The Centre’s digital push stares at a debit card usage problem: nine of ten cards are used solely for cash withdrawals at ATMs.
Reserve Bank of India data for October 2016 put the number of debit cards in the country at 94.2 crore. People used debit cards for transactions worth Rs 2.63 lakh crore in October but over 90 per cent of these were done at ATMs. Only 8 per cent utilised these cards at POS (Point of Sale) terminals to purchase goods and services.
Nearly 50 per cent of the total number of debit cards are being actively used but the utilisation rate for goods and services is much lower — around 6-8 per cent. This is despite the fact that there are 15.12 lakh POS terminals across the country as against a total of 2.20 lakh ATMs.
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The data indicates that though the number of cards has risen rapidly over the years, their usage rate for buying goods and services hasn’t kept pace and remains very low — a reflection of the dependency on cash in the Indian economy.
Banking sector executives said only about 5 crore card holders are using these for actual purchases at POS terminals. The executives said lack of awareness regarding the multiple utility of the cards could be one reason for the low utilisation rate.
In contrast, though the number of credit cards — 8.95 crore in October — is around one-tenth of the number of debit cards, their usage at POS terminals was much higher — Rs 29,866 crore in October.
Amitabh Tewary, senior business leader at Mastercard, said: “As POS acceptance proliferates, the reliance on ATMs will relatively come down. So people will start using their cards not just for withdrawals but also for point of sale transactions, which means for purchase of goods and services.”
Banks are planning to add another 10 lakh POS machines by March. Tewary said India spends around Rs 80 lakh crore annually on personal consumption expenditure, of which only about 5 per cent is through cards.
The government has said that one of the main objectives of withdrawing old notes of Rs 500 and Rs 1,000 was to lower the reliance on cash, and step up electronic transactions.
Last week, the Centre announced a slew of measures to boost digital transactions, including waiver of service tax on digital payments amounting to less than Rs 2,000, discounts on petrol and diesel purchases, suburban railway tickets and insurance policies bought from state-owned insurance companies through electronic means.
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