The number of credit cards in circulation fell below the 20-million mark in March, as issuers continued to cull inactive and defaulting accounts and focus instead on increasing spends.
The country’s credit card population fell to 18.3 million as of end-March from a peak base of 28.3 million in April 2008, according to data released by the Reserve Bank of India. In the last financial year, 6.04 million cards were put out of circulation. This is in addition to nearly 3.61 million credit cards being cancelled in 2008-09. So, over two years, nearly 10 million cards have gone out of circulation.
This is the first time since August 2006 that the credit card population has declined below 20 million.
As the economy slid into a downturn, unsecured portfolios of banks such as credit cards and personal loans were severely affected. As part of a firefighting exercise, banks began to cancel inactive cards and close accounts they feared would default. The country’s largest private sector lender, ICICI Bank, cut its base from a peak of more than eight million to about five million at present. Late entrants into the credit card space such as Barclays Bank and Axis Bank were also affected.
However, issuers have since become optimistic and have resumed new card issues from the second half of 2009, while simultaneously culling inactive and defaulting accounts. Some like HDFC Bank remained bullish and continue to issue 70-80,000 cards every month. HDFC Bank has the second largest credit card network in the country, with 4.3 million cards as of March 31.
Rather than increase the numbers of cards, issuers are trying to increase the spending on each. Standard Chartered Bank has seen its monthly credit card spending increase from Rs 250 crore last year to Rs 400 crore. “We are aiming for a target of Rs 500 crore per month soon. Ours is a highly rewards-driven programme, concentrating on what works with customers,” said Shyamal Saxena, general manager of retail banking at StanChart.
The focus on getting fewer customers to spend more is reflected in the numbers. According to RBI data, customers spent an average of Rs 2,685.97 per transaction in 2009-10, up from Rs 2,518.4 in 2008-09. In 2007-08, customers spent an average of Rs 2,540.9 per swipe.
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Bankers say the market has also shifted towards the high-end, less susceptible to delinquencies. “The focus for the last three years has been the premium segment and losses from this segment are significantly less than from other segments,” said a senior executive of a large foreign bank.
While the pool of premium customers is much smaller than the mass segment, high-end customers make up by spending more. “I would prefer to have 5,000 high-end customers rather than 20,000 premium segment customers,” the executive added.