Credit card spend hits new high in May; bounce rates by value at 3-year low

Credit card spends hit an all-time high in May, reaching Rs 1.14 trillion and registering 8 per cent month-on-month growth over April, reveals the latest data released by the Reserve Bank of India (RBI). On a year-on-year (YoY) basis, card spends grew 118 per cent.

The banking system also saw healthy 1.7-million credit card additions in May – the highest in 27 months and 23.2 per cent higher than in the same month last year.

The surge in card additions was led by HDFC Bank, Axis Bank, SBI Card, and ICICI Bank. With May’s additions, the country’s total card base is now at 76.9 million.

HDFC Bank added 38,500 cards in May, followed by Axis Bank (21,500), ICICI Bank (21,200), and SBI Card (20,200).

“Spends remained strong and continued their healthy momentum in May, led by a rising share of e-commerce transactions, keeping growth in spends buoyant,” said Motilal Oswal in a note.

“Players such as SBI Card, ICICI Bank, and Axis Bank will continue their strong performance, while HDFC Bank is witnessing strong recovery, which is likely to continue,” it added.

HDFC Bank faced an RBI ban on issuances of new cards for eight months, from December 2020. Since the lifting of the ban, the second-largest lender of the country has beefed up its credit-card customer acquisition.

Macquarie Research in a note highlighted Axis Bank’s lower card spends, and raised concerns on the quality of the card portfolio.

“HDFC Bank and SBI Card continue to see strong card additions and have also seen strong trends in spends and have gained market share,” Macquarie Research said in a note.

“Axis has been losing spending market share despite adding a large number of cards. Citi also has steadily been losing spending market share every month. Axis Bank’s spend per card also continues to be 30 per cent lower than the industry average, which raises some concerns on the quality of credit card franchise,” the note observed.

Citi, which is exiting retail banking operations from India and several other markets, will be selling the portfolio to Axis Bank, which includes credit cards.

HDFC Bank enjoyed the lead in terms of spending market share in May, at 27.7 per cent. It was followed by ICICI Bank (19.2 per cent) and SBI Card (18.7 per cent).

Data released by the RBI showed that the bounce rates were also at a three-year low. Analysts, however, pointed out that it was yet to be seen if these trends were sustainable as interest rates had started to rise.

“Bounce rates by value are also at three-year-low levels. These data points indicate that the retail economy is strong. However, with interest rates expected to rise rapidly in the next few quarters, we need to see whether the current trends are sustainable,” the Macquarie note added.