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RuPay, the Indian card payment network, is a product of National Payments Corp. of India (NPCI), the umbrella organisation in charge of retail payments in the country
RuPay, the Indian card payment network, is a product of National Payments Corp. of India (NPCI), the umbrella organisation in charge of retail payments in the country

RuPay debit cards trail far behind Jan Dhan accounts

There are 302 million RuPay cards against 412 million Jan Dhan account, data shows

The gap between the number of Jan Dhan account holders and RuPay debit cards continues to widen, highlighting the slowing growth of India’s home-grown card payment network, even as the government pushes banks to switch to it from global networks such as MasterCard and Visa.

Data from the Pradhan Mantri Jan-Dhan Yojana (PMJDY) website showed that as on 4 November 2020, there were only 302 million RuPay cards against 412 million Jan Dhan accounts. That means 110 million account holders without RuPay cards, up from 79.5 million on 4 December 2019. The falling adoption means only 73.3% of Jan Dhan account holders now have a RuPay card, slipping further from December 2019 figure of 78.8%.

Launched in August 2014, PMJDY aims to provide at least one basic banking account to every household, along with a free RuPay debit card. RuPay is a product of National Payments Corp. of India (NPCI), the umbrella organization in charge of retail payments in the country.

The two likely reasons are non-replacement of expired cards, and non-issue of cards with new accounts.

“A lot of the new PMJDY accounts are being opened without debit cards and there are several reasons behind it," a financial sector expert said on condition of anonymity. He added that several debit cards already issued are not being used and many customers do not collect debit cards issued to them.

“Banks, therefore, are not too keen on issuing new cards, knowing well that people are not using them."

Finance minister Nirmala Sitharaman on 10 November said banks need to promote only RuPay cards, adding with the card network becoming global, it is not necessary for Indian customers to be offered other cards.

According to the RuPay website, there were 600 million RuPay cards in force as of January, issued to both Jan Dhan and non-Jan Dhan account holders.

“It alarms to see an expanding gap between new PMJDY accounts added and RuPay debit cards issued," Ashish Das, a professor of Mathematics at the Indian Institute of Technology Bombay (IIT-B) wrote in a paper in September. Das argued that this is perhaps an outcome of the government’s policy to discontinue merchant discount rate (MDR) on RuPay cards since January.

Expressed as a percentage of any digital transaction at a point-of-sale terminal, MDR is the charge paid by the merchant to the bank, card network and the PoS provider for offline transactions and to the payment gateways for online purchases. Merchants here are shops (brick-and-mortar as well as online) where a customer swipes a card to pay for goods, and card networks are companies like Visa, Mastercard and RuPay. Unless there are other extraneous causes, a possible cause could be that banks have deliberately moved away from RuPay and promote another card scheme which generates more revenue for them, wrote Das.

A central bank committee had pointed out in July that reducing MDR to zero for certain payment methods “had a negative impact on the payment ecosystem – impacting survival of payment gateway entities, hampering innovation efforts and resulting in job losses and a slowdown in the expansion of the digital payment infrastructure in India".

However, a senior private sector banker told Mint that even without MDR, banks have not slackened in RuPay card issuances. “Even if there is a commercial cost to it, banks will never go to the extent of opposing the government’s financial inclusion programme."

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