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After registering a marginal lull in June, 2023, credit cards are making a forceful comeback in July, 2023. As per RBI data, credit card spends for the month touched a record high of Rs 1.45 lakh crore. Notably, spending had gone down by about 2.4% last month. But with the festive season around the corner, credit card expenditure is set to increase in the months to come. 

In keeping with it, more than 65% of credit card spends last month were towards e-commerce payments. India added about 11.9 lakh credit cards in July, widening the total credit card outstanding base to 8.99 crores. Axis, ICICI, HDFC and SBI maintained their dominance as top credit card issuers, with Axis adding about 2.30 lakh credit cards last month. In terms of credit card spendings, HDFC took the lead with Rs 39,403 crore being spent via HDFC credit cards last month. 

However, debit card usage witnessed a steady decline, with the total value of online transactions via debit cards being a mere Rs 19,539 crores for July, 2023. In contrast, the value of online spending through credit cards touched Rs 95,000 crores. 

Credit costs to put banks on edge

Even in terms of online volume, credit cards far outpaced their debit counterparts. While credit cards were swiped about 13.42 crore times last month, debit cards stood at the half mark, with 6.14 crore swipes. The stupendous growth in credit cards, which is a form of unsecured loan, has led to many experts believing that the credit costs are set to exponentially rise in the years to come.

As per a report by Nomura Research, about 60-70% of the total provisions of large private banks could be earmarked exclusively as credit costs for unsecured loans. For most prominent banks like HDFC, ICICI and Axis, unsecured loans constitute anywhere between 10-20% of their total loan book. This figure is as high as 52% for some banks, like Bandhan.