Debit cards: The new cash for Indians
The demonetisation exercise has led to a surge in first-time debit card users.business Updated: Nov 26, 2016 16:19 IST
The demonetisation exercise has led to a surge in first-time debit card users.
While there are over 700 million debit cards in the country, 20% have remained inactive and only 10% have been used to make purchases. More than 90% debit card holders use their plastic only to withdraw cash from the ATMs, according to industry sources.
But following the government’s announcement on November 8 to withdraw all high denomination currency notes of R500 and R1,000, the overall usage of plastic money has increased by around 100%.
The fastest-growing merchant categories include restaurants, lodging, department stores, super markets and healthcare, an ICICI Bank spokesperson said.
“We have seen an over 100% increase in debit card usage... until now, only about 5% of the purchases were being made on debit cards, but now more and more people are using the cards for purchases,” an Axis Bank spokesperson said.
Following the high usage, the finance ministry is looking at bringing in more incentives for electronic transactions, sources said. Banks have already waived the transaction charges on debit cards till December 31. However, the Union Budget could spell out mechanisms to push electronic payments in a bigger way, said the sources quoted above.
“We are encouraging people to adopt e-payment mechanisms... we want more and more businesses to cut out cash transactions,” a senior government official told HT.
Finance minister Arun Jaitley has repeatedly underlined the need to adopt e-payment mechanisms.
In a bid to clean up unaccounted money, the government has already made PAN (permanent account number) mandatory for all high-value cash transactions. From January 2016, all individuals carrying out cash transactions above R2 lakh or incurring hotel bills exceeding R50,000 need to quote PAN.
“Debit card transactions more than doubled in the past week, compared to regular volumes,” the ICICI Bank spokesperson added.