Amid significant reduction in
defaults and focus on income-based lending, banks are seeing their credit
cardbusiness grow at a healthy rate. Credit card loans saw a year-on-year
growth of 24.3 per cent as at January-end 2013 against 8.5 per cent January-end
2012. In absolute terms, credit card loans stood at Rs 25,200 crore as at
January-end 2013 against Rs 20,300 crore in the year-ago period, according to
Reserve Bank of India data.
The credit card business had
declined substantially post 2008-09 in the wake of the global financial crisis
and most banks’ credit card loans witnessed a de-growth due to rising
delinquencies.
According to Romesh Sobti,
Managing Director and CEO, IndusInd Bank, there was a phase of reckless growth
in credit cards about 7-8 years ago where the basics of income-based lending
were ignored and lot of surrogates came into play. “Thereafter, there was a
period of consolidation and, therefore, banks closed down many accounts due to
delinquencies, huge write-offs and the market was washed out,” he said.
IndusInd Bank had acquired Deutsche Bank’s credit card business for over Rs 224
crore in 2011 with about 1.35 lakh cards outstanding. As on January 2013, the
mid-sized private lender had about 2.2 lakh cards outstanding.
Better income-based lending and
access to credit information bureaus are helping banks grow their credit cards
business. Credit cards will be very profitable for banks over the next five
years. Paresh Sukthankar, Executive Director, HDFC Bank, said focus on internal
customer base in the credit card portfolio has helped the bank reduce defaults.
“The problems in the portfolio (credit card) were resolved more than a year
back. It is very much a profitable portfolio now and banks are coming back into
the business,” he said. HDFC Bank, the largest credit card issuer, had 6.2
million cards in circulation as on January-end 2013 against 5.5 million in the
year-ago period. The bank has an outstanding portfolio of about Rs 10,000
crore.
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