Just to recap: the period from August ’16- October ’16 is the Pre Demonetization, the period from November 2016 to December 2016 was at the height of its implementation and January 2017 to April 2017 is the period where life slowly gets back to normal.
Things were toughest during the period immediately after the announcement of demonetization.
Spends on credit & debit cards have actually increased over the last 9 months or so. They grew by over 50% between Aug ’16 — Oct ’16 and Jan ’17 — Apr ’17. Over the same period, withdrawals fell to 3/4th of pre demonetization levels.
The frequency with which people use their cards to make purchases has gone up (Nearly 20%) while the frequency of cash withdrawals have fallen by the same number. So to a certain extent, demonetization did have the impact it was intended to. People are certainly using hard cash less and cards more.
I wonder though, if this behavior will permeate through society? Since bank account penetration in India is low and card penetration even lower, wont people revert to factory settings and prefer to use hard cash?
India is credit card starved country and Indians are a credit averse people. We don’t like taking loans and prefer to live within a defined budget. But before credit card penetration can take off, don’t people need to get comfortable with the Idea of a chip and pin? Electronic Money?
Even the beneficiaries of the free bank accounts being opened in the country need to understand how the system works. Most people in rural India find the thought of using an ATM or dealing with a bank executive truly daunting. The distribution and availability of ATMs is another problem that needs to be solved before debit card usage can really go main stream.
Perhaps this is the ugliness of a revolution — the chaos that ensues before India learns to manage her finances differently, or maybe it’s just a flash in the pan and we’ll go back to our ‘we are like that only’ ways. But the withdrawal data & card spend data will be one indicator of what’s going on.
Thanks for your time,
Ashish
- Team KG
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You can reach me on ashish@kalagato.com
