Credit card base up after 18 months

The aggressive clean-up operation on banks’ credit card portfolios may finally be paying dividends, with issuers returning to the growth path. Data released by the Reserve Bank of India (RBI) showed that in April, the number of new cards issued was a million higher than the inactive and loss-making accounts culled. After falling for 18 straight months, the number of credit cards in circulation rose from 18.28 million to 19.29 million in April.

This increase follows a financial year in which 6.4 million cards were removed from the system. The country’s credit card population fell to 18.28 million as of end-March 2010 from a peak of 28.3 million in April 2008, according to the RBI data.

As the economy slid into a downturn, unsecured portfolios of banks such as credit cards and personal loans were severely affected. As part of a firefighting exercise, banks began to cancel inactive cards and close accounts that they feared would default. The country’s largest private sector lender, ICICI Bank, cut its base from a peak of more than eight million to about five million.

However, issuers are optimistic about the prospects of the industry and have resumed new card issuances from the second half of 2009.

At the head of the pack is HDFC Bank, which is issuing 80,000-90,000 new credit cards a month, according to Parag Rao, head of cards at the private sector lender. The bank had 4.45 million credit cards in circulation as of March 31, 2010.

SBI Cards has also been adding more than 20,000 cards a month, according to Managing Director & CEO Abhay Singh.

An enduring theme for the banks is to focus on existing customers. For instance, 90 per cent of new cards sourced by HDFC Bank are from the existing customer pool.

Rather than increasing their card base, some issuers look to get more out of existing customers by increasing spends per card. Standard Chartered Bank, for instance, has seen its monthly credit card spends increase from Rs 250 crore last year to Rs 400 crore in April.

According to Shyamal Saxena, general manager, Retail Banking, Stanchart, the bank aims at a target of Rs 500 crore per month in card spends.