With more banks issuing credit and debit cards and with a larger number of merchant terminals in place, the value of plastic money transactions went up by over 42 per cent to Rs 70,459 crore (Rs 704.59 billion) during 2007-08.
According to the latest data released by the Reserve Bank of India, the growth was significantly higher than the 24.51 per cent rise in the value of plastic money transactions in 2006-07 and was partly attributed to banks encouraging people to use cards for transactions.
In recent months, banks have increasingly put in place schemes, like cash-back offers, to entice people to use more of debit cards.
A banker said use of debit cards was also being pushed as a part of a strategy to encourage account-holders to keep more cash in their accounts.
In an attempt to reduce branch visits and lower transaction costs, banks have been on a spree of issuing debit cards.
The number of such cards went up by 46.7 per cent to 88.31 million at the end of March this year compared with 60.17 million in 2006-07.
The use of credit cards also rose, with some banks offering equated monthly instalment schemes to encourage
people to spend. In addition, banks were liberal in doling out cards to as many people as possible to improve their loan books.
Banks are now revisiting the strategy as the outstanding balance on credit cards has shot up and defaults are higher.
During 2007-08, the total credit card outstanding rose 43.6 per cent to Rs 5,843 crore (Rs 58.43 billion). Till May 23 this year, the outstanding shot up by 87 per cent to Rs 12,375 crore (Rs 123.75 billion).
A Yes Bank executive, who expected the debit card use to overtake that of credit cards, said the ease of making payments was one of the primary drivers for growth in recent years.
"The growth of e-commerce has also fuelled the usage of cards for services like booking air and railway tickets. There are a large number of people using cards for utility services," he added.
An executive of a public sector bank said the number of merchant terminals has grown by 30-40 per cent during the last 12 months or so and the number of outlets that offer the facility to swipe cards was estimated at 400,000.
