Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
Plastic Money: Opportunities & Challenges in India
AUTHOR
Ms. Deepti Gupta*
*Asst. Professor, Department of Business administration, Vidya Knowledge Park, Meerut
Ms Megha Bansal**
**Lecturer, Department of Business Administration, Meerut International Institute of Technology, Meerut
ABSTRACT
In Today’s Scenerio,India has come out of self-binding shackles to look Young as the words “India Shines”
reflects and another word which reflect this are “Plastic Money”. Today is the age of Instant Swipes rather
than having a huge sum of cash in the pockets and anxiety in the mind.Plastic Money was launched in 1981
in India and it is the entry of Foreign Banks which made them popular, especially after 1991 i.e. the phase of
Liberalization, Privatisation & Globalization, when India follows ‘Go Global’ concept and it accepts all
attachments of there concepts and try to adhere with them.Plastic money or Polymer money made out of
Plastic is a new & easier way of paying for goods & services. Debit card, Credit card, ATM’s, Smart card etc.
are different forms of it. Though Diners club & American Express launched the use of credit card in 1950,
however they became more popular with the use of Magnetic stripes in 1950.
Money”. The Plastic Money offers an amicable
I
ntroduction
solution when it comes to purchases 7 the inability to
This is the age of Plastic Cards with the rapidly
possess or carry cash. Today is the age of Instant
growing upwardly mobile middle class in India
swipes rather than having a huge sum of cash in the
being drawn to the Plastic Money Culture. Plastic
pockets & anxiety in the mind.
Money refers to the substitution of the usage of
Australia leads the world in plastic banknote
currency money at the time when the transaction of
technology. Due to the problem faced with the paper
buy & sell is taking place, by usage of a card
note the invention of plastic money has been
normally
such
introduced. The paper money has small life cycle and
substitution. India has come out of self binding
can’t be recycled but as compared with the plastic
shackles to look young again. “India shines” are the
money which has long life cycle and can be recycled
words which reflect this and other words are “Plastic
for further utilization in making plumbing fittings and
made
of
plastic
representing
Plastic Money: Opportunities & Challenges in India
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
etc. In Pakistan first plastic money is introduced by
originated in the first decade of the 18th century with
the Habib Bank which was not get the familiarity
the general bank coming into existence in 1786.Bank
among people and then Allied bank’s Master card
of Hindustan followed General Bank. Both the banks
was launched which was very popular among the
are now defunct. The Oldest Bank in India is State
customers, the different banks come up with their
Bank of India, being established as the Bank of
different form of credit and debit cards. The card
Calcutta in June 1806. Later on the wave of
transactions, both debit & credit, were up by more
Liberalization & Globalization pave way to private
than 42% to Rs 70,459 crore during 2007-2008
banks, which came to be known as new generation
according to latest data from the Reserve Bank of
techno-savy banks such as ICICI Bank & HDFC
India (RBI).These data indicates the increasing use of
Bank & with these banks a magical word “Plastic
Plastic Money in India but before discussing in detail
Money” entered in India.
we are dealing with types of Plastic Money available
PLASTIC MONEY: VARIOUS FORMS IN
in India.
INDIA
OBJECTIVES OF THE RESEARCH PAPER




1. Credit cards
The Various Opportunities available for the
A Credit Card is Plastic Money that is used to pay for
Plastic Money
products & services at over 20 million locations
To Understand the reason for their increasing use
around the world. All one need to do is to produce the
in India
card & sign a charge slip to pay for your purchases.
Factors which hinders the use & functioning of
The institution which issues the card makes the
Plastic Money in India.
payment to the outlet on your behalf, you will pay this
Safety Measures taken by RBI to prevent the
loan back to the institution at the later date. Credit
hindrances in functioning of Plastic Money.
card essentially a “Pay later Product” along the
The Economic Growth of a country depends on the
financial sectors performance that converts the fuel of
dimensions of time for settlements or payments.
2. Debit Card
saving into kinetic energy for the growth of various
Debit Card is of “Pay now” Feature. Debit card is
changes has taken place which has affected The
issued by the bank in which one has account. When a
Indian Financial Sector, which is at the core of its
debit card is used to make a payment, the amount
country’s economy as well as reforms & banks which
charged is instantly removed from your bank balance.
are part & parcel of financial sector. In India, Banking
It is only accepted at the outlets with electronic swipe
Plastic Money: Opportunities & Challenges in India
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
machines that can check & deduct the amount from
The following points below depicts the difference
your bank balance online
between the two famous forms of Plastic Money:
3. Charge Card
A. Credit Cards:
Charge card is a variation of Plastic Money where the
1. ‘Pay Later’ Product
payment of the purchase of goods is done within you
2. Can avail credit for 30-45 days
have to pay off by the due date whereas in credit card
3. No access to current & savings account
you are not declared defaulter, even you exceed your
4. Not essential to open a bank account
due date a month immediately after the purchase. It
sophisticated
carries all the features of credit cards but in Charge
5. Tele- Communication network is not required
card.
6. Holder not required to have amount in the
account to the extent of the transaction
4. Master Card & Visa
Master
Card
&
Visa
are
global
non-profit
organizations dedicated to promote the growth of card
7. Risk of Frauds exists
B. Debit Cards:
business across the world. They have built a vast
1. Pay Now’ Product
network of merchant establishments.
2. Instantaneously debited to customer’s account
5. Smart Card
3. Direct access to current & savings account
It contains an electronic chip which is used to store
4. Essential to open a bank account
cash. This is most useful in case of small purchases
5. Point of sale terminals to be installed at
with the rapidly growing consumer needs, the Plastic
merchant establishment & hence are capital
Money has lots of potential in India. Banks from the
intensive
Public Sector & Private Sector are competing with the
well established foreign players in this Industry.
6. Amex Card
6. Bank account must have the required amount
to the extent of the transaction
7. Risk minimized through PIN based system
It stands for American Express & is one of well
PLASTIC REVOLUTION IN INDIA
known charge cards. This card has its own merchant
Earlier Plastic Money growth was very slow in terms
establishment’s tie-ups & does not depend on the
of its number & value. Even the number of players
network of Master card or Visa. It is a means for high
was limited & mainly foreign banks like HSBC, Citi
income group’s categories & companies and may not
Bank & Standard chatered bank dominated the
be acceptable at many outlets.
market. In beginning Indian Banks like SBI were not
Plastic Money: Opportunities & Challenges in India
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
attracted by this product & took ample of time to start
THERE ARE VARIOUS OTHER REASONS
dealing in Plastic Money. The scenario has now
FOR INCREASING USE OF PLASTIC MONEY
changed drastically. Now there are number of
IN INDIA WHICH ARE AS FOLLOWS:
nationalized & private banks dealing in Plastic
1. The E-Payment Boom
Money. Metropolitan consumers as well as smaller
The E-Payment is on boom now days in Indian
town citizens, both are enjoying the use of Plastic
Financial Sector. The bulk & retail payments are
Money.
being easily done through Electronic Clearing System
Credit card is the most prominent business which is
(ECS) which results in low transaction cost & less
expanding in Indian Financial Services. There are
manual work. In the same way Electronic Fund
currently 25 million credit cards in India where ICICI
Transfer (EFT) such as Credit Card, debit card, smart
is the largest player with 8.5 million cards issued. The
cards, prepaid & ATM cards has grown to Rs. 15,711
other prominent players in this sector are Citibank,
crore in 2004 from 0.6 crores in 1999.
SBI-GE Card & HDFC Bank. The reasons for such an
2. Explosive Growth
expansion of Plastic Money/E-Payments are:
Due to the conversion of Indian Financial sector from

Due to technological changes
cash to e-payments system lead to more & more

Due to growing internet access among consumers
money in banks. Also the costing of the banks is also

Due to rising consumer confidence
reduced to a greater extent as merely Rs.1 is being

Due to Convenient delivery payment models
charged when a debit card is used at merchant
E-payments have been increased by over 60% in
establishments as compared to the cash withdrawn
previous three years. By next two years it is expected
from bank by walk in customer. Therefore growth in
that the retail payment market will increase by 65-
deposits implies more loans which give rise to
70% with an increase in value from 150 billion dollar
economic activities.
to 180 dollar. Today the Indian payment mode has
3. Increased Acceptance
shifted from paper notes to electronic mode. This shift
As most of the merchants have started using e-
is mainly due to reduce the risk involvement &
payment modes, more & more customers are using
money movement while dealing with high value
plastic money for paying off for goods & services.
transactions.
Consumers usually prefer to use cards for high value
items. Electronic payments for purchase of consumer
durables has grown by 56 per cent, while jewellery
Plastic Money: Opportunities & Challenges in India
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
purchases paid by card has grown by49 per cent.
Thus, we conclude that E-Payments are the main
Moreover there has been a drastic increase in the
source of increasing consumption and increase money
number of consumers who are now using cards to pay
in the economy. Therefore the Plastic Revolution will
for items of daily expenditure as well as big-ticket
have a long stay with the acceptance in infrastructure
items. The major reason for such an increase is the
& regulation in place.
number of establishments accepting e-payments.
BUBBLING IN INDIAN PLASTIC MONEY
4. Growth Potential
MARKET
The Growth Potential of Plastic Money is enormous
The Indian Plastic Money Market is bubbling with the
as out of 150 million Indians constituting the banked
activity, with both Indian & Foreign Banks trying to
population, 30 millions are eligible for credit cards &
expand their presence. The RBI’s latest numbers
all are eligible for debit cards. India has received 15%
testify that growth in Plastic Money was much higher
of the world wide remittances which is almost five
than 24.51% recorded in 2006-07.This Scenario is
times of FDI into the country so keeping cash within
bound to brighten up & register an exponential
the system has been crucial for India.
growth in coming years. India is poised to become the
5. Debit Cards
second biggest market in the world next to U.S
As the economy is migrating towards E-Payments,
The following reasons may support the above fact:-
the ‘buy now pay now’ character of debit card has

shown a dramatic increase in India which has year on
year growth rate upto 76%.ATM cash withdrawals
India has over 130 million people with the Bank
Account.

The large middle class segment of our population
accounts for over 80% of debit card volumes. Over
is increasingly becoming consumerist bordering
90% of the debit card holders withdraw cash from
on 20 crore should easily provide the bare for
ATM’s to pay for goods & services which would be a
such growth.
precursor to debit cards being used for payment.

6. Other Advantages
The desire on the part of the middle class 7 upper
middle class to enhance their lifestyles by
The other benefit of shifting from the cash system to
accessing more products & undertaking more
e-payment system is the inbound tourism in which the
leisure activities will switch them over to Plastic
Online Ticketing by the railways has been the
Money.
forerunner in e-payment acceptance.

India turning to be one of premium visitor
destinations.
Plastic Money: Opportunities & Challenges in India
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390

India has the largest “young” population in terms
of sheer size & this young segment is the major


1. Information Technology -both opportunity &
challenge
driver of Plastic Money in India.
Use of Plastic Money has increased the dependency
Thus, in consideration with the above reasons, we
on the network which has brought IT department’s
can say that the plastic money will turn out to be
additional responsibilities & challenges in managing,
of great use & acceptance in India.
maintaing & optimizing the performance of the
Explosive rise in corporate citizens, with the
banking networks. All bank products & services are
formation of more & more Joint stock companies.
available at all times and across the entire
FACTORS
HINDERING
THE
USE
OF
organization. It is essential for today’s retail banks to
FUNCTIONING OF PLASTIC MONEY
generate revenues & competition.
While on one hand, the plastic money has hampered
Besides, there are network management challenges
the Indian middle class, on the other hand, it has left
whereby keeping there complex, distributed networks
many a card holders confused. Despite the fact that
& applications operating properly in support of
there are about 3 million credit card industries,
business
majority of them are ignorant of card usage. The
challenges include insuring that account transactions
Credit Card & Management consultancy conducted
applications run efficiently between the branch
the study on this issue of Plastic Money. Though the
offices and data centers.
objective
become
essential.
Specific
use of the Plastic Money is Revolutionary which will
2. KYC Issues & Money Laundering Risks
change the scenario of the financial market and
Competition for clients leads to KYC procedure being
upgrade the situations but due to many unavoidable
waived in the bid for new business. Banks must also
situations its use is not increasing with the pace at
consider
which it is expected to.
documents they will accept & other processes to be
“It is surprising that majority of card holders in
completed. The RBI has issued detail guidelines on
the country are ignorant of the fundamentals like
application of KYC Norms in November in 2004.
interest rate. There is an urgent need to educate
Besides some issues related to the smooth functioning
the card holders”
of Plastic Money in India is in a state of preparedness
-Mr. Vijay Mehta, chief consultant, CCMC.
for varied challenges of the future. As aptly told by
SOME OTHER HINDERING FACTORS ARE:
Charles Parwin”It is not the strongest of the
Plastic Money: Opportunities & Challenges in India
seriously
the
type
of
identification
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
species that survive nor the most intelligent but the

one most responsive today”
of
transparency
in
disclosing
fees/charges/penalties. on disclosure of detailed
3. Ignorance
There was a critical gap in the understanding of the
Lack
billing procedure

Unsolicited calls to members of the public by card
card holders in the areas such as interest rates &
issuing banks/direct selling agents pressuring
processing fees on outstation cheques.Due to snob
them to apply for credit cards.
value people applies for cards & later on due to lack

Communicating misleading/wrong information
of knowledge they realized the complicated aspect
regarding credit cards, regarding conditions for
related to interest rates.
issue, amount of service charges/waiver of fees,
RBI: ACTING AS A REGULATOR
gifts/prizes.
Use of Plastic Money is growing at an unprecedented

Sending credit cards to persons who have not
rate in India. Plastic Money is growing in leaps &
applied for them/activating unsolicited cards
bounds in India. Today numbers of banks are offering
without the approval of the recipient.
cards. Though initially the foreign banks have a
The Working Group deliberated a major of
dominant share but the entry of Indian Banks like
number of issues relating to:
SBI, ICICI & HDFC Bank will soon change the rule
1) Customer Rights Protection
of the game & with the entry of these banks the
2) Code of Conduct
Central Bank of India will act upon as a monitoring,
3) Customer Grievances & rights
regulating & controlling authority.
4) Transparency & Disclosure
Plastic Money, despite of its small size-merely 14%
The Group recommended that the most important
of Indians has given causes for so many complaints &
terms & conditions should be
for this RBI has to come with a roadmap for setting
advertised & sent separately to the prospective
up a grievances redressal mechanism.RBI has already
customer. This includes issues relating to:-
set up a working group for regulatory mechanism for
1) Fees & Charges
cards.
2) Drawal Limits
RBI has received many complaints regarding the
3) Billing
Plastic Money & major issues are:
4) Default

5) Termination/Revocation of card membership
Charging very high interest rates/service charges
6) Loss/theft/misuse of card
Plastic Money: Opportunities & Challenges in India
highlighted &
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390
7) Disclosure
that the people can benefit. Though the precautions
RBI is processing out all these recommendations &
will not eliminate complaints completely but, it can
issue guidelines which are going to pave the path of a
certainly reduce the number. The way to reduce the
healthy growth in the development of Plastic Money
chances of falling prey to negative aspects of Plastic
in India. The RBI is also considering bringing the
Money is by being establishing eternally vigilant &
credit card disputes within the ambit of the Banking
establishing sound procedures.
Ombudsman Scheme. But while issuing its guidelines
REFERENCES
RBI should consider the consumer along with the

banks & frame a layout which leads to the promotion
of plastic money even into rural India & smooth
Financial Intermediation: Innovations & Practices,
The ICFAI University Press (2004).

Katuri Nageswara Rao”The Indian Scenerio” IT
functioning of this in the developing financial sector
in Banks Emerging Trends, The ICFAI University
of India.
Press (2005).

CONCLUSION
Pramod Gupta”The Future of Plastic Money” IT
“Never before in history has innovation offered
in Banks Emerging Trends, The ICFAI University
promise of so
Press (2005).
much to so many in so short a
time”- Billgates

Sheeba Kapil”E-Banking: In Nascent Stage in
Billgates once quotes the above referring to
India” IT in Banks Emerging Trends, The ICFAI
innovations on technology. The same holds true for
University Press (2005).
innovations in financial services too. With the

Radha Purswani”Financial Market Innovations-A
innovation of IT the Plastic Money makes spinning
Paradigm shift & New Dynamics”, The ICFAI
changes in consumption & production patterns. The
University Press (2008).
Indian Population no doubt is increasing the use of

Plastic Money due to demographic changes, rising
income levels, change in consumer needs, attitudes &
S.Bhaskaran”Changing Faces of Indian Banking”,
The ICFAI University Press (2008).

Sudhanshu
Ranade”Plastic
Money
gaining
behaviour & increasing credit fredliness & still have
Currency Fast”. The Economic Times, Chennai,
the potential in this sphere.
Aug 6(204).
Inspite of all these good aspects the Central Bank of

India is receiving complaints regarding this new
money & for this it has to make some guidelines so
Plastic Money: Opportunities & Challenges in India
“Credit Cards: Plastic Money never saw it better
in India than now”

www.Article alley.com
Journal of Maharaja Agrasen College of Higher Education
Volume-2, Issue-1, June 2015
Online ISSN 2394 - 4390

“Plastic
Money,
Elastic
Rules”-
www.bookmark.com

“The
Plastic
Revolution”-
www.outlookmoney.com

Rediff on the Net Business News:”The Plastic
Trap”

“Retail:
The
Key
Growth
Drivers”-
www.equitymaster.com
Plastic Money: Opportunities & Challenges in India