The Right Swipe: At 25%, Credit Card Business Sees Robust Growth In 2018

There has been a significant increase in the number of credit cards issued by banks in the last one year.

According to data from the National Payments Corporation of India (NPCI), the number of outstanding credit cards went up 24.87 per cent at 4.42 crore in December 2018, compared to 3.54 crore last year.

The rise in the number and value of transactions over the last two years proves the segment is growing steadily – the spurt is being driven by top private lenders, as well as SBI Cards.

ICICI Bank has been continuously expanding its unsecured credit card portfolio, with a focus on cross-selling to its existing customers. Last quarter, it also launched a co-branded credit card, in association with Amazon Pay. SBI Cards has now reached the seven million cards-in-force milestone. Its growth has been driven by the launch of special cards such as SBI Doctors Card, and Kargak Unnati SBI card for agriculturalists. For Axis Bank, the 36 per cent growth in credit card portfolio was one of the drivers of the overall retail segment growth at 20 per cent.

Is this growth sustainable and safe at a time when banks are already battling NPAs? There are different views.

Last year, the RBI had cautioned banks against higher dependence on the retail segment, including credit cards and personal loans. HDFC Bank’s recent increase in penalties on late payment of card dues could also be a hint to the precautionary measures being taken up, said a senior executive of a public sector bank.

While the usage of cards has been in vogue since the mid-1980s, the market began to witness a quantum jump only from the the early 1990s.

The total number of cards issued by 42 banks and outstanding increased from 2.69 crore as of December-end 2003 to 4.33 crore as of December-end 2004. Then, there was a downward spiral, when banks faced many challenges in recovering dues and, as a result, led to the decline in credit card business. Again, from 2014, banks started seeing the expansion of card businesses.

“But now things are different as any loan or card is being only given on the basis of Credit Bureau data, and that acts as an inbuilt mechanism,” said an executive with a private bank, which is among the big players in the segment.