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Credit card spends surge: Festive season sees over 25% jump in October vs September

CNBCTV18 logo CNBCTV18 02-12-2021
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Credit card spends in India have witnessed a surge thanks to the festive season. Over the past six months, average monthly spending on a credit cards have increased to about Rs 12,400 from Rs 10,700 earlier, brokerage firm Motilal Oswal said in a report.

Growth rate, in terms of card acquisition and spends (both MoM) are the best in last 4-5 months or the best in this fiscal so far.

Spending growth rate has increased to 25.79 percent in October 2021 versus 3.2 percent in September 2021. Similarly, spending per card growth rate increased to 23.25 percent in October 2021 versus 1.47 percent in the previous month. Overall, the number of credit cards have increased by 2.05 percent in October versus 1.71 percent in September.

© Provided by CNBCTV18 Per card spend:

Strong momentum was seen for SBM Bank India (+57.2 percent MoM), AU SFB (+38.1 percent MoM), followed by Axis Bank, HDFC Bank, City Union Bank and Federal Bank, to name a few. Slowdown has been significant for Karur Vysya Bank (-40.5 percent MoM), DCB Bank (-5.9 percent MoM) followed by Kotak Mahindra Bank (-5.44 percent MoM).

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The credit card business is the most profitable for any bank or lender as interest rates are extremely high -- at or above 30 percent.

Credit cards form around 6.63 percent of total cards issued by lenders.

The last few months have been phenomenal for lenders in their credit card business as average ticket size increased by 52.2 percent between June and October.

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Between June-Oct, ticket size movement: Bank of America +172% Federal Bank +113% AU SFB +84% IndusInd Bank +74%

Industry +52%

Only Karur Vysya Bank saw a decline in its average ticket size by 24 percent, while the decline in average ticket size for October (MoM basis) was at -40.5 percent.

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Market share movement (MoM)

HDFC Bank's market share loss momentum has continued for 11 months in a row. The biggest beneficiary of HDFC Bank's loss has been ICICI Bank followed by SBI. And Axis Bank has continued its upward trajectory in terms of market share gain over the last few months.

© Provided by CNBCTV18 Market share momentum -- October 2021 vs September 2021 is as follows:
  • Top mkt share loss was seen for SBI, Citi Bank, HDFC Bank, Standard Chartered Bank & American Express.
  • Top market share gain was seen for RBL Bank, Axis Bank, Kotak Bank, ICICI Bank & IDFC First Bank.In percentage terms, the top gainer in credit card distribution were Karur Vysya Bank, South Indian Bank, Federal Bank and AU Small Fin Bank (all having a growth of greater than 32 percent).
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The credit card market leader in India is HDFC Bank. The highest rise in credit cards issued (in October versus September 21) was by ICICI Bank, followed by HDFC Bank, Axis Bank, SBI, RBL Bank and Kotak Bank. All the lenders have issued over 1 lakh credit cards (MoM).

Those who lost their market share in credit cards was Standard Chartered Bank, CITI Bank, American Express, HSBC, J&K Bank, Bank of America, Bank of India, DCB Bank, City Union Bank and Tamilnad Mercantile Bank.

HDFC Bank continues to remain the dominant force in the market with market share of 22.97 percent, followed by SBI at 19.23 percent and ICICI Bank at 18.04 percent. The top 4 players have 71.9 percent market share in India. The remaining 29 lenders/banks, have a market share of less than 5 percent each.

However, the festive season trend may not continue in the near term. While festive season has been one of the best months for credit card lenders in FY22 or even YTD, the trend may decline in the coming months. However, the silver lining in the business momentum has been the strong distribution of cards. November may be strong due to Diwali. But it will be interesting to see the spending trend in January 2022.

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