Trend of inactive cards, delinquencies seen reversing

Rising consumption expenditure and declining defaults are prompting banks to give a renewed thrust to their credit cards business.

In the first three months of the current fiscal, the number of new credit cards issued by banks increased by about 3.60 lakh. As of June-end, the number of credit cards in circulation stood at 1.80 crore against 1.76 crore as of June-end last year, according to Reserve Bank of India data.

Top issuers

HDFC Bank, Standard Chartered Bank, State Bank of India and Axis Bank have added the maximum number of cards in the reporting quarter.

“The consumer spends are going up dramatically… Hence, we are seeing a positive traction in the credit card market,” said Parag Rao, Senior Vice-President, Credit Card, HDFC Bank.

Over the last few years, banks have been weeding out inactive and delinquent cards.

SBI cards, a joint venture between SBI and GE Capital, has seen a 5 per cent drop in delinquencies since 2010.

“We have seen growth in cards where the annual fee is low. We are also planning to push the platinum and signature cards, targeting high net worth individuals, because of their compelling value proposition,” said Kadambi Narahari, CEO, SBI Cards and Payment Services Private Ltd.

ICICI Bank, HSBC and Royal Bank of Scotland saw a decline in credit card issuances in the first quarter. Analysts say these banks may still be purging inactive and delinquent cards.

Credit scores of customers is helping credit card companies target the right customer.

Banks are throwing in goodies to make credit cards attractive. The offerings include EMI (equated monthly instalment) conversion facility or reward points in the form of movie and air tickets, or vouchers for lifestyle and clothing brands.

Banks are also selling co-branded cards with airlines and petroleum companies. These cards offer free air tickets for expenditure exceeding a certain threshold.

(This article was published on August 13, 2012)
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