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Tracing Demonetization Through Electronic Transaction Behavior

RBI today (25th April 2017) released the POS & ATM statistics for month of March. Do you know that the stats of credit & debit card usage at POS & ATMs closely reflects the dynamics of demonetization? For ease of comparison, we converted the statistics to ‘per day transactions’ and ‘per transaction value’. This also ensured that the difference in number of days across months is neutralized in the analysis.

First let us look at POS.

  1. Most importantly, the number of POS outlets increased by 82% from Mar-16 to Mar-17 compared to only 23% from Mar-15 to Mar-16. If you are wondering whether it is a demonetization impact, then you  are absolutely right. Compared to 9% growth from March-16 to Oct-16, it is 67% from Oct-16 to Mar-17.
  2. Debit card usage:
    1. With cash in shortage and ATMs running dry, the per day average transaction count grew at breakneck speed in Nov & Dec-2016. By Jan-17, as cash replenishment started happening, the number of transactions dropped (negative growth in Jan & Feb-17) and more or less stabilizing in Mar-17. This may mean that many of those card transactions would have returned as cash transactions by Mar-17. Part of it would also have migrated to other modes of digital transaction (mobile, UPI etc) but ‘return to cash’ will be major driver.
    2. The per transaction value surely went down in first month (Nov-16), driven by usage of debit cards even for small transactions which were otherwise done by cash. This then picks up in Dec-16 & Jan-17 partly due to lower base attained in Nov-16 & also because of tapering off of the transaction growth. Surprisingly the ‘per transaction value’ dropped off further in Feb-17 & Mar-17 even with fall of ‘per day transactions’
  3. Credit Card Usage:
    1. Shortage of cash would have driven the growth in per day CC transactions till it started to drop from Jan-17, once the cash position eased. The increase in March may be due to lot of sales etc that happens before year end
    2. The CC which is generally used for higher value transaction would have got used for a lot of transactions which would have been done in cash during demonetization. This resulted in lower transaction value before again gaining grounds from Jan, once cash position eased

Let us now look at behavior at ATMs. For this we will only  look at Debit cards as credit card usage at ATM’s is very miniscule in comparison.

  1. Average transaction value decreased for first 2 months primarily due to regulatory cap on withdrawals
  2. Average transaction value grew from Jan primarily due to slow easing of cash availability and phase removal of per day cap. Since there was a shortage of cash, people maximized the withdrawals and hence the spurt. Things started to settle down by early March as reflected in a much lower growth of average transaction value. Also availability of more 500 Re notes would also have played a role.
  3. Avg transactions per day obviously went down as expected in Nov & Dec due to ATMs running dry and ATMs becoming operational only after a few weeks of gap. Post that drastic drop, there was increase in transaction as cash flow eased in ATMs. It hit a maximum in Feb-17 before dipping in March indicating completion of re-monetization


RBI ATM POS Statistics: https://www.rbi.org.in/Scripts/ATMView.aspx

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