Card payments on point-of-sale (POS) terminals have hit a record monthly amount of Rs70,000 crore, a level that would have taken three years to reach had demonetization not taken place, State Bank of India (SBI) said in a research report on Thursday.
“We have analysed that demonetization has brought the nation at least three years ahead in digital payments. In other words, if demonetization had not happened, it would have taken three years more for credit and debit cards transactions on PoS terminals to reach the current level of Rs700 billion (assuming a yearly growth rate of 25%)," said the report authored by Soumya Kanti Ghosh, group chief economic adviser, SBI.
The report states that a similar trend has been observed in the usage of pre-paid instruments and mobile banking.
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The growth in digital payments has been attributed to demonetization of Rs1,000 and Rs500 banknotes on 8 November and also announcements made in the Budget 2017.
The finance minister, in his budget speech, announced major tax exemptions in basic customs duty (BCD), excise/countervailing duty (CV) duty and special additional duty (SAD) for manufacturers of PoS card readers, mobile PoS (mPoS), fingerprint readers and iris scanners.
“We believe that increasing number of PoS terminals (post demonetization, Indian banks have been able to set up 1.18 mn extra PoS terminals) and ease of doing digital transaction will increase this level further," said the SBI report.
The government had announced in the budget 2017 that 1 million additional PoS machines would be installed by March next year. The SBI report said the target has been exceeded in less than a year’s time.
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Use of cash is not efficient anymore, especially post-demonetization and the Goods and Services Tax (GST), said Rahul Gochhwal, co-founder of Trupay, a financial technology company.
“Most traders and merchants preferred cash to avoid tracing of income before demonetization and GST. However, they don’t have that incentive now. A little investment needed to set up card acceptance infrastructure discouraged them to move to digital payments before demonetization," he said.