voluntary,” requiring worker authorization. This protected workers from coercive employers who might impose cheques for their own convenience.

2. State Responsibility for Access: He promised the government would “look into” opening bank branches in collieries, tea gardens, and remote areas. This was the crucial enabling counterpart, acknowledging that granting the option to pay by cheque was meaningless without state action to provide the means to use it.
   Together, these assurances embodied the principle that worker agency (voluntarism) and state-supported access (bank branches) must go hand-in-hand.

Q4: Drawing a parallel from the 1926 news snippet about Britain, how does India’s current digital public infrastructure (DPI) represent a modern solution to the age-old problem of distribution and access?
A4: The British report discussed state plans for a “skeleton organisation” to distribute food during emergencies, managed by the Postmaster-General. This mirrors the state’s role in creating resilient systems for essential distribution. India’s Digital Public Infrastructure (DPI)—the JAM Trinity (Jan Dhan, Aadhaar, Mobile) and Unified Payments Interface (UPI)—is the modern, digital equivalent of that skeleton organisation for financial distribution. It is a state-architected system designed to ensure the reliable, shock-resistant “supply” of financial services to every citizen, just as Britain planned for food. It solves the 1926 access problem by making the bank branch virtual (on a mobile phone) and transactions instantaneous, overcoming the physical barrier of building branches in every remote hamlet.

Q5: In today’s context of digital wage payments and UPI, what are the contemporary echoes of the 1926 challenges regarding voluntarism, access, and exploitation?
A5: The core challenges have evolved but persist in new forms:

• Voluntarism vs. Mandates: While digital payments bring transparency, mandatory bank transfers can digitally exclude those without phones, connectivity, or literacy, echoing the hardship of compulsory cheques without access.

• Access Barriers: The problem is no longer a lack of bank branches but poor digital connectivity, unreliable cash-out points (ATMs/BCs), and “cash-out fees” charged by agents, creating a new penalty for the cash-dependent poor.

• New Forms of Exploitation: The “stranglehold of moneylenders” has digitized into predatory digital lending apps that target workers with easy, high-interest loans, leading to harassment and new debt cycles. The challenge of protecting workers from financial exploitation has simply moved to a new, algorithm-driven arena.