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Credit card spends seen to be rising sharply in Oct, Nov

November 8, 2021 root Banking & Finance

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Credit card spends are seen to have risen sharply in October and the first week of November on the back of festive spends.

“Credit card spends have grown 34 per cent quarter-on-quarter in the second quarter of 2021-22 and trends of October and November first week remain very strong,” said a report by ICICI Securities.

October 2021 is likely to be 15-18 per cent better than September 2021 and the run rate for the first week of November has been better than October 2021, it further said.

As per trends, credit card spends have seen a growth of 17 per cent in October and 11 per cent in November.

The traction in spends through credit cards is evident from absolute spends of ₹80,200 crore in September 2021 and the ratio of credit card to debit card spends which stands at 1.28x now, the report noted.

According to data with the Reserve Bank of India, there were 6.5 crore outstanding credit cards at the end of September 2021 compared to 6.39 crore in August.

Of this, HDFC Bank continued to have the largest number of credit cards at 1.49 crore in September compared to 1.47 crore in August.

Credit cards in force for State Bank of India rose to 1.25 crore in September from 1.24 crore in August.

ICICI Bank’s credit cards grew to 1.16 crore in September versus 1.14 crore in August.

Banks too have reported robust growth in credit card spends in the second quarter results and have been expecting increased transactions with the opening up of the economy.

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HDFC Bank issues 4 lakh credit cards post-RBI ban

September 30, 2021 root Banking & Finance

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The bank will relaunch its Millennia, MoneyBack+ and Freedom cards, to which it has added a host of new features and benefits.

HDFC Bank has issued 4 lakh credit cards since the Reserve Bank of India (RBI) lifted a regulatory embargo on issuance of new cards by the lender in August. The largest private bank by assets plans to relaunch three credit card products, which will be available to customers in October, it said on Wednesday.

The bank will relaunch its Millennia, MoneyBack+ and Freedom cards, to which it has added a host of new features and benefits. Creating and co-creating new card products is part of the bank’s strategy to straddle every customer segment across the Indian market, said Parag Rao, group head – payments, consumer finance, digital banking & IT, HDFC Bank.

The bank also plans to partner with other entities to expand its customer base. Last week, HDFC Bank had announced a strategic tie-up with Paytm to deliver financial solutions to consumers and merchants across the country.

“We looked at our existing 15 million customers and how we could show them much more value. We are thankful to these customers for being with the bank and we would like to reward them by revamping and relaunching a couple of our products so that they get far more value than before,” Rao said.

The Freedom card is targeted at consumers who have just started earning and are used to making online purchases. Meant for first-time job-seekers, it will offer credit limits ranging between Rs 15,000 and Rs 50,000. The MoneyBack+ credit card is aimed at middle-class families seeking value on their everyday spends. The Millennia card is meant for the affluent, tech-savvy consumer in the age group of 25 to 40 years. The refashioned card will offer cashbacks on spends on shopping, dining, entertainment and travel.

“Our research over the last 15-20 years and a lot of customer feedback tells us that once you cross the first three-four years of credit card usage, your requirements become more fine-tuned and sharper. Some customers love reward points, some love cashbacks, discounts and deals,” Rao said. Over the next three to four quarters, HDFC Bank will gain back its market share in the number of cards in force, he added.

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Deposit customers, alliances to lead HDFC Bank’s credit card comeback, BFSI News, ET BFSI

August 23, 2021 root Banking & Finance

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HDFC Bank expects to increase its credit card issuance to half a million per month by February 2022 riding on its expanded liability base, new partnerships and wider product suite as it looks to make up for the lost nine months in which it was restricted in issuing new cards by the Reserve Bank of India (RBI).

Parag Rao, group head, payments, consumer finance, digital banking and IT, HDFC Bank said the bank expects to get to the pre-ban run rate of 300,000 per month in the next two months and increase it to 500,000 by February in largely driven by new deposit customers added to the bank’s franchise in the last nine months.

“Over the years our business has grown largely on the back of our liability customers and we expect that to continue. Over the last nine months we have added 400,000 accounts every month, this in addition to the 60 million customer base we have will be the main drivers of our growth and we have enough headroom to grow. We already have a pipeline of pre-approved cards based on customer profiles that have been monitored since the ban,” Rao said.

80% of the bank’s new cards are issued to new customers currently and Rao does not expect this ratio to drop much dispute new commercial partnerships the bank plans to launch.

On December 3 last year, RBI barred HDFC Bank from issuing new credit cards and introducing new digital products after multiple glitches linked to digital banking, cards and payments on the bank’s platform were reported in the past two years.

The ban was lifted on August 17 but not before impacting the bank’s market share as number of outstanding credit cards dropped from 15.4 million in November 2020 to 14.8 million in June 2021, even as its closest competitors gained at its expense.

Even as the credit card ban was lifted the RBI still has some restrictions on the bank for new launches of digital business generating activities planned under Digital 2.0. It is unclear how those restrictions will impact the bank.

Despite the loss of market share in credit cards, HDFC Bank remains the largest issuer of credit cards in India ahead of SBI Card (12 million) and ICICI Bank (11 million) latest available RBI data as of June 2021 showed.

Rao said the bank used the last nine months in relooking at its value proporsition, engaging with existing customers more deeply and building new strategic alliances which will be announced starting from the festive season next month.

HDFC Bank has lined 20 initiatives including co-branded cards with tie-ups with travel, fintech, consumption, hospitality and mobility companies among others. These alliances will be unveiled over the next nine months.

Rao said depsite the ban the bank has been able to retain its market share in terms of card spends and spends on its cards are still 1.5 times higher than the nearest competitor.

The bank will use more digital data for underwriting and is also in the process to create a multichannel social media and phone-based hub to address customer greviances.

The bank also plans to increase its footprint in merchant acquiring and point of sale businesses to 200 million from 2.3 million currently, Rao said.

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HDFC Bank aims to regain lost market share in 1 year after RBI lifts credit card ban, BFSI News, ET BFSI

August 23, 2021 root Banking & Finance

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HDFC Bank is looking at winning back the market share by number of cards in the next one year, a senior official said on Monday. The largest private sector lender by assets was allowed to issue new credit cards by the RBI last week, over eight months after being banned from doing so due to concerns over repeated technological outages.

Parag Rao, its group head for payments and consumer finance, digital banking and IT told reporters that the bank has set some milestones for itself as it seeks to re-enter the market.

The first is to achieve monthly new credit card sales to 3 lakh, the number right before the ban in November 2020, Rao said, adding that the same will be achieved in three months.

Two quarters after that, it aims to take the monthly new card sales to 5 lakh a month, Rao said, adding that in three to four quarters from now, it plans to regain the market share by number of cards.

Rao added that during the ban, the bank lost its market share by number of cards but was able to maintain the market share on initiatives taken to prod users to spend.

It can be noted that as per data, the bank’s market share by number of cards had come down by around 2 percentage points to under 25 per cent, as smaller rivals including ICICI Bank and SBI Cards seized the opportunity to close the gap.

After the lifting of the ban, HDFC Bank had spoken about coming back with a bang.

Rao said spends on credit cards are 60 per cent higher in April-June quarter on its card portfolio.

The bank will depend on its internal set of customers to grow the number of cards and is also looking at partnering with key players like Paytm announced earlier in the day, to increase its sourcing.

Rao also said that the conservative approach on the credit front will continue for the bank even as it goes aggressively on the new business sourcing.

The bank scrip was trading 0.57 per cent up at Rs 1,522.95 a piece on BSE at 1318 hrs as against gains of 0.43 per cent on the benchmark.

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Will be “back with a bang” on credit card rollout, says HDFC Bank, BFSI News, ET BFSI

August 18, 2021 root Banking & Finance

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Private lender HDFC Bank on Tuesday said that all preparations are in place to be back with a bang on credit cards and new schemes will be rolled out soon. The bank had earlier stated that it has lined up a series of new card launches in anticipation of RBI lifting its ban.

Eight months after a ban was imposed, in a letter to the HDFC Bank board on Monday, the RBI communicated that it has decided to lift restrictions on launching new credit cards while the restrictions on launching new projects under digital 2.0 was still in place. Last month the lender’s chief Sashidhar Jagdishan had stated that the bank has complied with 85% of the requirements of RBI on the technology front.

“All the preparations and strategies that we have put in place to ‘come back with a bang’ on credit cards will be rolled out in the coming time,” the lender said in a press statement. “We would like to inform all that the Reserve Bank of India has lifted the restriction placed on sourcing of new credit cards. We thank the regulator for this. The board has taken note of the same and the bank is committed to full compliance of the regulatory directions.”

The bank added that it will continue to engage with the regulator and ensure compliance on all parameters, so that the restrictions imposed on new launches of the Digital Business generating activities planned under Digital 2.0 could be lifted soon.

The RBI has asked the bank to submit a board-approved letter indicating continued compliance with its IT examination report.

“The ban has come before the festive season which starts from September onwards in India, so the juggernaut can roll with full force and launch credit cards, attractive schemes within their ecosystem partners and be a force to reckon with,” said Suresh Ganapathy, associate director, Macquarie Capital.

As per Macquarie’s analysis, HDFC Bank lost nearly 180 basis points of market share as of May 2021 since end of November 2020 when the ban on launch of new credit cards came into effect. Their market share slipped to 24% while ICICI Bank and SBI Cards gained 130bps and 37bps to 17.4% and 19.2%, respectively.

The lender also has vast ground to gain and can easily capture back the space it lost after it added 36.5 lakh liability accounts from January to June 2021,1.5-2 lakh credit cards per month pre-Covid.

“Overall, lifting of RBI restrictions before the beginning of festive season is a positive development as HDFC Bank has usually been aggressive during festive season and offers various discounts on consumer products,” said Nitin Aggarwal, research analyst, Motilal Securities.

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HDFC Bank’s credit card base shrinks by 3L during Dec-Mar

May 21, 2021 root Personal Finance

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According to an HDFC Bank official who spoke on condition of anonymity, the lender is gearing up to return to the market once the regulatory penalty is reversed.

The Reserve Bank of India’s (RBI) embargo on sourcing of new credit card customers by HDFC Bank may have started to affect the lender’s card base. According to data released by the central bank, the number of credit cards outstanding at HDFC Bank fell by about 3.23 lakh between December 2020 and March 2021 to 1.5 crore.

The lender has long been the market leader in terms of cards in circulation as also spends, but the RBI’s decision to penalise the lender for lapses in its digital services may be slowing down the growth. It was not immediately clear whether the card base shrank due to a churn in cards or a conscious weeding out of inactive cards by the bank. Queries sent to the bank remained unanswered till the time of going to press.

ICICI Bank may turn out to be the biggest beneficiary of HDFC Bank’s absence from new issuances. In March, it continued to lead in fresh issuances, accounting for nearly 52% of new cards, showed data released by the RBI. The total number of new credit cards issued during the month stood at 4.02 lakh.

According to an HDFC Bank official who spoke on condition of anonymity, the lender is gearing up to return to the market once the regulatory penalty is reversed. “We are using this time to build up our liability base and keep our system ready to hit the market once the embargo is lifted,” he said. Historically, the bank has issued a majority of its credit cards to its own deposit holders.

During a call with analysts after HDFC Bank’s Q4FY21 results, the management said it had opened about 2 million new liability relationships in the March quarter and about 7 million liability during the full year. It has more than 2.5 million corporate salary customers during the year.

Chief financial officer Srinivasan Vaidyanathan said the bank is continuously investing in increasing spends, depth and width, revolve behaviours, product upgrades, line enhancements and loans on cards. “The impact of the non-issuance of cards is on new employees in corporates, new corporates on-boarding, etc. This loss of new customers can normally be made up within a few quarters of stoppage being lifted, since the bank continues to source liability customers who will be pre-approved,” he said, adding, “About three-fourths of our sourcing comes from existing customers of the bank.” In the meantime, the lender is focused on engaging with existing card customers who are dormant or inactive in order to “resuscitate” them.

So far, analysts have been hopeful about the bank’s ability to bounce back in its traditional area of strength. After the Q4 results, Kotak Institutional Equities said in a note, “Overall, we have not seen any business impact as the liability franchise is holding up well. The bank is working with its existing credit card base to generate business currently, but this issue would have an impact in the medium term if not resolved soon.”

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HDFC Bank reports 18% jump in net profit to Rs 8,758 crore; gross NPA ratio at 0.81%

January 16, 2021 root Banking & Finance

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In terms of asset quality, HDFC Bank noted that gross and net non-performing assets were at 0.81% of gross advances and 0.09% of net advances.

India’s largest private sector lender HDFC Bank, today reported an 18.1% on-year rise in net profit during the fiscal third quarter. HDFC Bank’s standalone net profit stood at Rs 8,758 crore in the October-December quarter against Rs 7,416 crore in the same period last year. The bank’s net revenue was recorded at Rs 23,760 crore against Rs 20,842 crore from the year-ago period. On a consolidated basis, HDFC Bank’s net profit for the period under review was Rs 8,769 crore, against Rs 7,659 crore in the previous year.

HDFC Bank’s net interest income for the previous quarter grew 15.1% to Rs 16,317 crore helped by growth in advances, which was at 15.6%. The liquidity coverage ration of HDFC Bank was reported to be at 146%, well above the regulatory limit. Other income in the said period was at Rs 7,443 crore, 31.3% of the net revenue.