Credit card spending in November 2024 saw a sharp decline of 16.1% month-on-month (M-o-M), dropping to Rs 1.7 trillion, as consumer spending moderated after the strong festival season boost in October, according to the latest data from the Reserve Bank of India (RBI).
Alongside the dip in spending, the growth in new credit card issuances also slowed considerably in November, with only 350,000 net cards issued, a significant drop compared to 1.3 million cards added during the same month in 2023.
This slowdown follows the RBI’s decision in November 2023 to increase the risk weight for banks on unsecured lending. As a result, major credit card issuers have adjusted their growth strategies, leading to a decrease in new issuances.
Factors Contributing to the Slowdown
Saurabh Bhalerao, Associate Director at CareEdge Ratings, explained that both increased delinquency rates and the RBI’s revised risk-weight norms have contributed to this slowdown. Banks, now facing higher delinquency rates, are adopting a more cautious approach in issuing new credit cards, tightening approved limits, and focusing more on collections.
Major issuers like HDFC Bank, SBI Cards, and ICICI Bank added a combined total of over 460,000 new cards. However, Axis Bank saw a reduction of nearly 40,000 cards during this period.
Concerns About Asset Quality and Rising Defaults
Analysts at InCred Equities noted a growing concern over the asset quality in the credit card industry, as delinquency rates have risen. According to TransUnion CIBIL India, the percentage of credit cards with payments overdue by 90 days or more increased by 14 basis points quarter-on-quarter (Q-o-Q) to 1.8%. Defaults are particularly rising among new-to-credit customers, especially in Tier-II cities and beyond.
As a result, there is a noticeable shift towards premium cards by select issuers who are focusing more on higher-quality customers.
Outlook for December
Despite the decline in credit card spending in November, industry experts are optimistic that spending will bounce back in December, driven by year-end sales, e-commerce promotions, and insurance and NPS payments. Mayank Markanday, Head of Digital Banking at AU Small Finance Bank, predicts that these factors will help fuel a surge in credit card spends.
As the year wraps up, credit card issuers and consumers alike are anticipating a strong finish to the year, particularly in the retail and online shopping sectors.