Tag: Jan Dhan Yojana

Carry your cards, ATMs are not dying, BFSI News, ET BFSI

Banking & Finance

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There are various reports and discussions on how ATMs are going to vanish soon. But I don’t find any supportive data to believe in it. Digital payments are adding billions of transactions every month and POS terminals are also trying to add the features of ATMs but ATMs will stay in the system for a long time as cash still plays a dominant role in the economy. In fact, there are many restaurants and stores which do not accept any mode of digital payments and believe in only cash. Here is what RBI data of the last two years shows: ATMs are not dying.

State of ATMs – June 2020

Banks Total ATMs ATMs in Rural
PSU Banks 1,34,518 28,900
Pvt Banks 73,098 6,034
SFBs 1,935 199
White Label 23,790 11,807
Total ATMs 2,34,267 46,965

State of ATMs – June 2021

Banks Total ATMs ATMs in Rural
PSU Banks 1,36,889 26,858
Pvt Banks 73,750 6,281
SFBs 2,156 237
White Label 25,995 13,580
Total ATMs 2,39,761 47,011

The data shows that there is a slight increase in the total ATMs from 2020 to 2021. By June 2020 total ATMs were 2,34,267 which increased to 2,39,761 by June 2021. The slight decrease is in the number of rural ATMs by PSU banks may be due to bank mergers.

ATMs are a useful product

ATM was one of the biggest innovations in the banking industry much before digital payments. It killed the long serpentine queues at the bank branches where people used to spend hours to get cash. ATMs allow people to withdraw cash anywhere, anytime according to their convenience. RBI has also ensured that banks have enough ATMs and imposes penalty on banks which don’t maintain their ATMs.

Digital versus ATM

With the rise of digital payments, people have certainly shifted to mobile payments which are far more convenient. But that doesn’t mean that they are not using the cash. India’s cash to GDP ratio is 14.7%, which is much higher compared to the OECD countries.

For online shopping and small payments, people are using mobile payments, but for large payments, they still chose either cash or cheque.

The rise of POS

I often find that POS has been another product that is equivalent to ATMs. Over the years POS also added new features and it’s not just a payment receiving terminal. It has also started dispensing cash and that trend is rising. There are more than five million merchants using POS terminals and many of them are offering cash withdrawal. Recently a payment gateway company Mswipe told me that they are dispensing cash around Rs 50 lakh per day at POS terminals. POS will certainly help small-ticket transactions and areas where there are fewer ATMs.

Need for rationalising ATMs

India has on average 20 ATMs for 100,000 people, the global average is 50. I also find a big mismatch in the placement of ATMs in urban areas. There are areas where dozens of ATMs are set up within a vicinity of 2-3 miles, but there are areas where there are no ATMs at all. I think banks and financial institutions should review their placements. Also, ATM machines need to be upgraded with new features that will inform customers about the shortage of cash before using the machine.

Though people are using digital in villages as well, I am aware of people who travel for 10-12 miles to withdraw cash from ATMs. Jan Dhan Yojana has brought millions of people into banking but still there are many more millions away from banking. And they will need cash.



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COVID-19 brings about behavioural change in cash usage, say experts, BFSI News, ET BFSI

Banking & Finance

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The COVID-19 pandemic has brought about a behavioural change in usage of cash with people withdrawing larger amounts from ATMs but preferring to make digital modes to make payments, said, experts. The ferocity of the second wave of the coronavirus pandemic has scared people, forcing them to withdraw larger amounts from the ATMs with a view to avoid frequent visits. The money thus withdrawn is mostly held for emergency use and often payments are being made through UPI and other digital modes.

Talking about the behavioural change in currency usage, Sarvatra Technologies founder and MD Mandar Agashe said that in view of the lockdown and social distancing norms, people are not venturing out to banks and ATMs as frequently.

“The average ticket size of withdrawals at any given time has gone up by almost 20 per cent, as people withdraw in larger quantities and prefer to hoard, pre-empting medical or any other form of emergencies, which ultimately is not consumed as much.

“The average ticket size of withdrawals which earlier ranged between 2,000-3,000 now has invariably gone up by 20 per cent to Rs 3,000-4,000 across both rural and urban India,” Adashe said.

He further said UPI was taking care of small-ticket transactions with the average ticket size constant at Rs 1,000.

Owing to this behavioural shift, daily average transactions on IMPS have now gone up to Rs 9,000 which was earlier in the range of around Rs 6,000-7,000, he said.

“The second wave of the pandemic has had a significant impact on the handling and management of cash.

“This has in turn brought about substantial shift in behavioral patterns among the masses which will play out in favour of digital transactions in the long run,” he added.

Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service through mobile phones.

According to the RBI’s latest data, the outstanding currency in circulation on May 7 was Rs 2,939,997 crore, up from Rs 2,858,640 crore on March 26.

Care Ratings Chief Economist Madan Sabnavis opined that during these uncertain times, there is a preference for people to hold down to cash.

It is more for precautionary purposes because one needs cash for rainy days such as for medical reasons or for any sudden other expenses, said Sabnavis.

PayNearby founder, MD and CEO Anand Kumar Bajaj said the anxiety of lockdowns has forced people to withdraw money and to keep cash handy – both for medical emergencies and basic needs in these dire times.

This surge in cash usage indicates that people have started to accumulate cash in anticipation of more stringent lockdown measures that might be announced to curb the pandemic, he said.

Additionally, as a counter-measure to offer relief and sustenance to the crisis-affected migrant workers and low-income cohorts, the government has disbursed direct benefit transfer (DBT) to millions of Pradhan Mantri Jan Dhan Yojana (PMJDY) beneficiaries, he said.

Aadhaar ATM, which is the backbone for disbursing DBT to citizens, saw a huge surge across all PayNearby retail stores, primarily led by increased adoption in rural, semi-urban and tier-II towns, Bajaj said.

“Our annual figures reported AePS (Aadhaar-enabled Payment System) withdrawals worth Rs 10,000 crore in Q4 FY2021 as against Rs 7,650 crore vis-a-vis the same quarter last year.

“So, withdrawal of DBT funds can also be considered a significant reason for high cash in circulation, especially in the rural economy,” he said.

mPokket founder and CEO Gaurav Jalan said there was a tremendous uptick in digital transactions following demonetisation in 2017, as currency usage slumped.

“Even as penetration of digital payments continues to grow and become a more important part of consumer spending patterns, currency in circulation has also seen significant growth.

“This suggests that although consumers find digital payments convenient and easy, they continue to prefer cash as a medium for certain types of transactions,” he said.

Spice Money CEO Sanjeev Kumar said that at Spice Money, “we have witnessed a whopping annual growth of 124 per cent in AePS services in 2020-21 with transaction value being more than Rs 30,000 crore. Our daily Aeps transaction has witnessed an all-time high at Rs 165 crore”.

Khaitan & Co Partner Abhishek A Rastogi said people want to keep money liquid and handy for emergency needs. “Further, the risk of catching infection by going to the bank for depositing/withdrawing is high and is generally avoided in these times.”

Further, hospitals have been recently allowed to accept cash even beyond 2 lakh on receipt of PAN and Aadhaar card.

“In such situation, people want to keep more cash handy and avoid banking channels for payment. The cash usage would have gone even higher in case cash is readily accepted by e-commerce companies as ‘cash on delivery’,” he opined.



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Technology Driven Financial Inclusion as a key to unlock the vision of Aatmanirbhar Bharat, BFSI News, ET BFSI

Personal Finance

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While the world is grappling with its set of challenges, India has continued to face headwinds due to subdued private consumption and liquidity crisis which has gotten severe with the continued economic slowdown and the COVID-19 outbreak. The lockdown has had a profound impact on the lives of millions of vulnerable people. Yet, India has demonstrated how it rises to challenges and uncovers opportunities therein. Instead of succumbing to these unprecedented times, India aims to resurge the economy by becoming a self-reliant, Aatmanirbhar Bharat. The idea is not to cut off from the rest of the world, but instead to adopt an integrated approach to empower its citizens who are at the receiving end of this crisis, who have a dream but do not have the means to turn their aspiration into reality. This kind of self-reliance is only possible if we can reach out to every single individual in every section of the society.

An idea is only as good as its execution. The ability to get on and do it, is what sets changemakers apart from the rest. Over the years, the government has made several strides, the Pradhan Mantri Jan Dhan Yojana (PMJDY), is said to be one of the biggest financial inclusion initiatives in the world. The scheme ensures access to a range of financial services like availability of basic savings bank account, access to need based credit, remittances facility, insurance, and pension. Sukanya SamriddhiYojna, Rashtriya SwasthyaBima Yojana (RSBY), Prashan Mantri Mudra Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Atal Pension Yojana, Stand Up India scheme are few of the initiatives that have given an impetus to this vision. With technology at the helm of these initiatives, the government made sure it provided the necessary digital infrastructure to drive this change in the form of Aadhar enabled payment scheme (AePS), PAYGOV India, Bharat Interface for Money (BHIM), Bharat Bills Payment Interface (BBPS), Immediate Payment Service (IMPS), BHIM Aadhaar to name a few.

The government has taken several measures in the context of COVID- 19 to ease the stress of the financial sector by injecting funds into the system. These measures have ensured unhindered credit outflow from financial institutions. But to set the vision in motion, financial institutions need to be driven by the cardinal purpose of delivering financial inclusion that ignites transformative changes and improves the situation for the financially excluded households at the bottom of the pyramid who are often beyond the reach of the ambit of mainstream financial providers.

By moving the needle beyond traditional methods of consumer finance and microcredit, banks and NBFCs can provide solutions to the vast underserved populations across the length and breadth of India and help societies towards attainable financial inclusion. Companies are now harnessing technology to reinvent traditional business models and offer faster, cheaper, and convenient financial products and services. The combination of IT and mobile technology combined with IT enabled services has emerged as a viable solution for financial inclusion with the lack of physical presence of these institutions and stringent social distancing norms in place.

Here are few initiatives undertaken by institutions, that will go a long way in spearheading financial inclusion in the post COVID-19 world and in making the country an Aatmanirbhar Bharat

Digital Lending

Earlier most of the loan disbursement and collections of microfinance loans was done on a cash basis at the branches. With the fear of contraction and stringent lockdown measures, branch operations were severely impacted. With mobile banking platforms and real-time data, some established digital lenders quickly responded to the liquidity needs of individuals as well as SMEs affected by COVID-19 related lockdowns and containment measures. The user friendly and scalable platforms have helped in ensuring continued access to financial services, by maintaining credit flows to households and businesses while keeping people safe. Digitization of loan application processes has enabled borrowers to apply for loans remotely, which is going to prove to be a key driver in the post pandemic world.

Every coin has two sides to it. While there are numerous benefits of digitalization, there also lies a risk associated with the same. Unauthorized dubious online platforms often get away by charging unaware customers an exorbitant rate of interest, later using unfair tactics to recover the loan amount. One should avoid sharing KYC documents to predatory lenders and refuse to sign any agreement of loan with an entity who is not registered with the RBI. The onus lies on the financial community to encourage financial literacy to help the end consumer make informed choices. An Aatmanirbhar Bharat can only be built with a well informed and responsible approach.

Adoption of New Age Technologies

With the growing economic impact of COVID-19, there will be an increase in the need for affordable and personalized financial assistance as well as an upward spiral of bad loans. The nature of risk is no longer estimated by just the credit history. While tradition risk profiling predicts the likelihood of repayment on the loan based on past track record, the financials of the borrower combined with the nature of the industry that the borrower operates in is very important in the present scenario. Psychometric personality test can shed light on hidden personality and behavioral traits including value and belief system of the borrower. Artificial intelligence (AI), machine learning (ML), and big data analytics has made it possible for fintech lenders to collect and analyze the data to carry out a more comprehensive and accurate credit risk profiling. With the introduction of initiatives like video KYC, Aadhar-based KYC, account aggregators, lenders can easily access customer data, with their consent, and ensure better due diligence. It helps to understand potential credit risks and make faster credit decisions, even in the absence of traditional credit history. Data can also be used to offer more customized credit solutions best suited to the borrower’s needs.

Digital Payment

Digital payment is the most common instrument of financial inclusion and has witnessed a rise in the past few months due to COVID-19 with UPI growing by leaps and bounds. UPI – a real-time unified payment interface developed by the National Payments Corporation of India (NPCI) that facilitates inter-bank transactions has made digital transactions easy and instantaneous. It helps users to transfer, receive, and save money on payments bank platforms, which are simplified banks designed to reach customers via mobile phones using a virtual ID. With fear of contraction plaguing the minds of citizens, India has embraced the digital wave exponentially. Google Pay, BHIM, Paytm, PhonePe has been ruling the market with their on the go fast and reliable services.

Digital Financial Literacy Workshop

With technology evolving by leaps and bounds, it is imperative for financial institution to not just make it available, but also hand hold individuals and SMEs by training them to use the platform effectively to their advantage. The government’s DigiDhan Mela’s across the country aims to handhold users in downloading, installing and using various digital payment systems for carrying out digital transactions.

With digital platforms and applications taking precedence now more than ever, even financial institutions across India are organizing financial literacy workshops which are further fueling the widespread adoption. IT enabled kiosks, village screenings, financial counselling sessions, skill development workshops are few means of empowering and enhancing the lives of India’s hinterland.

Thus, with technology and connectivity taking centerstage, the robust digital finance ecosystem is transforming India into an Aatmanirbhar Bharat by being drivers and enablers of financial inclusion.

The blog has been authored by HP Singh, Chairman & MD, Satin Creditcare Network Limited

DISCLAIMER: The views expressed are solely of the author and ETBFSI.com does not necessarily subscribe to it. ETBFSI.com shall not be responsible for any damage caused to any person/organisation directly or indirectly.



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