Money & Banking

For banks, credit card biz is on the upturn

Beena Parmar Mumbai | Updated on March 12, 2018 Published on March 22, 2013


Loans outstanding as on January-end rose 24% over the year-ago period

 Amid significant reduction in defaults and focus on income-based lending, banks are seeing their credit cardbusiness grow at a healthy rate.

Credit card loans saw a year-on-year growth of 24.3 per cent as at January-end 2013 against 8.5 per cent January-end 2012.

In absolute terms, credit card loans stood at Rs 25,200 crore as at January-end 2013 against Rs 20,300 crore in the year-ago period, according to Reserve Bank of India data.

The credit card business had declined substantially post 2008-09 in the wake of the global financial crisis and most banks’ credit card loans witnessed a de-growth due to rising delinquencies.

According to Romesh Sobti, Managing Director and CEO, IndusInd Bank, there was a phase of reckless growth in credit cards about 7-8 years ago where the basics of income-based lending were ignored and lot of surrogates came into play.

“Thereafter, there was a period of consolidation and, therefore, banks closed down many accounts due to delinquencies, huge write-offs and the market was washed out,” he said.

IndusInd Bank had acquired Deutsche Bank’s credit card business for over Rs 224 crore in 2011 with about 1.35 lakh cards outstanding. As on January 2013, the mid-sized private lender had about 2.2 lakh cards outstanding.

Better income-based lending and access to credit information bureaus are helping banks grow their credit cards business. Credit cards will be very profitable for banks over the next five years.

Paresh Sukthankar, Executive Director, HDFC Bank, said focus on internal customer base in the credit card portfolio has helped the bank reduce defaults.

“The problems in the portfolio (credit card) were resolved more than a year back. It is very much a profitable portfolio now and banks are coming back into the business,” he said.

HDFC Bank, the largest credit card issuer, had 6.2 million cards in circulation as on January-end 2013 against 5.5 million in the year-ago period. The bank has an outstanding portfolio of about Rs 10,000 crore.

Published on March 22, 2013
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