HDFC Bank aims to offer 1 mn credit cards in '14

Lender had 5.12 mn cards - almost a third of the total number of credit cards in the industry - at the end of November, 2013

HDFC Bank, the largest issuer of credit cards in India, plans to offer a million ones year. As of November-end 2013, the bank had a base of 5.12 million cards — about a third of the total credit cards in the country.

“We are bullish on our credit card business. We will leverage our strong distribution network and liability base to expand our cards portfolio. We are seeing incremental growth of 75,000-80,000 cards every month and plan to add a million new cards in the next 12 months,” Parag Rao, senior executive vice-president and business head (card payment products and merchant acquiring services), HDFC Bank, told Business Standard.

In the recent past, the bank has been one of the most aggressive issuers of credit cards. While many banks stayed away from unsecured lending in an uncertain macroeconomic environment, HDFC Bank had been growing its credit card base consistently for about two years, on a month-on-month basis.

However, growth in the bank’s credit card base had decelerated earlier this financial year. According to Reserve Bank of India data, the number of outstanding HDFC Bank’s credit cards outstanding declined for three consecutive months — June, July and August, 2013.

Rao said the decline was due to portfolio restructuring. “Our active card base has always been growing. But on a net basis, the numbers fell, as we started cleaning up inactive and dormant cards. We had stepped up this activity earlier this year. It is a regular exercise. Now, more than 90 per cent of our cards are active and going forward, we expect our credit card base to grow, even on a net basis,” he said.

Currently, the bank’s credit card book stands at about Rs 12,000 crore.

Analysts say inactive cards put pressure on the profitability of credit card players, as they have to bear maintenance costs without earning any revenue on these cards. Also, the risk of misuse is relatively higher for cards that are inactive for long, as such cards are often misplaced.

Rao said the uncertain macroeconomic environment was unlikely to affect HDFC Bank’s plans to expand its credit card base. “We have a strong risk management system, our data mining is robust and we mostly offer cards to customers with whom we have already established a banking relationship. Our delinquency rate in the credit card business is one of the lowest in the industry,” he said.