Active credit cards drop 2.3 million in August over new RBI norms

Active credit cards drop 2.3 million in August over new RBI norms: The Reserve Bank of India’s (RBI) new rules, which call for the deactivation of cards that have been inactive for a year, are mostly to blame for the decline in the number of outstanding credit cards, which fell to 77.99 million in August from over 80 million in July.

Active credit cards drop 2.3 million: Key Points

• Credit card spending fell 3% on a high base in August, the first time in several months that net card additions decreased month over month (MoM) by 2.8%. Nevertheless, spending exceeded Rs 1 trillion for the sixth straight month.
• For some years, the banking system had been adding roughly 1-1.5 million cards every month. However, credit cards outstanding for the sector fell by 2.3 million in August, primarily due to steep drops seen by HDFC Bank and Axis Bank. This is partly due to the adoption of the new RBI regulations, which demand that credit card firms delete dormant cards after 365 days.
• HDFC Bank and Axis Bank’s net credit card additions got significantly decreased in August. Outstanding credit card balances at HDFC Bank decreased from 17.94 million in July to 16.42 million in just one month, an 8.47% decrease. The number of outstanding credit cards at Axis Bank decreased by 10.6% in July, from 9.93 million to 8.87 million. Axis Bank is the fourth-largest credit card issuer in the nation, behind HDFC Bank, which is the largest.
• According to the RBI’s circular, cards inactive for more than 12 months as of 1st July 2022 had to give clear consent to continue or be closed.
• On the other side, SBI Card added the most cards in the reviewed month (296,259), followed by ICICI Bank (211,520).
• In terms of active cards, HDFC Bank and Axis Bank had market share declines of 130 basis points (bps) and 100 bps, respectively. SBI Card and ICICI Bank saw increases of 90 bps and 80 bps, respectively. In light of this, the SBI Card stock increased 3.4% on the BSE.
• Although credit card spending decreased by 3% month over month, but it increased by 45% year over year to Rs 1.12 trillion.
• Despite having a high base, credit card spending reached an all-time high of Rs. 1.16 trillion in July. Due to the upcoming festival season, when spending tends to be more than usual, card spending is anticipated to increase.
• According to previous patterns, several issuers anticipate a successful holiday season and have put up special deals on credit cards to encourage festival spending. Credit card use has steadily increased as a result of an uptick in business spending and a recovery in discretionary spending.
• HDFC Bank now has a nearly 29 percent market share in spending, up from 60 basis points in August. Despite having a high market share in August, ICICI Bank remained the second largest issuer. SBI Card is currently closing up on ICICI Bank’s spending market share, having gained 70 basis points.