Micro lending badly hit; surge in use of cards

The country’s micro finance institutions, which essentially extend small loans to the poor and weaker section of society and accepts repayments in cash, is one of the worst hit by the demonetisation move. “The overall transaction count has increased by more than 65 per cent, showing significant shift from cash to card,” said Rajeev Agrawal, chief executive officer, Innoviti Payment Solutions, a Bengaluru-based payment gateway company that processes transactions worth $2 billion annually. “The overall average transaction size, however, has dropped by around 30 per cent, suggesting that a lot of the new transactions are relatively lower ticket value spends, which were earlier done using cash.” A further analysis of the data shows that the number of online transactions of less than Rs.250 increased by 177 per cent post demonetisation. “It is likely to boost credit and debit card transactions as well as use of e-wallets, particularly for small ticket size transactions,” said Deepak Premnarayen, chairman, FirstRand Bank India. Interestingly, overall increase in transactions is more skewed towards debit cards, with over 70 per cent surge when compared to the 40 per cent rise in credit card use.