Post India’s Cash Ban: An Update on Digital Payments

The Government of India announced in November of 2016, a nationwide ban on high currency notes which stirred the consumer finance system. To support the common man in their daily transactions there was an increased reliance on digital transactions and payments. Digital payments and transactions saw a very significant spike from November 2016 till almost April of 2017.

Taking into consideration digital transactions in the months, November 2016, February and April 2017, all post demonetisation months. The growth rates between the three months chosen here, were compared in terms of ATM and POS terminal transactions. Ideally speaking, if the demonetisation was a success, POS terminals should have witnessed a growth, and ATM transactions should have declined. As ATM transactions ultimately lead to cash transactions.

The comparison between the months clearly show that between November 2016 and February 2017, the ATM and POS transactions rose. The growth of the ATM transactions were relatively higher, showing the cash crunch situation in the country, whereby most people were withdrawing cash, to make sure there was no emergency requirement of the same.

However, once February was over, and the cash crunch in the economy settled down, the Reserve Bank of India data shows, that the number of transactions for ATM declined, and POS increased.


 Nov-16February 2017Apr-17
No. of Transactions (in million)ATMPOSATMPOSATMPOS
Credit 0.497.90.494.90.5106.6

* data published by Reserve Bank of India


% Growth between Nov 16 and Feb 1723.4%3.7%
% Growth between Feb 17 and April 2017-4.6%8.0%
% Growth between Nov 16 and April 201717.6%12.0%

* data published by Reserve Bank of India 


April 2017, marked the six months period since demonetisation. The data here points to the fact that, again, both ATM and POS transactions rose. And this time, the comparison between the six months gap showed, that ATM transactions grew faster than POS terminals. Thereby, suggesting, that the economy in fact is going back to cash again.

Since, India is inherently a cash driven economy, this could be a minor setback as well. One of the key changes that came in to existence due to demonetisation was the increased awareness amongst consumers regarding online payment methods, which not just limited to card transactions only. Mobile and payment wallet transactions registered a strong growth in the economy.

Hence, though it is too soon to tell, that whether the economy is going back to cash or not. It definitely looks like it, as per the data published by Reserve Bank of India, post the first six months of the demonetisation.