Increasing focus on digital transactions helps banks boost credit card business

Banks are betting big on credit cards to ramp up their retail lending portfolio with a significant increase in the card business. As of September 30, 2019, credit card business rose 40 per cent in the case of some major banks, and is likely to witness a further increase.

For HDFC Bank, advances under the credit cards segment rose to ₹52,043 crore in September this year, compared to ₹40,535 crore in the year-ago period.

Credit cards, along with personal loans, grew by 47 per cent as of September 30 for ICICI Bank to ₹52,400 crore. It has been one of the drivers for retail growth.

According to Rakesh Jha, Chief Financial Officer, ICICI Bank, this portfolio accounts for 8.6 per cent of the overall loan book of the bank.

The increasing focus on digital transactions is also driving the growth of credit card business. According to Axis Bank, the spend on credit cards grew 34 per cent year-on-year. SBI Cards has also reached the milestone of 95 lakh cards in force. With an 18 per cent market share in card business, it now has 17.7 per cent market share in total spends.

The spike in credit card business not only reflects in the individual business of banks, but has also been captured by RBI data.

Up to September 2019, credit card outstanding went up to ₹97,650 crore, representing an increase of 24.4 per cent, compared to the year-ago period.

The increase in card business is also being driven by many other factors. The use of credit bureau data and strict adherence to applicants’ ‘good score’ have been helping banks to expand the card business without worrying much about the security of the portfolio. “Fixed deposit-linked credit cards for those who have bad credit history are being extended, which is also adding up to the confidence of banks, in view of the unsecured nature of credit card business,” said a top official with a major private sector bank.

Herd movement

However, the Reserve Bank had earlier cautioned banks on the ‘herd movement’ among bankers to grow retail credit in the wake of lean growth in corporate credit book.