IBFEATURES

The credit card marketplace is seeing some disruption, thanks to Covid-19 and the Reserve Bank of India’s (RBI) ban on HDFC Bank and Mastercard from issuing new cards.

HDFC Bank’s loss is ICICI Bank’s gain. In the middle of the pandemic, ICICI Bank grabbed the opportunity to grow its credit card business, handing out cards to in-house customers and those with whom the bank has a business relationship.

The calibrated growth has helped ICICI Bank add 4.5 lakh cards in the first three months of this financial year while HDFC Bank saw its cards portfolio shrink by 1.58 lakh during the same period, the Reserve Bank of India (RBI) data showed.

The trend in this fiscal beginning April is, in fact, a continuation of a disruption in the credit card marketplace that started since the RBI debarred HDFC Bank from issuing fresh cards in early December, until its technology issues that led to a series of outages over the previous couple of years get sorted out.

HDFC Bank is still the biggest player with 14.83 million outstanding credit cards, according to the RBI’s latest data until June end. But in the period between the end of November 2020 and the end of May 2021, HDFC Bank has lost almost 5.5 lakh credit card customers.

ICICI Bank gained over 1.32 million customers, the highest by any lender during this period. The country’s second-largest private sector lender saw its customer base rise from 9.71 million outstanding credit cards as of 30 November to 11.03 million by the end of June this year.

ICICI Bank’s credit card growth has been largely led by the huge success of its co-branded credit card with e-commerce major Amazon. Amid the Covid pandemic, Amazon Pay ICICI Bank credit card has on-boarded one million customers in the nine months until June-end.

SBI Card, the only pure play card company, grew its credit cards by 2.23 lakh during the three-month period ending June. The attempt was to grow the cards business by converting the customer base of its parent, State Bank of India (SBI). In the period between the end of November 2020 and the end of June 2021, the second-largest player in the credit card market gained 7.5 lakh customers to take its total from 11.29 million to 12.04 million.

Axis Bank has seen its outstanding credit cards actually shrink this fiscal by 8,827 beginning April. The Axis management had indicated that Covid had impacted its business but the personal loan segment is not a worry as majority of the lending is to the salaried class.

Axis Bank has, however, gained in the period spread over the time the ban on HDFC Bank became operational until June end. In the period between December and the end of June 2021, the bank added 2.6 lakh credit card customers and its total has risen from 6.88 million to 7.14 million.

Source: RBI

Among the smaller new private sector banks, RBL Bank has added the largest number of cards among its peers this fiscal. While the bank has added 1.13 lakh cards in three months, its overall gain since HDFC Bank went into the ban period has been 2.3 lakh customers. Citibank India, which is planning to shut its India retail operations, has lost about 1.3 lakh customers in the same period, RBI data showed.

Bank of Baroda has seen its credit cards shrink in the first three months of this fiscal, probably impacted by the second wave of the coronavirus pandemic.

The trend is different for Bank of Baroda when it comes to the period between end of November and end of June during which period it has climbed from 0.52 million to 0.62 million, RBI data showed. Other players to gain are also Yes Bank and IndusInd Bank while Kotak Mahindra Bank and American Express have lost.

The credit card population in India increased by 2.71 million between end of November and June end to 62.82 million from 60.11 million.

So far as credit card spends go, it has fallen in the fiscal first quarter ended June. The table will show you a trend of how credit card spends is evolving for the first three months of this fiscal compared to the March 2021 outstanding figures, based on RBI data.

There could be another twist to the credit card tale. The RBI ban on Mastercard since 22 July is sure to slow down the issuance of credit cards. RBL Bank, Yes Bank and Bajaj Finserv will be the most impacted as their entire card schemes are allied with Mastercard, Nomura said in a report.

We have already seen Axis Bank’s credit cards drop in the first two months of the fiscal but it recouped in June, independent of the Mastercard story. The bank’s co-branded card with Flipkart, which is seeing good traction, is allied with Mastercard and this will get impacted from 22 July onwards. The bank is already estimating an impact of 17-18% in terms of credit card issuance since the RBI imposed the ban on 22 July. If this continues in August, this impact could rise to 21-22% before normalcy is achieved by mid-September.

How the Mastercard ban impacts Axis Bank and other credit card players is a matter of speculation but there is a definite shift taking place in the market at this stage, albeit slowly.