Even as spend on cards fell in November, because of the cash crunch, Ghosh said, there has been an increase in mobile banking transactions by around 10 per cent over the previous month and it rose to Rs 1,24,500 crore in November. Even as spend on cards fell in November, because of the cash crunch, Ghosh said, there has been an increase in mobile banking transactions by around 10 per cent over the previous month and it rose to Rs 1,24,500 crore in November.

WHILE most banks have reported an increase in the number of transactions involving swipe-cards since demonetisation was announced on November 8, there has been a sharp decline in the total value of these transactions. Reflecting a dip in consumption, the use of debit and credit cards at point of sale (PoS) terminals fell to a nine-month low in value terms in November and witnessed a sharp decline of 31 per cent over that in the previous month.

According to data released in an SBI Research report on Wednesday, the aggregate of debit and credit card transactions at PoS fell to Rs 35,240 crore in value terms for November 2016 which is the lowest since February 2016 when the aggregate spend on PoS terminals amounted to Rs 33,600 crore.

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The decline in November came even as the amount spent at PoS terminals grew consistently this calendar from Rs 33,230 crore in January 2016 to Rs 51,116 crore in October 2016. In fact even in December (until Dec 13, 2016) card spend on PoS remained muted and amounted to Rs 18,130 crore.

Speaking to The Indian Express, Soumya Kanti Ghosh, group chief economic adviser of State Bank of India said, “Decline in consumption could be one of the possible reasons as people were uncertain about spending after the announcement was made. Even December figures look down and we need to see how it can be improved because it could otherwise have an impact on growth.”

Even as spend on cards fell in November, because of the cash crunch, Ghosh said, there has been an increase in mobile banking transactions by around 10 per cent over the previous month and it rose to Rs 1,24,500 crore in November.

However, in line with a decline in aggregate spend at PoS, the average transaction at a PoS also fell from Rs 2,229 in October to Rs 1,714 in November.

Devendra Pant, chief economist at India Ratings said, “Post delegalisation of the high-denomination old currency, there was an expectation that spend through credit and debit cards would grow but the data shows that there has been a big impact on consumption.”

While the decline is sharp in November this year after the festive month of October, the spend in the three months between October and December 2015 hovered between Rs 35,000 crore and Rs 36,000 crore and there was no decline in spend post the festive month.

A senior official with a leading private sector bank said that while the bank has witnessed a rise in the number of transactions on its cards, there has been a decline in value terms. “We have noted that because of the cash problem, people are using their debit and credit cards for low-ticket items but there has been a sharp decline in spends on big-ticket items such as purchase of consumer durable items. People are deferring their large ticket purchases and it is leading to a slowdown in the near term,” he said.

While there are 15.1 lakh PoS machines in the country, the SBI report pointed that there is a need of additional 20 lakh more terminals if digitisation has to gain traction. The report further said that the size of digital banking needs to double from the current level so as to bridge the gap of currency in circulation.

“The current size of digital banking (including credit card + debit card transaction through PoS terminals, transaction through Prepaid Payment Instruments like m-Wallet, PPI cards etc and mobile banking) is around Rs 1.7 lakh crore. This size has to increase from the current level to at least Rs 3.5 lakh crore (which is a conservative estimate of the gap between the actual currency in circulation and required currency in circulation),” said the report.

In fact, banks have seen a sharp rise in demand for PoS terminals since demonetisation. While an HDFC Bank official in November said that their daily request for terminals is now more than what they received for earlier months, ICICI Bank and Axis Bank officials also said that they have witnessed a sharp rise in demand for PoS terminals.

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