Despite the number of credit cards issued by banks falling since the peak in 2007-08, there has been a sharp spike in overall credit card spends. According to the Reserve Bank of India (RBI) data, at the end of March 2012 the number of cards outstanding were lower at 17.65 million, compared to 18.04 million at the end of March 2011. But credit card spends jumped to R96,613 crore from R75,516 crore during the same period.
HDFC Bank had 5.6 million credit cards outstanding at the end of 2011-2012, higher than the 5 million at the end of March, 2011.
Banks attribute the trend of falling credit card outstanding numbers and rising spends to the end of reckless issuances of cards, which marked the 2006-2008 period, and the subsequent increase in focus on quality of customer acquisitions.
After 2008, when there was a spurt in credit card delinquencies, banks became more cautious in issuing credit cards. Many banks cleaned up their books by writing off bad accounts while other banks like Deutsche Bank and Barclays Bank discontinued their credit card operations in the country.
Anand Selvakesari, head of consumer banking at Citibank India, said that banks now take more precautions in studying the credit history of customers before issuing cards. He said that credit bureaus like Credit Information Bureau of India limited (CIBIL) are more evolved today and offer rich data on credit worthiness of customers. Banks use this data to fix credit limits and charges. Citibank?s outstanding cards currently stands at 2.2 million.
Nitesh Ranjan, chief economist of Union Bank of India, said that customers are more confident of spending through credit cards now. The rise in point of sale (PoS) terminals and use of online payment is encouraging consumers to go for plastic money. According to RBI data, at present there are over 90,000 ATMs and 6.5 lakh PoS terminals in the country. Credit card issuers are also luring customers through offers like converting credit card dues into equated monthly installment (EMI) payments and reward points on shopping.
Kadambi Narahari, CEO, SBI Cards, said that people using multiple cards are now narrowing down to just one or two cards. ?Despite the fall in overall credit card numbers, the number of active cards is going up. Dormant or unused cards are going out of the system,? he said. SBI Cards also has around 2.2 million outstanding cards.
Narahari said that margins will come under pressure for credit card companies as clients become more disciplined and do not revolve their monthly dues beyond the 45 day interest free period. However lower collection costs and delinquency levels will negate some of these strains.
Banks say that the market potential of 100 million card users is still largely under-penetrated. Having focused on the tier 1 cities, major credit card issuers like HDFC Bank, Axis Bank, Citibank and SBI Cards, have chalked out plans to expand into tier 2 and tier 3 cities.
