Payment transactions fell massively across the country in the month of April as lockdown imposed to prevent spread of Covid-19 pandemic crushed economic activity across sectors. Payments data for April also mirrors the industrial production data released by the government for the same month last week, which showed that factory output contracted by a record 55.5 per cent in April.
How big was the contraction in April?
According to latest data from the Reserve Bank of India, overall value of transactions contracted by 46 per cent in April over March, led by declines across various modes of payment modes barring direct benefit transfer payments by the government using the Aadhar-enabled platforms, which recorded a jump of 138 per cent. Transactions and payments through various banking channels — cheques, NEFT and RTGS, and ATM withdrawal, fell between 26 per cent and 71 per cent in April over March. The sharpest contraction was noticed in value transacted through issuance of cheques which fell by 71 per cent in April to Rs 1.63 lakh crore in April from Rs 5.65 lakh crore in March.
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Which are country’s largest payment systems and how they fared?
The RBI-operated Real Time Gross Settlement (RTGS) system, the largest mode for online high-value transactions, recorded a contraction of 46.5 per cent in value to Rs 64.43 lakh crore in April from Rs 120.47 lakh crore in March. Among the other highly-used online payment mode, the National Electronic Fund Transfer (NEFT) recorded a fall of 42.7 per cent in transaction value to Rs 13.06 lakh crore in April, down from Rs 22.83 lakh crore in March. RTGS and NEFT combined account for a little over 90 per cent of total payments in the country. Transactions under RTGS are processed continuously on real time basis, whereas NEFT transactions are processed in batches of half-hourly intervals.
Why did ATM withdrawals fall?
Cash withdrawals from ATMs through debit cards slumped to Rs 1.27 lakh crore from Rs 2.49 lakh crore — a contraction of 49 per cent. The need for cash went down as it was required only for buying essential items or meeting health needs. This indicates that spending on discretionary items came to a standstill during the lockdown.
What about the other digital modes of transactions?
The data shows that other digital modes of payment also recorded sharp fall in value transacted during the month. IMPS — or immediate payment service — transaction value also fell by 40 per cent to Rs 1.21 lakh crore in April from Rs 2.01 lakh crore in March. Unique payment interface or UPI transactions fell 26.8 per cent during the same period. These payment systems as well as the Cheque Truncation Service (CTS) are operated by the National Payments Corporation of India (NPCI).
Why did government transfers rise?
The exception to trend was the APBS (Aadhaar Payment Bridge System), which is used by the government to transfer funds/subsidies under various heads directly into Aadhaar-enabled accounts of beneficiaries. Value transacted under APBS jumped by 138 per cent to Rs 18,996 crore from Rs 7,951 crore. This could be because of government transferring funds to beneficiaries accounts under the Pradhan Mantri Garib Kalyan Yojana that was announced on March 26 to help poor provide income support during the lockdown period.