 "Credit Card spends fall sharply in November after festive October high")
Credit card spends in November dropped 16.1 per cent month-on-month (M-o-M) to Rs 1.7 trillion, owing to moderation in consumer spending, following strong festival season momentum in October, latest data by the Reserve Bank of India (RBI) showed.
Meanwhile, growth in credit card issuances also slowed significantly in November, with the industry adding only 350,000 net credit cards. This compares to 1.3 million net additions during the same period last year.
Net additions of credit cards started slowing down after the RBI, in November last year, increased risk weight for banks on unsecured lending.
Following RBI’s measure, major issuers have calibrated their growth in the segment, which has resulted in a slowdown in issuances of credit cards.
“Both delinquency and revised risk-weight norms have contributed to the reduction in card issuances. As banks face higher delinquency rates, they become more stringent in issuing credit cards, monitoring approved limits, and focusing on collections. This cautious approach is likely limiting new credit card issuances,” said Saurabh Bhalerao, associate director, BFSI Research, CareEdge Ratings.
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Among major issuers, HDFC Bank – country’s largest credit card issuer – added 187,118 cards, SBI Cards added 231,058 cards and ICICI Bank added 50,767 cards. However, Axis Bank saw its outstanding cards decrease by 39,734 during this period, according to the data.
In a report, analysts at InCred Equities observed that the asset quality trend in the credit card industry seems to have weakened, as seen in the caution over new card issuances by most players.
“There are heightened concerns about asset quality stress building with the rise in 90+ days past due (dpd) by 14 basis points (bps) quarter-on-quarter (Q-o-Q) to 1.8 per cent, according to TransUnion CIBIL India. We are witnessing rising defaults by new-to-credit customers who are facing difficulty in paying their dues on time, specifically from Tier-II cities and beyond. Consequently, we are seeing a higher focus on premium cards by select players,” the analysts said.
The outstanding cards in the banking system in November 2024 stood at 107.23 million from 96 million in the year-ago period. Spending increased 4.97 per cent year-on-year (Y-o-Y) to Rs 1.7 trillion from Rs 1.61 trillion.
After the monthly drop in credit card spending, industry experts believe that it will gather pace in December amid year-end sales.
“Credit card spends will bounce back organically in December as insurance, NPS payments and year-end sales offered by e-commerce players & end of season sales on the retail side will fuel growth,” said Mayank Markanday, head of digital bank, AU Small Finance Bank.