Debit card transactions recover after brief slump

Debit card transactions at restaurants, malls and retail shops have been rapidly rising after the Reserve Bank of India 's (RBI) diktat in December last year for mandatory punching of the personal identification number (PIN) on card-related transactions.

The initial deadline to start the practice was June, but was extended to December last year.

According to available RBI statistics, debit card transactions in value terms fell sharply after the directive was enforced on December 1, 2014. Transactions crashed to Rs 42 crore in December last year from Rs 8,400 crore in November.  The main purpose of the mandatory PIN  was to reduce the incidence of frauds. In fact , PIN is now a second layer of security  for the debit card holders  after the merchant swipes the card with payment on his POS ( point of sale) machine.

But transactions recovered to Rs 3,835 crore in January 2014  and Rs 7,435 crore in February. But this was still below the November 2013 figure. The data of March and April is yet to come out. Bankers say there are indications that  it would have surely grown beyond the November level.

Many say the bigger issue is of increasing usage of debit card at the ATMs where the transactions are negligible at merchant outlets. Today, the value of debit card transactions at merchant outlets is less than five per cent  of the total transactions that takes place every year. People use debit card more often for cash withdrwal through ATMs. The total debit card transactions over ATMs for cash withdrwals are whopping at Rs 157,578 crore in February this year as against Rs 7,435 crore at merchant outlets

Today, banks issue debit cards by default as being a savings bank account but there is no effort to encourage them to shop through a debit card.