Credit Card Additions Slow As Banks Exercise Caution

Mumbai: Faced with delinquencies in the credit cards business, banks continue to cherry pick customers resulting in a sharp deceleration in the pace of net credit card additions. While credit card spends managed to grow year on year, they declined sequentially. Bankers said that they do not foresee a significant improvement in growth despite the upcoming festive season. According to the data from the Reserve Bank of India (RBI), the industry’s net card addition during April to August 2024 was 36.89 lakh down 38 per cent compared to 59.75 lakh cards during the same period last year. For August, banks added 9.24 lakh credit cards down 34 per cent compared to 14 lakh credit cards in August 2023. The total number of cards in force were 10.5 crore during the five months of the current fiscal compared to 9.1 crore, a growth of 15.6 per cent year on year and 0.9 per cent sequentially. Credit card spends grew 16.6 per cent to Rs 8.21 lakh crore during April to August 2024 but fell 2.6 per cent to Rs 1.68 lakh crore in the month of August 2024.

Ravindra Rai, managing director and chief executive officer at BOBCARD Limited (a subsidiary of Bank of Baroda) told DC, “The new card addition has largely declined because of the overexposure of certain categories to customers availing unlimited benefits. RBI has been highlighting and awakening the audience about the associated risk involved in unsecured lending which influenced issuers to be more cautious and promptly initiate safe harbours.”

“Meanwhile, we are treading this path with “Caution Aggression” as we believe the loyalty of our customers has been our biggest moat to the franchise,” he added.

On growth momentum Rai said, “Growth momentum is expected to increase in the last two quarters, primarily due to monsoons and the upcoming tailwind of the festive season spends. However, the larger exuberance shall still be missing unlike the last two years, since both issuers and the manufacturers/merchants shall be wary of giving additional discounts or rewards to boost demand. Hence, we may not see an astronomical rise in Y-o-Y spends, even though the Q-o-Q numbers may be much better.”

Sanjeev Moghe, president and head cards and payments at Axis Bank told DC, “We don’t expect the growth momentum in new acquisition to improve as the risk (delinquencies) has gone up and all of us have slowed down new acquisition. So as a measure of caution, lenders have slowed down. But the new acquisition slowdown does not have an immediate impact on spending. So spends will continue to grow in double digits.”

Meanwhile, India’s most used retail payments platform, Unified Payments Interface (UPI), continued its strong upward trajectory for the month of September, with more than Rs 20.64 lakh crore worth of payments changing hands. This is the fifth consecutive month where value of transactions have surpassed the Rs 20 lakh crore mark.