The most used real-time payment system in India UPI recorded growth of 12.3 per cent in this period, while payments made through debit and credit cards recorded 12.7 per cent and 18.6 per cent, respectively
Nearly all payment modes — from cash, cards and Unified Payments Interface (UPI) — have registered a sharp uptick in volumes in the first three weeks of the month, in signs that India’s business activities and consumer sentiment are reviving in June after a slump in April and May when most states were under lockdown because of the COVID-19 second wave.
According to the Reserve Bank of India’s daily payments database, volumes on nearly all payment channels registered higher month on month growth in the first 21 days of June, against the same period in May.
UPI – the most used real-time payment system in India – recorded growth of 12.3 per cent in this period, while payments made through debit and credit cards recorded 12.7 per cent and 18.6 per cent, respectively, data sourced by ET from RBI showed.
These include payments made both digitally through net-banking as well as at physical point of sale (PoS) devices at storefronts.
“The trends of spending in June till date indicate ~18 per cent jump compared to May 2021 (31% if we consider the third week of Jun ’21 over May’21). This also puts June 2021 spend trend at a higher level compared to all months of FY21 except March which is a seasonally strong month,” according to a report by ICICI Securities.
The payment snapshot for FY22-To Date (TD) indicates the impact of the COVID-19 second wave has been significantly less than the first. This is true for all modes of payments including credit cards, the report released on Tuesday said.
Similarly, cash withdrawals at teller machines across the country – a proxy for cash spends – registered a healthy uptick in the first 21 days of June as well.
A total of Rs 1.01 lakh crore (1 INR = 0.01348 USD) of currency was withdrawn in three weeks of June against Rs 95,318 crore, a growth of 6.4 per cent, as per the RBI data.
These include withdrawals made through both ATMs managed by banks as well as cash points maintained by business correspondents in rural India. The surge in withdrawals is likely owing to increased business activities as states across India have lifted lockdown curbs in June.
Similarly, volumes on channels used by corporates and businesses for settlement have also recorded an uptick. NEFT – used predominantly for wage payments by businesses and other interbank settlements – saw volumes grow by 10.9 per cent, in this period.
RTGS, which is used for big-ticket payments between banks and corporates, also registered a healthy 21.4 per cent growth in this period. This is a sign of increased business activity across sectors in India.
To be sure, in May – during the peak of the second wave – nearly all modes of payment, digital and cash, saw a monthly decline owing to subdued economic activity, the data from the RBI showed.
Channels such as UPI, IMPS and FASTag, as well as NEFT and RTGS, all recorded sharp declines in both volume and value of payments processed.
According to experts, as vaccination drives pick up pace and restrictions around entertainment and dining are further lifted, payment companies are expected to process increased volumes. The shift towards digital payments is likely to continue even as lockdowns are lifted.
“The tailwinds for digital payments in India are strong as most businesses have established digital infrastructure over the last 12 months. For instance, sectors such as education and health where most spends were earlier through cash or cheque have mostly transformed to cashless,” the chief executive of a payments company said.
“Even during the lockdown months of April and May, merchant payments (P2M) on UPI barely registered a dip even as most shops were shuttered,” the person added.