Credit Card Records Decline By Almost 50 Lac In A Year

Even as the economy is back on track and consumer confidence up, the number of credit cards in the system continues to dip. In the last one year, the total number of credit cards in use has dipped by almost 50 lakh.

According to the latest data released by RBI in its monthly bulletin, the number of credit cards dipped to just about 2 crore as of end February 2010 from around 2.5 crore a year ago. The data also indicates that average monthly card spends both in terms of value as well as volume have still not touched the pre-crisis (prior to Lehman collapse) levels.

Average monthly spend in FY10 has fallen to Rs 5,100 crore against Rs 5,400 crore in FY09. While average monthly volumes in the current year has been just 1.94 crore a month compared with 2.16 crore a month in FY09. Even peak festival spending through cards in the current fiscal is less than the previous years levels. ICICI Bank, the largest card issuer had around 8.5 million cards outstanding at its peak, which has now fallen to around 5 million. While for SBI credit card, the number has dipped from 3.5 million to 2.8 million.

The fall in cards is surprising as banks have started disbursing unsecured loans like personal loans, post crisis, in the past few months. Even credit cards outstandings are treated as unsecured lending by banks. Some large credit card issuers like ICICI Bank, SBI Card, Citi and even smaller issuers like ABN Amro and Barclays have either slowed down or cut their outstanding cards. Only few players like HDFC credit Card and Standard Chartered have seen a nominal growth in their numbers.

Pralay Mondal, country head (retail assets & credit cards), HDFC Bank, said: Lot of attritions are happening in the system as loss ratios had gone up. Banks are not adding as much new customers. As new customer acquisitions are lower than attritions, the overall numbers are falling. Previously, the number of new customers were higher. We are currently doing around 80,000-90,000 new credit cards a month and our losses are much lesser than industry. Currently, HDFC Bank has close to around 5 million credit card customers while StanChart has around 1.4 million customers.

Adds Shyam Srinivasan, Country Head Consumer Banking, Standard Chartered Bank: StanChart has kept its numbers flat for a while now. We have increased our share in the business. Some of them had overdone themselves and now they are letting go of customers. Its a normal process. As they were hit by high credit losses, they are trying to clean up.

According to Abizer Diwanji, executive director of Corporate Finance, KPMG India, Today, nobody is expanding on the card portfolio except in the debit card space. The cost of merchant acquisition is tremendously high. The maintenance of delivery of credit card is high compared to a personal loans. Its a far more cumbersome job.

One of the biggest problems facing the industry has been the rise in bad debts in the past few years. However, this seems to have stopped and bankers say there has been a drop in bad debts in the past few months. Sources said the overall credit card losses for the industry have now come down to 15-16% against around 18% earlier. However, even at these rates, most issuers are still making losses.