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Recovery signs: Most retail payment channels show rise in transactions in June over May, hint at consumption recovery

The outlier among the payment channels was the NACH mode, through which EMIs and insurance premiums are paid. NACH transactions fell in June, suggesting pressure on loan repayments.

June 23, 2021 / 01:47 PM IST
UPI transactions increased 13 percent in volume terms to 1.74 billion and in value terms by 11 percent to Rs 3.87 lakh crore.

UPI transactions increased 13 percent in volume terms to 1.74 billion and in value terms by 11 percent to Rs 3.87 lakh crore.

The majority of the payment channels used for making retail payments saw a rise in the volume and value of transactions in the first 21 days of June, as compared to the same period in May. The easing of lockdowns and other restrictions in June may be helping to boost consumption and payment transactions, analysts said.

According to data released by the Reserve Bank of India (RBI), the transactions made through Immediate Payment System (IMPS), Unified Payments Interface (UPI), debit and credit cards as also cash withdrawals increased in June over May.

In April and May, the various payment channels had recorded month-on-month declines in transaction volumes because of lockdowns across states and the onslaught of the second wave of COVID-19.

UPI transactions increased 13 percent in volume terms to 1.74 billion and in value terms by 11 percent to Rs 3.87 lakh crore. IMPS volumes rose 7.6 percent in volume terms to 211.21 million and 4.65 percent in value terms to Rs 1.97 lakh crore. Credit card usage rose 18.6 percent to record 78.3 million transactions in June while debit card swipes rose 12.8 percent month-on-month to 164.05 million.

Cash withdrawals through ATMs increased nearly 11 percent from the previous month to 196.5 million transactions and withdrawals through micro ATMs were up 4.3 percent to 60.83 million transactions.

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There was a drop in the number of debit transactions made through the National Automated Clearing House (NACH) channel, through which a large number of loan repayments and insurance premium payments are made. NACH debits fell 0.61 percent to 70.3 million for the first 21 days in June from 70.7 million for the comparable period in May.

The rate of decline of NACH transactions has risen in recent months. In May, nearly 36 percent of debit requests on NACH were declined, up from 34 percent in April. This trend points to a likely worsening in credit quality across lenders’ loan portfolios.

The second COVID-19 wave had also hit consumer sentiment badly. The survey of consumer confidence conducted by the RBI in the last week of April and up to May 10 in 13 major cities revealed that consumer confidence fell to a new all-time low in May 2021.

Yet, the fallout of the 2021 COVID-19 wave was better than that of the first one in 2020, PayU India said in a report on 22 June. Year on year, there has been a 52 percent increase in the number of transactions and a 76 percent increase in expenditure between May 2020 and May 2021, PayU India said.

“Broadly, businesses and consumers were better prepared to deal with the exigencies of lockdown in 2021. Given that the lockdown was staggered and geographically restricted, the growth of digital payments has been steady, especially for sectors like retail, logistics & pharma,” said Hemang Dattani, Head - Data Intelligence, PayU.

Spends in some sectors like travel were hit in particular due to the second wave. For instance, immediately after the lockdown in 2021, there was a 65 percent drop in transactions and a 78 percent drop in expenditure in the travel segment, according to PayU.

Analysts have seen the improvement in payments data in June as a sign of pick-up in consumption. In a report dated 22 June, ICICI Securities said that the payment snapshot available for the year so far indicates that the impact of the second COVID-19 wave has been significantly less than that of the first.

“While the impact of the second wave will be higher in May’21 vs Apr’21, one can expect recovery in Jun’21 considering UPI payments in May’21 have been similar to Apr’21; online sales are likely to recover and we are witnessing progressive normalisation in Jun’21,” ICICI Securities said.
first published: Jun 23, 2021 10:59 am

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