The early part of calendar 2018 saw 15 scheduled commercial banks – including the country’s three largest banks and 10 from south India – scale back their network of point-of-sale (PoS) terminals. According to data released by the Reserve Bank of India (RBI), the size of the POS networks of the 15 banks shrunk between 0.4% to 33% in the December 2017 to February 2018 period.
The scale-back coincides with the ongoing cash crunch at ATMs, which first emerged in February in the states of Andhra Pradesh, Karnataka and Telangana, and could have contributed to the increased demand for cash even as it now limits the payment options for citizens.
State Bank of India (SBI), HDFC Bank and ICICI Bank saw the number of POS terminals deployed fall by 0.4%, 0.9% and 4.5%, respectively, over the two-month period. While SBI and ICICI have seen the number of POS machines rise in February 2018 when compared to February 2017 (when the demonetisation exercise ended), HDFC Bank has seen a drop even on a year-on-year (y-o-y) basis. It had 4.07 lakh POS machines operational in February 2018, down from 4.14 lakh machines in February 2017.
The bank had earlier said that it was not scaling back its POS network, but churning it to ensure the machines are deployed at the most optimal locations.
The drop in POS deployment was more pronounced for the South India-based banks, with Indian Overseas Bank’s network shrinking by 33% between December 2017 and February 2018 to 12,187 terminals. Federal Bank followed with a 8.5% contraction in POS installations to 11,937.
Other mid-sized public-sector banks have also downsized their network – Central Bank of India, Andhra Bank, UCO Bank and Vijaya Bank all cut back on their POS terminals deployed by 2-8%. Bankers confirm that the pace of additions to the POS network, which spiked during and after demonetsation, has slowed.
Earlier this month, Ambuj Chandna, head – retail liabilities, investments and payment products, Kotak Mahindra Bank, told reporters, “That (phenomenon of high POS additions) was true in the phase of demonetisation. But, if you see the last few months, a lot of banks are unwinding.”
Madhusudanan R, co-founder, M2P Solutions, which enables merchants to accept digital payments, said that merchants now often return POS machines in the absence of adequate transaction volumes.
“The rate of deployment has definitely gone down,” he said, adding, “The other aspect of POS is that as cash came back, for some of these merchants, the necessity of having a POS has reduced. There have been some merchants who have returned because there are not enough volumes and there is a rental associated with having a POS machine.”
Merchant acquisition for digital payments is a loss-making business for banks in India and only banks with large balance sheets can afford to invest in it. Given this, it remains to be seen if the relatively smaller lenders will continue to reduce their footprint.