It seems that Prime Minister Narendra Modi’s vision of “cashless India”, of which currency demonetisation was the first strike, is on the right path.
According to a Times of India report, debit cards have conclusively displaced credit cards as the primary mode of payment in the country following “note ban”.
Until October last year, despite outnumbering credit cards by a factor of more than 25, debit cards accounted for only 42 per cent of the total card spend. However, this has jumped to 60 per cent after demonetisation, which was announced on November 8, 2016.
This change in payment mode is largely driven by small public sector lenders like Oriental Bank of Commerce and Punjab & Sind Bank, where usage of cards has gone up nearly five times.
According to the report, debit card transactions jumped up to three times in December 2016 as compared to October, until the “note ban” was announced. The transactions, however, slipped to double those in October last year.
However, according to payment companies, customers are sticking to use of debit cards for utility and petrol bill payments and travel bookings.
Last October, public sector banks saw transactions worth Rs 10,893 crore from the 61.7 crore debit cards they had issued till then.
On the other hand, private and foreign banks have reported transactions worth Rs 11,048 crore although their debit card base was much smaller at 12.25 crore.
However, things have changed after the announcement of demonetisation on November 8, 2016.
In January this year, public sector banks reported debit card transactions valued at Rs 29,339 crore against Rs 19,664 crore worth transactions recorded by debit cardholders of private banks.
Before the announcement of note ban, in October, for every 100 debit cards in circulation, there were only 19 transactions made in a month. This jumped to 54 transactions a month in December, but dropped to 40 a month in January 2017.
Banks have claimed that if debit cardholders use their cards even once a month on an average, the share of debit cards in transactions will cross 80 per cent.
“In metro centres, the credit card penetration is high and increasing. Given a choice, customers will use their credit cards to make payments because of rewards. But in smaller towns debit card is the only instrument that the customer has,” an official with the National Payments Corporation of India (NPCI), was quoted by Times of India as saying.