Will Modi's Digital India dream ever come true?

The value of transactions through debit and credit cards used at the PoS fell to Rs 64,200 cr in February

The falling trend in the value of card transactions at point-of-sale (PoS) terminals continued for the second month in February.

The value of transactions through the debit card and credit card used at the PoS fell to Rs 64,200 crore (Rs 642 billion) in February against Rs 81,712 crore (Rs 817.12 billion) in January, according to the Reserve Bank of India (RBI) data.

The value of such transactions had peaked to Rs 89,180 crore (Rs 891.8 billion) in December. It was a sharp jump from the Rs 58,734 crore (Rs 587.34 billion) in November, a month in which demonetisation came into effect.

The share of the debit card fell to 55.76 per cent in February from about 60 per cent in January.

The peak was in December at 65.07 per cent, up from the 54.78 per cent in November 2016.

The usage of the debit card had overtaken that of the credit card in percentage terms (in value terms) in November. In October, the debit card share was 42.29 per cent as against 57.21 per cent of the credit card.

Debit card usage at ATMs acquired a different picture with remonetisation. People used the debit card more for withdrawing cash at ATMs. Withdrawals touched Rs 1,92,838 crore (Rs 1,928.38 billion) in February, up from the Rs 1,51,644 crore (Rs 1,516.44 billion) in January.

In December, the value of withdrawals at ATMs was Rs 84,934 crore (Rs 849.34 billion), down from the Rs 1,23,452 crore (Rs 1234.52 billion) in November.

At present most of the digital banking activity is taking place in metropolitan and urban areas. Unless more and more merchant and service providers come on board for electronic payments, the volumes will move up only gradually. It can change only when the number of PoS terminals - physical as well as the mobile version - at merchant establishments goes up drastically, bankers say.

The tally of the PoS has grown from 1.51 million at the end of October to 2.22 million at the end of February.

Mythili Balasubramanian, executive director (retail banking) at IDBI Bank, said the rise in digital transactions in semi-urban and rural parts of the country would substantially bring down the costs of cash management.

The ticket size of transactions is small but the volumes are huge. Thus, better digital banking set up in the hinterland would help to reduce cost for the RBI and banks.

Photograph: Reuters