The value of non-cash payments is on track to contract for the second consecutive month in May following the contraction seen in April, according to representative data released by the Reserve Bank of India.
The RBI data, collected from a sample of banks and the National Payments Corporation of India, shows that the value of non-cash transactions up to May 28 is only marginally higher than the amount transacted in November, the month demonetisation was announced, and significantly lower than the amount seen in subsequent months.
The representative data shows that November saw ₹95,249.1 billion worth of non-cash transactions, while the first 28 days of May saw a marginally higher ₹95,601.5 billion worth of transactions. This is far lower than the ₹1,05,421.2 billion seen in December and still lower than the ₹1,51,089 billion in March, the highest it has been since demonetisation.
Since March, however, the value of non-cash transactions has contracted across almost every channel. The value of non-cash transactions in April stood at ₹1,11,046 billion, down 26.5%, while the May figure so far has contracted 13.9%.
In other words, the value of non-cash transactions would have to jump 13.9% in the last three days of May to even equal the April value, which itself was far lower than the March figure.
‘Limited success’
“Now that cash has become available, people are lapsing back to cash payments,” DK Srivastava, Chief Policy Adviser at EY India, told The Hindu . “On the whole, the success of digitisation may be limited, but it must be judged after these trends are stabilised.”
The data shows that RTGS transactions contracted 13.5% in the first 28 days of May compared with the figure for April, while NEFT transactions contracted 14.4% over the same period.
Cheque transactions were down 17% and card transactions were down 10.7%. The card transaction data was obtained from four banks, and so may not indicate the exact picture of the industry, but it is still representative, according to banking experts.
The only two areas that witnessed growth in the value of transactions were those conducted using the Unified Payments Interface (UPI) and e-wallets. While the former grew 11.4%, the latter grew 2.2%. However, since the absolute value of these transactions is so small, the two instruments together make up only 0.05% of all non-cash transactions.
“Month on month, we have been witnessing 100% growth consistently since demonetisation,” Rahul Gochhwal, Co-founder of Trupay, a UPI-based payment app, said. “The burst of post-demonetisation is over. The digital payments peaked in March and post that, with remonetisation taking place, of course the cash transactions have increased. At the same time, the newer forms of digital payments have been consistently increasing.”
Mr Gochhwal added that the seasonal factor of filing taxes could be why December and March witnessed a surge in digital transactions, but that this did not explain the continued contraction in May.
