Indians’ credit card spends in September jumped 57% on a year-on-year basis to Rs 80,000 crore, according to the latest data from the Reserve Bank of India (RBI). This represents 3.2% sequential growth, despite a high base of Rs 77,981 crore in August.
In the past six months, the average monthly spending on a credit card increased to about Rs 12,400 from Rs 10,700 earlier, brokerage firm Motilal Oswal said in a report.
And the momentum is only expected to continue as the economic activity improves, leading to consumer confidence and optimism.
The current figures are much higher than the pre-pandemic level. In January and February of 2020, right before the first nationwide lockdown, credit card spends had been to the tune of Rs 67,402.25 crore and Rs 62,902.93 crore, respectively.
But does all the credit for this pickup in spending go just to the festive season? No. There are several other factors in play. An increase in the number of cardholders is another reason for a rise in transaction values.
The banking system reported nearly 1.1 million new credit card additions in September, taking the number of outstanding credit cards to 65 million. The 10.8% growth in September is the highest in 11 months.
Competition in the industry is also driving up credit card disbursements. For instance, IDFC First Bank, which entered the credit card space only in January this year, already has half a million cards in circulation.
TOP CREDIT CARD ISSUERS AS ON SEP 30 HDFC Bank: 14.98 millon
SBI: 12.58 million
ICICI Bank: 11.7 million
Axis Bank: 7.51 million
RBL Bank: 3.1 million
Citibank: 2.59 million
Kotak Mahindra Bank: 2.44 million
One of the main reasons for the spike in new card additions in September was the return of India’s biggest credit card issuer, HDFC Bank, into the market after eight months. In mid-August, the RBI lifted the embargo on the issuance of new cards by HDFC Bank. Since then, the bank is on an aggressive drive to regain the market share it lost during the period.
Over the past 10 months, ICICI Bank has added close to 2 million new credit cards whereas Axis Bank has added 6.3 lakh cards.
For October, the spending is estimated to be even higher, as e-commerce platforms like Flipkart and Amazon ran their annual festival sales in the first week of the month. What is boosting the usage of credit cards is their co-branding for offering cashbacks while shopping on these platforms. Amazon Pay has tied up with ICICI Bank, while Flipkart is collaborating with Axis Bank.
By July this year, ICICI had issued more than 2 million Amazon Pay ICICI Credit Cards. Meanwhile Axis Bank had issued 1.36 million of its co-branded credit cards with Flipkart in just two years of its launch.
What is more heartening for the credit card industry is that its growth is sustaining despite a rise in cash transactions through UPI. The value of transactions made through the platform crossed $100 billion in a month for the first time in October.
A whopping 4.2 billion UPI transactions were recorded in August this year, totalling $103 billion in value. Both are new all-time highs.
While UPI is seen as a threat to credit cards, both seem to be co-existing as they serve different purposes – credit cards for big-ticket items and UPI for day-to-day purchases.
Either way, digital payments are the winner ultimately.
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