For the first time, debit card purchases are now higher than credit card purchases, spurred in part by the drive to a cashless economy following demonetisation last year. For the first six months of the current fiscal, debit card purchases totaled Rs 218,778 cr while purchases through credit cards were Rs 212,461 cr.
In 2011-12, there were almost two debit card transactions for every credit card purchase. In 2016-17, purchases through debit & credit cards were nearly equal.
Ever since RBI first introduced a differentiated merchant discount rate (MDR) for debit cards in 2012, vis-a-vis credit cards, their usage for purchases has shot up. MDR is the charge paid by a merchant to a bank for sales through debit or credit cards. Before June 2012, both debit & credit cards incurred similar MDR.
Debit card purchases growth rate more than doubled last fiscal, as the demonetisation propelled the move to a cashless economy.
This is also the first time that the RBI has rationalised MDR based on the merchant's previous year's turnover, rather than the transaction value.