Net credit card additions down to 2 mn due to seasonal, regulatory factors

Card spend flat at Rs 4.79 trillion but likely to pick up in coming quarters

The net credit card additions in the banking sector nearly halved to 2 million in the first quarter of the current financial year (Q1FY25) from the previous quarter due to seasonal and regulatory factors.

According to the Reserve Bank of India (RBI) data, the net credit card additions during the April-June quarter of FY25 stood at 2 million, 48 per cent lower than 3.9 million in the December-March quarter of FY24.

In November 2023, the RBI said that credit card receivables of banks will attract a risk weight of 150 per cent against 125 per cent, and for non-banking financial companies (NBFCs), it would be 125 per cent, up from 100 per cent.

“The sequential decline in net credit card additions during Q1FY25 is due to seasonal factors and regulatory restrictions including RBI’s increase in risk weight norms and directions and restrictions on co-branded credit cards of a few banks. The first quarter is generally slower for the industry,” said Saurabh Bhalerao, associate director, CareEdge Ratings.

The RBI issued revised guidelines for co-branded credit card issuers in March 2023, directing them that the issuer's name must be explicitly displayed in all marketing and advertising materials. The banking regulator had also restricted Federal Bank, and South Indian Bank from issuing new co-branded credit cards, citing regulatory deficiencies.

“We have paused on boarding of co-branded credit cards since March and, therefore, the cards that have been added during the quarter have been our organic cards alone. That is why on a quarter-on-quarter (Q-o-Q) basis, we have seen some decline in the card issuances. For the industry, it typically would be linked to the first quarter being quieter. Most players tend to get to a crescendo by the end of the financial year, and then we tend to see a little bit of a slowdown.  I'm sure it will pick up in the coming quarters,” said Shalini Warrier, Executive Director, Federal Bank.

Federal Bank’s net credit card additions in Q1FY25 stood at 30,062. The net card additions by segment leader HDFC Bank rose to 7,42,546 . On the other hand, other major players like SBI Cards saw a drop in net credit card additions to 3,49,863 , ICICI Bank to 3,49.863 and Axis Bank saw a decline to 2,46,264 during Q1FY25.

Meanwhile, credit card spending remained flat at 4.79 trillion during the quarter under review compared to the previous quarter. The first quarter of the financial year tends to be muted for the industry. The spending is likely to pick up in the upcoming quarters, driven by the festive season.