Net credit card purchases in the banking sector nearly halved to 2 million in the first quarter of fiscal year 2025 (Q1FY25) compared to the previous quarter, due to seasonal and regulatory factors.
According to the RBI’s credit card data, net credit card extensions stood at 2 million in the April-June quarter of FY25, down 48 per cent from 3.9 million in the December-March quarter of FY24.
In November 2023, the Reserve Bank of India (RBI) said that banks’ credit card exposures will be risk-weighted at 150 per cent, up from 125 per cent. Non-banking financial companies (NBFCs) will be risk-weighted at 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 constraints, including RBI’s increase in risk weighting norms and guidelines and restrictions on co-branded credit cards from a few banks. The first quarter is generally slower for the sector,” said Saurabh Bhalerao, associate director, CareEdge Ratings.
Similarly, in March 2023, RBI had issued revised guidelines for co-branded credit cards, requiring the card issuer’s name to be explicitly displayed in all marketing and promotional materials. Further, the banking regulator had also restricted two credit card issuers – Federal Bank and South Indian Bank – from issuing new co-branded credit cards.
“In terms of credit card issuance for Federal Bank, we have paused onboarding of co-branded credit cards since March and hence the cards that were added during the quarter were only our organic cards and hence we have seen some decline in card issuance on a quarter-on-quarter (QoQ) basis. For the industry, it would generally be because the first quarter is quieter. Most players tend to peak till the end of the financial year and then we usually see a little bit of a slowdown. I am 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. Meanwhile, segment leader HDFC Bank’s net card additions rose to 742,546. On the other hand, other major players such as SBI Cards saw a decline in net credit card additions to 349,863, ICICI Bank to 349,863 and Axis Bank saw a decline to 246,264 in the 3-month period ended Q1FY25.
Meanwhile, spending through credit cards remains flat at Rs 4.79 trillion in the quarter under review as compared to the previous quarter, as the first quarter of the financial year is typically muted for the industry. However, spending is likely to pick up in the coming quarters, following the festive season.
First print: Jul 24, 2024 | 7:50 PM IST