Banks, already saddled with high non-performing assets, (NPAs) have a new problem in hand — rising credit card usage and an increase in loan amount against such cards.
As of July 31, 2016, the outstanding number of credit cards stood at around 25.94 million, up 18% against the same period last year, while outstanding credit card loans rose 29% to ₹42,900 crore during the period, according to RBI data.
For the past few months, loans taken against cards have been growing at over 25%.
But once bitten is twice shy.
Hit by over exposure to companies, banks, including HDFC Bank and Axis Bank, have decided to go slow on their plans to grow the credit card portfolio.
“We do very low levels of business with clients outside our customer base. Even then, this is a time for us to be cautious, given the fact that jobs and salaries are not growing as one might like,” said Jairam Sridharan, chief financial officer at Axis Bank.
India’s third-largest private sector lender, Axis Bank, reported a 40% growth in the number of credit cards issued to 2.8 million at the end of July 31, 2016, compared to the same period last fiscal, 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 Cards has 3.86 million and Axis Bank has 2.87 million.
HDFC Bank, which is also the country’s second-largest private bank, grew its credit card business by 18.5% during the July to September period, down from 26% in the April-June quarter.
“As far as new cards issued are concerned, we have moderated a little because we wanted to be more prudent,” said Paresh Sukthankar, deputy managing director, HDFC Bank.
“The credit card segment has become more fee-based, and has more checks and balances now,” said Manu Sehgal, business development leader, Equifax, an information solutions firm.