Newgen banks opt for alternate channels

Transactions jump 57% to to Rs 2,10,473 crore.

Plastic money is catching the fancy of the Indian consumers. Payments through credit and debit cards have increased by 24 per cent to Rs 44,819 crore up to February this year compared with Rs 36,133 crore in February 2006, according to data from the Reserve Bank of India.

Customer payments through electronic channels have increased by 57 per cent to Rs 2,10,473 crore, according to RBI. Electronic fund transfer has increased by about 24 per cent to Rs 68,832 crore.

"Customers are increasingly using plastic money to purchase air tickets, wine and dine and also for other leisure needs. Spends on fashion and lifestyle products comes next,'' said Sachin Khandelwal, general manager, head of cards products group, ICICI Bank.

This is convenience banking at the click of a mouse. Majority of the new generation private sector banks claim that almost 80-90 per cent of their transactions are routed through alternate banking channels which include telephone, internet and automated teller machine (ATM).

Commercial banks, in particular the new generation private sector banks and foreign banks, encourage their customers to use alternate channels for payments. The routing of banking transactions through ATMs and other electronic channels enables banks to reduce operating cost.

Banking transactions executed at a branch will cost a bank around Rs 40. In metros, this cost goes up to Rs 70 as the real estate cost is very high. While if the transaction is routed through an ATM, the cost comes down to Rs 18. Usage of a credit or debit card at a point of sale terminal brings down the cost further to Rs 1.

"Bank customers now pay their utility bills and other monthly obligations such as equated monthly installments on loans, life insurance premiums through electronic clearing system (ECS). ECS is an electronic channel for retail payments,'' said Hemant Kaul, president, retail banking, UTI Bank.

The RBI is also encouraging the use of electronic channels and plastic money as a payment gateway as it leaves an audit trail. "Increase in usage of electronic channels also leads to increased tax compliance. This is good news for the government,'' said a senior official from the RBI.