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The country appears to be on a swiping spree if the recent spurt in the credit card business of banks is any indication.
According to data released by the Reserve Bank of India in February, the total credit card outstandings of banks stood at ₹1,05,905 crore as on December 31, 2019, a year-on-year growth of 25.3 per cent.
Overall credit card spend also went up 32 per cent year-on-year in the last financial year and touched ₹6 lakh crore, with 47 million cards issued.
This buoyancy is clearly visible in the loan books of some banks. For ICICI Bank, the personal loan and credit card portfolio grew 49 per cent in the third quarter of the current financial year compared with the corresponding previous period. This accounts for 9.2 per cent of the bank’s overall loan book. The retail portfolio under credit cards alone grew 43 per cent for the bank, which had identified the segment as one of the key drivers of retail income growth.
In the case of HDFC Bank, advances under the credit card segment grew to ₹57,678 crore as on December 2019 from ₹44,339 crore in the same period the previous year.
For SBI Cards, which has now gone for a public issue, credit card spends and the outstanding number of cards have been growing over 54 per cent and 34 per cent, respectively, in recent years.
According to bankers, the complete reliance on Cibil score has made the credit cards portfolio ‘healthy’ and ‘dependable’ and helped in increasing the focus on digital transactions post demonetisation. Banks are also increasingly reaching out to new customers now.
All is well?
Is this growth healthy, as credit card lending is unsecured? Yes, says Prasanna Tantri, Executive Director, Centre for Analytical Finance, Indian School of Business. “If you look at the broader picture, in the overall bank loan portfolio of ₹101-lakh crore, credit card outstanding is only about ₹1-lakh crore. Given our population and the low base, I see nothing alarming in this trend,’’ Tantri told BusinessLine.
There is also an increasing tendency among the young to switch to credit cards due to the changing lifestyle, he added.
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