Demonetisation boosts digital payments; debit card growth jumps over 30%


The acute shortage of cash has driven up both the volumes and value of card transactions at point-of-sale (PoS) machines. Data from the Reserve Bank of India (RBI) shows the value of transactions in the first 19 days of December — for a sample of four banks — is up nearly 30% over the comparative period of November.

The aggregate value of credit and debit card transactions during December 1-19 was R28,620 crore compared with R35,240 crore for the whole of November. If card transactions continue at the current pace, these four banks would report a value of around R45,100 crore for December. This would, nevertheless, be smaller than the R51,121 crore clocked in October, the peak of the festive season.

Analysts expect digital transactions to rise sharply as a result of the government’s decision to withdraw high-value bank notes, amounting to 86% of the currency in circulation. However, in the near term, an environment of scarce cash may have caused consumers to hold back spends including those through digital channels.

There are an estimated 1.5 million PoS machines in the country today with State Bank of India commanding a strong share; Axis Bank, ICICI Bank and HDFC Bank have also deployed a have large numbers of machines. Retail electronic payments as a whole have been growing at a compounded 20% and in a bid to push debit card transactions, the RBI, on December 16, capped the merchant discount rate (MDR) on transactions of up to Rs1,000 at 0.25% and for those between Rs 1,000 and Rs 2,000 at 0.5%. This is important since the costs for transactions through an electronic platform are borne by the retailer. Analysts also point out that the biggest challenge in getting consumers to use cards is the weak tax compliance. Both retailers and consumers believe digital exchanges make for easy scrutiny and therefore prefer cash over any form of electronic payment.

The volume of card transactions at PoS machines has also picked up pace this month with the four banks recording 168.9 million transactions till December 19, up from 130.15 million transactions in the comparable period of November. The total number of transactions in November 205.5 million.


IMPS transactions added up to Rs 25,920 crore in the first 19 days of December, as against Rs 32,480 crore for the whole of November. Assuming a uniform rate of growth for November, the figure would stand at Rs 20,570.67 crore for the first 19 days of November.

Transactions through mobile banking between December 1 and December 19 grew at a slower rate than in the previous month, adding up to Rs 75,280 crore, as against Rs 1.24 lakh crore for the whole of November. The amount the first 19 days of November would be around Rs 78,843.67 crore.