RBL Bank hopeful of revival in credit card spends as lockdown ends

Surabhi Mumbai | Updated on May 14, 2020 Published on May 14, 2020

Card additions will be lower than last fiscal

Private sector lender RBL Bank continues to bet big on the credit card business but plans to lower new additions this fiscal.

“We had a net addition of more than 10 lakh cards last fiscal. In 2020-21, we expect our net additions to be significantly lower,” said Harjeet Toor, Head, Credit Cards business, RBL Bank.

The lender is amongst the top four issuers on an average retail spend.

According to RBL Bank’s fourth quarter investor presentation, it had 27.5 lakh credit cards in force as on March 31, 2020 and had begun moderating card additions in the last three quarters. In the fourth quarter, it had added 3.4 lakh cards, compared to 3.9 lakh in the first quarter of 2019-20.

He noted that in the month of April, because of the lockdown, the bank saw credit card spends decline by almost 60 per cent which was in line with the industry.

“However, since May 4, when the lockdown started easing in some areas of the country, we have seen these spends increase by almost 35 per cent in the past week. We expect another large spike in spends the moment there is more easing in the top 10 to 15 cities which are part of the red zone today,” he said.

Toor said almost 75 per cent of the card spends are on essential items like grocery, fuel, utilities, telecom, wallet loading, health and insurance and food while just 6 per cent is on segments like entertainment and travel, which could see a prolonged Covid-19 impact.

“When life starts returning to normal and movement begins across the country, we expect spends on day-to-day expenses to return to pre-Covid-19 levels and also hope to see a rise in spend categories like lifestyle, e-commerce, fuel and food delivery because of pent-up demand and also accelerated conversion from cash to card,” he said.

Toor also said the bank has seen lower delinquency in the credit card segment as about 70 per cent of the customers are salaried, and in the balance self-employed segment, the bank has very stringent card on-boarding parameters.

“In fact, because of this the difference in delinquency levels between salaried and self-employed is only 30 to 40 basis points in our portfolio,” he said, adding that the bank has taken a very conservative view on credit costs and stress tested its portfolio severely for a Covid-19 impact.

“Our estimate is that while our credit costs will increase, our profitability will be similar to 2019-20 levels,” he said.

As many as 82 per cent of customers have a card with another bank, while the balance 18 per cent are credit tested and predominantly having a relationship with Bajaj Finance.

Published on May 14, 2020
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