
Credit card spending in India hit a record Rs 2 trillion in October 2024, marking a 14.5% increase from September, largely fuelled by festive season purchases. However, the growth in the number of active credit cards remained modest during the same period, signalling cautious expansion by issuers.
Data from the Reserve Bank of India (RBI) revealed that October’s credit card transactions were 13% higher compared to the same month last year. The total number of active credit cards reached 106.88 million, a year-on-year increase of 12.85%. Month-on-month, the net addition of credit cards was 786,337, up from 620,000 in September but below the 920,000 recorded in August.
Nitin Agarwal, a research analyst at Motilal Oswal Securities, has attributed the rise in spending to festive shopping, which significantly boosted transaction volumes.
Despite the surge in spending, delinquencies in credit card loans remain the highest among unsecured credit products. As of June 2024, many private banks reported an uptick in non-performing assets (NPAs) from unsecured loans, including credit cards. To address this, issuers have implemented stricter lending criteria and reduced credit limits for higher-risk borrowers.
The RBI, in its November bulletin, pointed to over-leveraged borrowers and rising provisioning requirements as key factors contributing to stress in small-ticket loans, personal loans, and credit cards. This has prompted banks to reassess their lending strategies, particularly in retail and services sectors.
HDFC Bank, India’s largest credit card issuer, led the October growth by adding 241,119 cards, followed by SBI Cards with 220,265 new additions, and ICICI Bank, which issued 138,541 cards. However, Axis Bank experienced a decline, with 20,573 fewer active cards during the same period.
Saurabh Bhalerao, Associate Director and Head of BFSI Research, noted that high-end credit card users were the primary drivers of October’s spending spike. “While festive spending provided a seasonal lift, the overall growth in credit card usage this fiscal year is expected to slow compared to last year’s double-digit growth,” he said.
The RBI has maintained a watchful eye on consumer credit expansion. Last November, it raised risk weights on unsecured loans, excluding categories like housing, education, and vehicle loans, to 125%. This move prompted banks to recalibrate growth in unsecured lending, including credit card portfolios, to mitigate risks.
As lenders navigate a challenging environment, balancing growth and risk mitigation remains a priority, even as the festive boost underscores the significant role of credit cards in driving consumer spending.
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