Card spends: Decline in June follows record in May

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Expenditure through credit cards that was ballooning for the past few months has declined 2.4% in June after recording a high in May, the Business Standard has reported. Expenditure through this plastic route that hit a high of Rs 1.41 lakh crore in May crawled down to Rs 1.37 lakh crore in June – a slide of 2.83%.

The number of cards issued also moved to the slower lane. Compared to the issuance of 12 lakh cards in both May and April, 9.4 lakh credit cards were added in June.

Reserve Bank of India data show that with the sole exception of State Bank of India which registered a 5% growth, almost all major issuers of credit cards suffered a reduction in expenditure. All the private sector biggies HDFC Bank, Axis Bank and ICICI Bank suffered a decline in business that ranged between 2% and 6%. SBI’s volume touched Rs 24,981 crore in June but was 35.47% lower than the Rs 38,716 crore business recorded by HDFC Bank in the same month. HDFC was the leader among all the credit card issuers in the country.

All other banks including Standard Chartered Bank, Bank of Baroda, Kotak Mahindra Bank, YES Bank, RBL Bank, IndusInd Bank suffered a decline in card expenditure.

The data from the central bank also show that an overwhelming majority of the expenditure in June – about 64% — were incurred while making online purchases. The rest was done at merchant outlets. This apportioning was, however, the same as in May.

Despite the crawl downwards, credit card spends remain very high. The expenditure through this route have remained over Rs 1 lakh crore for the 16th month on the trot. Moreover, in the last financial year, the credit card spend rose to Rs 14.3 lakh crore, a dramatic 47% higher than the expenditure in FY22.

At the end of June, the total credit cards in force issued in the country stood at 8.9 crore. The number stood at 8.5 crore at the end of FY23.

Besides recording the highest volume of credit card expenditure, HDFC Bank also led the market in June in terms of cards issued. It issued 2.28 lakh cards, pushing the total number of cards in its books to 1.84 crore (as on June 30). SBI comes close on its heels with a total of 2.05 credit card additions in June and a total tally of 1.73 crore cards. ICICI Bank managed to add 1.23 lakh cards in the same month, while Axis Bank came as a distant fourth, registering only 41,019 cards in June.

Incidentally, as the credit card business boomed in the country, the RBI has continuously cautioned the banking industry about the rise of unsecured loans in the system. Credit cards constitute one of the instruments in mass circulation that can generate unsecured loans.

The RBI has been alerting banks to be cautious while extending loans to this segment of borrowers. Usually, credit cards are issued after assessing the creditworthiness of an individual. It is an unsecured loan, which basically means loans are given without keeping any asset as collateral.