Credit card spends rise 14.5% in October on festive season purchases

In October, credit card spending in India surged to Rs 2 trillion (US$ 2.38 billion), marking a 14.5% increase from September, driven primarily by festive season purchases. According to the Reserve Bank of India (RBI), this spending represents a 13% year-on-year growth. Despite this uptick in spending, the total number of outstanding credit cards saw only a modest increase, rising 12.85% year-on-year to 106.88 million, with a slight 0.74% rise from September. The net addition of credit cards in October was 786,337, up from 620,000 in September but down from 920,000 in August. A research analyst at Motilal Oswal Securities, Mr. Nitin Agarwal, noted that the increase in spending is largely attributed to the festival season, although delinquencies in the credit card segment remain the highest among all credit categories, prompting issuers to tighten credit score requirements and reduce spending limits to mitigate defaults. 

The growth in credit card issuance in October was led by HDFC Bank, which added 241,119 new cards, followed by SBI Cards with 220,265 and ICICI Bank with 138,541. In contrast, Axis Bank reported a decline of 20,573 in its outstanding cards during the same period. Associate director and head of BFSI Research, Mr. Saurabh Bhalerao, pointed out that while high-end credit customers have contributed to the surge in spending, issuers are generally tightening credit standards. He cautioned that despite the seasonal boost, credit card spending growth for the current financial year is expected to be slower than the high teens growth experienced last year. Additionally, in response to concerns about rapid consumer credit growth, the RBI has increased risk weights for bank lending to certain consumer credit components, leading banks to reassess their growth strategies in unsecured lending portfolios. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.