Credit cards gain favour with customers as spends increase

Written by fe Bureau | Mumbai | Updated: Jan 2 2013, 06:00am hrs
Customers seem to be getting more comfortable paying with credit cards, as outstanding credit during the festive season grew more than it did during the rest of the financial year.

According to monthly data released by the Reserve Bank of India on Monday, total outstanding in credit cards for the month of November stood at R24,700 crore, growing 26% from the same period a year ago.

The annual growth has been the highest during this financial year.

The growth in the number of point-of-sale (PoS) terminals and the ease with which you can use cards for payments has contributed in customers spending more using their credit cards, said a senior official at a leading public sector bank.

The increased usage by customers has also pulled the attention of bankers towards growing their business going ahead. Electronic payments are easier for banks to handle since there is no physical cash transfer involved. However, the majority of the business is still concentrated among the top lenders.

To be sure, banks in India saw total credit card spends worth R9,502 crore in the month of September, and had 1.84 crore cards issued, RBI data showed. HDFC Bank, a leader in the credit card market, has a base of over 60 lakh cards. Total advances towards credit cards stood at R8,610 crore as on September 30, up 47% from a year ago.

State Bank of India, which is also the country's largest lender, has a card base of 25 lakh and adds about 50,000 new cards every month. Spends, too, have gone up by 15-16% from a year, a senior official from the bank said.

The spike in November has largely been due to the festive season. However, we are back to building our credit card business around our existing account holders, said KVS Manian, group head- consumer banking, Kotak Mahindra Bank.

With an existing credit card base of about two lakh cards, Kotak Mahindra Bank is issuing about 13,000-14,000 cards every month, from about 6,000 cards, said Manian. The bank currently records R170-crore worth of spends every month through credit cards.

Public sector banks too seem to be interested in growing their card portfolios further. There are about one lakh cards issued by our bank over the last five years, of which 70,000 are active right now. We plan to increase our card business in a big way over the next two years, said M Raghavan, executive director, Bank of India.