In its ongoing drive to encourage the use of plastic money and electronic payments, the government will nudge public sector banks to enhance their point of sale (PoS) terminal networks substantially, so that the country's total PoS terminals rise to 5 million in two years.
At present, India has around 1.2 million PoS terminals.
A senior ministry official told dna: "We will encourage public sector banks to expand PoS terminals to at least 5 million in the next 2-3 years. We will encourage banks by offering some incentives."
Banks also realise the cost effectiveness of digital banking and are moving towards it.
On Monday, the government had put out draft proposals to boost digital payments by giving income tax rebates by waiving off surcharge on various goods and services like railway ticket bookings, convenience charge while booking an airline ticket, surcharge on petrol among other benefits.
Sunil Srivastava, deputy managing director, State Bank of India, told dna: "The cash-to-GDP ratio in developed countries is less than 5%, but in India, the ratio is 12%. To discourage the use of cash, we are encouraging customers to move towards digital banking. Handling, printing currency is an expensive process, so plastic money and electronic transactions will be the focus of the bank during the year."
SBI is already planning an exponential expansion in its PoS terminals with a planned increase of terminals by 1,50,000 during the financial year. The bank has about 2,20,000 terminals.
Managing currency and disposing off soiled and counterfeit notes is a Herculean task undertaken by the Reserve Bank of India (RBI), all of which could be minimised with the proliferation of plastic money and e-transactions.
During 2013-14, around 14.2 billion pieces of soiled bank notes were disposed of against a target of around 17 billion pieces. For 2014-15, a target of around 17 billion pieces has been fixed, keeping in view of the disposal capacity available and the trend of actual disposal during the last three years.
During 2013-14, 4,88,273 pieces of counterfeit notes were detected, of which 4,68,446 pieces (95.9%) were detected by commercial bank branches while 19,827 pieces (4.1%) were detected at RBI offices.
AP Hota, chief executive the National Payment Corp of India (NPCIL), told dna: "For a country the size of India, electronic payments are easier to handle rather than cash. The country has 1.2 million PoS terminals, which is quite inadequate. We need to get at least 5 million such terminals across the country so that electronic transactions can increase and use of cash decrease."
Bank of India is also planning to increase its PoS terminals by nearly 25,000 terminals during the financial year, which will take its total to about 30,000.
A senior BoI official said: "All banks are looking at digital banking in a big way, so that the traffic can be diverted away from the brick-and-mortar branches to alternative channels like Internet banking, ATMs, PoS. the use of plastic money is also being encouraged by the government which will be beneficial for the banks as it will get cost effective."
