Credit card usage is fuelling fears for private banks owing to slowing growth from uncertainties in loan usage, which stems from fewer jobs and meagre salary hikes.
In the past two years, banks had cashed in on retail loans as corporate stress dented growth. At the end of July, the outstanding number of credit cards was around 25.94 million, up 18%, while outstanding credit card loans hit Rs42,900 crore, a 29% rise, according to Reserve Bank of India (RBI) data. For the past few months, loans taken against cards have grown at more than 25%.
However, having suffered over exposure to corporates, banks such as HDFC Bank and Axis Bank are now cautious on further expansion in the credit card segment. Both the banks are slowing plans to grow the portfolio.
Jairam Sridharan, chief financial officer at Axis Bank, said, “We do very low levels of business with clients outside our customer base. Even then this is a time for us to be extremely cautious given the fact that jobs and salaries are not growing as one might like. Issuers need to be very selective particularly if they are issuing outside their known internal customer base.”
India’s third-largest private sector lender, Axis Bank grew its credit cards by 40% from the previous year to 2.8 million, while credit and debit card spends grew 39%.
HDFC Bank is the largest credit card provider in the country, with 7.8 million cards, while ICICI Bank has 3.87 million cards, SBI has 3.86 million cards and Axis Bank has 2.87 million cards issued till July.
HDFC Bank, which is also the country’s second largest private bank, grew its credit card business by 18.5% in the June to September period, down from 26% in the June quarter. Sequentially it climbed less than 1% to Rs21,336 crore.
“Unlike the last quarter, the bank witnessed that credit card outstanding remained flat on a sequential basis. As far as new cards issued are concerned, we have moderated a little because we found that the even as new cards were issued, the active cards percentage was dropping, so we wanted to be more prudent… (Hence) if you look at the year-on-year growth, there probably has been a little bit of moderation (18.5%) on cards in terms of the balance sheet growth,” said Paresh Sukthankar, deputy managing director, HDFC Bank.
Besides unsecured loans, credit card outstanding has emerged as one of the fastest growing segments in the retail loans portfolio of banks.
“Delinquencies could have gone up in some retail segments but not anywhere close to the crisis period. Since the crisis, the credit card segment has become more fee-based unlike earlier, and has more checks and balances as well,” said Manu Sehgal, business development leader at Equifax, an information solutions firm.