HDFC Bank's credit card division turns profitable

HDFC Bank, which rolled out its credit card business in the beginning of 2002, has posted profits in this segment as on September 30.

The credit card base of the late entrant new generation private bank stood around 8 lakh and the debit card base at around 22 lakh in the first half of the current fiscal.

Neeraj Swaroop, country head (retail banking), said the card business is expected to contribute to the bank's bottomline by next fiscal. The bank's card base is expected to touch one million by December, he added.

The bank's commission income in 2003-04 grew by 35.5 per cent to Rs 320.4 crore with the main drivers being retail banking fees on debit/credit card and point of sale terminals, transactional charges/fees on deposits and depository (custody) accounts and commissions from cash management.

The credit card business is highly capital intensive with banks having to invest around Rs 200 crore upfront to get the business running. Hence, smaller and many public banks prefer to issue co-branded cards or not enter the market at all.

ICICI Bank, which had launched its card business in 2000, too posted profits in the second year of operations. The card industry is growing at 40 per cent a year and the HDFC Bank hopes to keep pace with this growth, said Pralay Mondal, senior vice-president and head (credit cards), HDFC Bank. Last year, the bank's card portfolio grew at over 100 per cent, he added.

Spend per card for the bank is higher than the industry average of around Rs 1,500 a month and the delinquency rate is less than the industry average of 7 per cent, Swaroop said. With festive season on the anvil, the bank expects card spends to increase by 20 to 25 per cent. Numbers of cards issued to new customers stood at around 70,000 per month, he added.

The use of plastic money was pioneered by Citibank in India in the late 1980s. Other foreign and private banks came into the fray subsequently.