Credit Card Spending Moderates in November
Credit card spending across India saw a significant cooling in November, declining by over 11% compared to the previous month. Total expenditures dropped to ₹1.90 lakh crore, reverting to levels observed before the busy festive season. This marks a notable decrease from the ₹2.14 lakh crore recorded in October.
Despite the monthly dip, consumer spending via credit cards remains robust on a year-on-year basis. November 2023 spending was nearly 12% higher than the ₹1.71 lakh crore spent in November 2022. This indicates sustained growth in credit card usage over the longer term, even as short-term fluctuations occur.
Card Base Continues to Grow
Financial institutions actively pursued customer acquisition in November, adding 847,000 new credit cards. This expansion brings the total number of credit cards in circulation to an impressive 114.8 million. The steady issuance of new cards suggests ongoing efforts by banks to capture market share and increase transaction volumes.
Saurabh Bhalerao, associate director-BFSI research at CARE Ratings, commented on the trend. He attributed the November decline to post-Goods and Services Tax (GST) normalization and the natural cooling of festive demand. He also pointed to the rapid expansion of the card base and a potential shift towards lower-value transactions amid cautious consumer spending habits.
Future Outlook for Spending
Looking ahead, Bhalerao anticipates a pickup in spending momentum. This is expected to be supported by typical year-end consumption patterns, continued steady card issuance, especially from state-run banks, and targeted promotional activities. Overall, credit card spending is projected to sustain a mid-single-digit year-on-year growth rate.
Online transactions and service-led spending are expected to be key drivers of incremental support in an increasingly mature market. The focus remains on evolving consumer preferences and digital payment trends.
Leading Banks in Card Issuance
HDFC Bank once again led the market in adding new credit cards, issuing 208,000 cards in November. This brings its total credit card base to 25.6 million. The bank continues to maintain its dominant position in the credit card market.
In a notable development, Federal Bank emerged as a surprise entrant among the top three issuers. The mid-sized lender has been aggressively expanding its card portfolio, adding 121,000 new cards during the month. This surge in issuance has grown its total credit card base to over 1.8 million.
SBI Cards secured the third position, reporting net additions of 109,000 cards, contributing to its total card base of 21.7 million. ICICI Bank followed closely, adding 106,000 new cards to reach a total of 18.5 million.
Other major players also saw growth. Axis Bank added more than 66,000 cards, while Kotak Mahindra Bank, after facing challenges, showed signs of recovery with 25,206 net additions. Conversely, IndusInd Bank experienced a decline, losing over 38,000 cards during November.
Live Events and Market Dynamics
Analysts noted that the growth moderation in the credit card segment is also influenced by banks' strategic focus on acquiring higher-quality customers. This approach comes amid rising delinquencies in certain segments of unsecured lending.
Lenders have implemented stricter underwriting processes, reduced riskier customer cohorts, and enhanced monitoring. These measures are aimed at improving asset quality. Bhavesh Jain, MD at TransUnion Cibil, confirmed this trend, stating, "Over the last few quarters, credit cards saw a slowdown in new originations alongside an uptick in delinquencies, driven by both macro pressures and portfolio-level risks. However, corrective actions have begun to show results, with asset quality improving in recent quarters."
Impact
This news suggests a cooling of consumer spending, which could impact the revenue growth of credit card issuers and banks. While the year-on-year growth remains positive, the monthly slowdown might signal a cautious economic outlook. Investors will monitor credit card spending as a key indicator of consumer health and bank profitability. (Impact Rating: 6/10)
Difficult Terms Explained
- Tapered off: Decreased gradually.
- Festive fervour: The excitement and high activity associated with festivals.
- Lakh crore: A unit of currency representing 1,000,000 crore rupees (1 followed by 13 zeros).
- Year-on-year basis: Comparing data from a specific period in one year to the same period in the previous year.
- Card issuers: Companies, usually banks, that issue credit cards.
- Circulation: The total number of credit cards that have been issued and are actively being used.
- Post-GST normalization: Adjustment to economic activity after the implementation of the Goods and Services Tax.
- Consumer spending behaviour: How individuals decide to spend their money.
- Consumption: The act of using goods or services.
- Promotional activity: Marketing efforts to encourage sales.
- Mid-single-digit: A growth rate between 5% and 9%.
- Incremental support: Additional help or boost.
- Maturing market: A market that has grown significantly and is no longer in its early stages.
- Net additions: The number of new cards issued minus the number of cards closed or cancelled.
- Delinquencies: Failure to make required payments on a loan or debt on time.
- Unsecured lending: Loans that are not backed by collateral, such as personal loans or credit cards.
- Underwriting: The process of evaluating the risk associated with a loan applicant.
- Pruning of riskier cohorts: Reducing exposure to groups of customers who have a higher likelihood of defaulting on payments.
- Asset quality: The measure of the riskiness of a financial institution's assets, such as loans and investments.
- New originations: The process of creating new loans or credit accounts.
- Macro pressures: Broad economic challenges affecting the overall economy.