Credit Card Spends Rise Again in October

Mumbai: Fueled by deals offered during the festive season, credit card spends have risen in the last two months. The total card spends (at PoS and online/e-commerce) rose to Rs 2 lakh crore in October from Rs 1.76 lakh crore in September and Rs 1.68 lakh crore in August. Most of the spends were through online shopping using credit cards due to attractive discounts and deals offered by e-commerce platforms like Amazon and Flipkart during their festive season sales. No-cost EMI option also emerged as a powerful motivator for online purchases. Bankers said that around 80-85 per cent of the credit card users plan their festive shopping specifically around these e-commerce sales, to capitalize on credit card-based offers and other discounts.

Sanjeev Moghe, president and head cards and payments at Axis Bank told DC, “If you see September spends were higher than August and October is higher than September. Given the festive period, spends have gone up. This is expected to normalize as the festive season gets over. Spends will come down again in November and then rise again slightly in December given the year end spends.”

Faced with delinquencies in the credit cards business, banks continue to cherry pick customers resulting in a net credit card additions of 7.86 lakh in October compared to 6.20 lakh in September and 9.2 lakh cards in August. The credit cards in force stood at 10.6 crore in October.

According to a survey by Paisabazaar released last week, gadgets, clothing and accessories, and home appliances emerged as the top three categories for festive spending. Over 75 per cent of respondents reported that they primarily spent on gadgets such as smartphones and smartwatches, likely driven by significant discounts offered on these items during major sales events like Amazon’s Great Indian Festival and Flipkart’s Big Billion Day.

Banks and NBFCs reported high delinquencies on credit cards, personal loans and micro-finance loans during the second quarter earnings. Most lenders have set aside more capital for provisions and had lower profits than expected. The surge in bad loans on credit cards, personal loan and microfinance portfolios comes nearly a year after the banking regulator tightened rules for unsecured loans. In November last year, the RBI asked NBFCs and banks to increase buffers for some consumer loans in an effort to check the exuberance in unsecured loan growth. It also mandated banks to increase their risk weightings to the non-bank sector.