D V Ravi, MD & CEO, Shriram Capital said, “ As we lay special focus on creating value through the smart use of digital tools, platforms, AI / ML, and other emerging technologies, I believe this will lead to an overall robust digital ecosystem across the companies”
Credit card spends are seen hitting record highs in October and November as the COVID-19 wave ebbs and festive euphoria sets in. As per trends, it has grown 17 per cent in October and 11 per cent in November.
Spending traction is evident from the record absolute spends and the ratio of credit card to debit card spend, which stands at 1.28x. October is likely to be 15-18% better than September while November’s first-week run rate has been better than October, according to ICICI Securities.
September jump
Credit card spends jumped 60 per cent year-on-year (YoY) in September, helped by the onset of the festive season. However, on a sequential basis the growth slowed down to 3 per cent at Rs 80,500 crore in September.
Spends grew strongly at 60% year on year (+16% on a two-year CAGR basis). Kotak Mahindra Bank reported the highest growth (27% MoM) in September, followed by IndusInd Bank and ICICI Bank (13% each).
Other major players reported growth in the +-4% range. On a two-year CAGR basis, spends for ICICI Bank grew 58%, IndusInd 33%, Kotak Mahindra Bank 29%. HDFC Bank and SBI Cards posted growth of 10–15% and Axis Bank and SCB 2–3%. On the other hand, Citi and Amex saw declines of 8% and 26% respectively. ICICI Bank surpassed SBI Cards to become the second-largest player in spends, with market share of 19.3% over 6MFY22.
Outstanding credit cards up 10.8%
The total number of outstanding credit cards in the system grew 10.8% YoY to 65 million in September 2021 – the highest in the past 11 months. Among the major players, ICICI Bank reported strong growth of 26.1% YoY, followed by IndusInd Bank (15.6%), SBI Cards (14.3%). Foreign players such as American and Citi witnessed decline of 10% and 5% respectively. SBI Cards and ICICI Bank continued to perform strongly, resulting in a 59–218 bps YoY increase in market share to 19.3% and 18.0% respectively in September.
ICICI Bank added close to 2 million new cards in the past 10 months, taking its credit card base to 11.6 million as of September. Despite a 247 bps year on year decline, HDFC Bank remained the largest player with a market share of 23.0%.
Around 10.91 lakh new cards were added to the system in September with HDFC Bank being the largest acquirer at 2.44 lakh cards.
Another option, if you are unable to make payments by the due date, is opting for a loan against your credit card. Various credit card companies offer pre-approved loans to customers, these can actually come in handy in this scenario. However, be mindful of the costs as the interest rate and other charges may be steeper. If you have multiple credit cards, compare interest rates and processing fees on each and go with the one that has least total cost for your preferred loan tenure.
Credit card spends jumped 60 per cent year-on-year (YoY) in September, helped by the onset of the festive season.
On a sequential basis, the growth slowed down to 3 per cent at Rs 80,500 crore, according to various research reports.
The festive season, opening up of the economy and rising consumer confidence is set to keep the credit card spends buoyant, experts say.
Kotak Mahindra Bank reported the highest growth (27% MoM) in September, followed by IndusInd Bank and ICICI Bank (13% each). Other major players reported growth in the +-4% range. On a two-year CAGR basis, spends for ICICI Bank grew 58%, IndusInd 33%, Kotak Mahindra Bank 29%. HDFC Bank and SBI Cards posted growth of 10–15% and Axis Bank and SCB 2–3%. While, Citi and Amex saw a decline of 8% and 26%, respectively. ICICI Bank surpassed SBI Cards to become the second-largest player in spends, with market share of 19.3% over 6MFY22.
Outstanding credit cards up 10.8%
The total number of outstanding credit cards in the system grew 10.8% YoY to 65 million in September 2021 – the highest in the past 11 months.
Among the major players, ICICI Bank reported strong growth of 26.1% YoY, followed by IndusInd Bank (15.6%), SBI Cards (14.3%). Foreign players such as American and Citi witnessed declines of 10% and 5% respectively. SBI Cards and ICICI Bank continued to perform strongly, resulting in a 59–218 bps YoY increase in market share to 19.3% and 18.0% respectively in September.
ICICI Bank added close to 2 million new cards in the past 10 months, taking its credit card base to 11.6 million as of September.
Despite a 247 bps year on year decline, HDFC Bank remained the largest player with a market share of 23.0%.
10.91 lakh card adds
Around 10.91 lakh new cards were added to the system in September with HDFC Bank being the largest acquirer at 2.44 lakh cards. ICICI Bank added 2.34 lakh, Axis Bank added 2.03 lakh, while SBI Cards added 1.75 lakh cards in September, while, Standard Chartered Bank, AMEX and Citi posted a decline of 13,000, 11,000 and 4,500, respectively, in the card base. IDFCF Bank also posted a strong performance with 39,000 new credit card additions in September.
Higher spends per card
Monthly spends per card for the industry increased to Rs 12400, from an average of Rs 10,700 over the past six months (higher v/s pre-Covid levels). This was attributable to an increase in the ticket size to Rs 4,300, the highest in the past several years.
Conversely, the number of transactions per card declined to 2.8 v/s 3.0 in August (3.1 in March). IndusInd and Kotak Mahindra Bank saw a higher increase of Rs 2,400 and Rs 2,200, respectively, followed by ICICI Bank with Rs 1,400.
IndusInd (Rs 9,700) and Amex (Rs 5,900) had the highest ticket sizes, followed by Kotak Mahindra Bank (Rs 5,100) and ICICI Bank (Rs4,900). All other players were in the range of Rs 3,900–Rs 4,300 – barring Citi and SCB, which were lower at Rs 3,000–3,200.
New Delhi, Leading stock exchange BSE on Tuesday said it has collaborated with private sector lender HDFC Bank to further encourage and promote the listing of startups and small and medium enterprises (SMEs) across India. Through this pact, HDFC Bank and BSE will evaluate banking and lending solutions for startups, undergoing listing process on startups and SME platform, the exchange said in a statement.
HDFC Bank will identify potential startups as well as SMEs and help them to partner with intermediaries like merchant bankers, chartered accountants and lawyers to list on BSE.
Both the parties have agreed to conduct and participate in joint outreach activities and contribute to each other’s publications on the startup ecosystem in India.
“Through this MoU (Memorandum of Understanding), we aim to resolve funding constraints for startups and SMEs in India. BSE along with HDFC Bank shall work together to create a sustainable ecosystem for startups and SMEs,” Ajay Thakur, Head, BSE SME and startups, said.
“Startups are reimagining and reshaping the world we live in. At HDFC Bank, we are committed to developing, strengthening and collaborating with the startup community and ecosystem in the country,” said Iqbal Singh Guilani, SVP, Retail Branch Banking, HDFC Bank.
BSE became the first stock exchange to get approval from markets regulator Sebi and had launched its SME platform in March 2012.
So far, 353 companies listed on the BSE SME Platform have raised Rs 3,732 crore from the market, and the total market capitalisation of such firms stood at Rs 38,538 crore. Out of 353 companies, 117 have migrated to BSE Main Board.
BSE is the market leader in this segment, with a market share of 61 per cent.
With the economy opening up, the asset quality of private banks improved in the September quarter. Further, banks efforts in reducing slippages, improved collections, better recoveries from written off accounts and RBI mandated loans recast also helped banks keep a lid on NPAs.
While the year on year NPA figures of most banks were higher than the last quarter’s figures, they are not comparable as after the Supreme Court‘s stay on classifying loans that were standard as on August 31 from NPAs banks had reported NPAs under proforma figures.
The drop
HDFC Bank, India’s largest private sector lender, reported a drop in gross non-performing assets (GNPAs) to Rs 16,346 crore during July-September against Rs 17,099 crore in the preceding quarter. Provisions and contingencies also dropped to Rs 3,924.70 crore during the quarter compared with Rs 4,830.84 crore in the June quarter. GNPA ratio fell to 1.35 per cent as of September from 1.47 per cent in the June quarter. It was 1.08 per cent in the same quarter, a year ago.
ICICI Bank‘s gross non-performing assets fell to 4.82 per cent of gross advances as on September 30, against 5.15 per cent in the June quarter. Net NPAs (bad loans) also fell to 0.99 per cent from 1.16 per cent sequentially in the September quarter.
Federal Bank‘s asset quality improved on a sequential basis as gross NPA came at 3.24% as against 3.50% in the previous quarter. Its net NPA stood at 1.12% from 1.23% quarter-on-quarter (QoQ). However, the gross NPA during the year-ago quarter stood at 2.84% whereas net NPA at 0.99%. Provisions (other than tax) and contingencies declined to Rs 245 crore as against Rs 543 crore in the previous quarter and Rs 532 crore in the year-ago quarter.
Axis Bank’s gross NPAs came in at 3.53% in the second quarter, lower than 3.85% in the June quarter and 4.18% in the previous year period. Meanwhile, the net NPA ratio during the quarter stood at l.08%.
Kotak Mahindra Bank’s gross NPAs during the second quarter stood at 3.19% compared with 3.56% in the June quarter. However, it was higher than 2.70% in the year-ago quarter. Meanwhile, the net NPA improved to 1.06% versus 1.28% on a sequential basis, and remained flat on a year-on-year basis.
GNPAs of banks will rise to 8-9 per cent this fiscal, well below the peak of 11.2 per cent seen at the end of fiscal 2018, with the COVID-19 relief measures such as restructuring dispensation, and the Emergency Credit Line Guarantee Scheme (ECLGS) helping limit the rise, according to CRISIL Ratings.
GNPAs as at March-end 2021 had declined to 7.5 per cent against 8.2 per cent as at March-end 2020.
With about 2 per cent of bank credit expected under restructuring by the end of this fiscal, stressed assets ― comprising gross NPAs and loan book under restructuring ― should touch 10-11 per cent (against March-end 2021 estimate of about 9 per cent), the credit rating agency said.
Banks and card networks have received nearly two million auto-debit mandates after the Reserve Bank of India (RBI) made it mandatory from October 1 to take prior consent of a customer before debiting their accounts.
Most of the recurring payments are linked to credit cards, while such a facility is not available in most places for debit cards.
In August, total credit card transactions stood at 19 million, and debit card transactions at 358.5 million. In value terms, credit cards were at Rs 77,732.94 crore and debit cards at Rs 64,351.52 crore.
The readiness
State Bank of India, Axis Bank, HDFC Bank, Yes Bank, American Express, Bank of India, Bank of Baroda, ICICI Bank, HSBC, RBL Bank, IndusInd Bank and Kotak Mahindra Bank have implemented the recurring payment framework for their customers.
Service providers such as Razorpay, Billdesk, PayU have come up with solutions to help card issuers, customers, and merchants to register their mandates on their customised platforms. BillDesk has set up SI Hub, PayU has created Zion while Razorpay has set up MandateHQ.
RBI’s auto-debit rule
Under the new auto-debit rules that kicked in on October 1, there are no automatic recurring payments for services like recharge, utility bill as the additional factor of authentication (AFA) has now become mandatory.
To ensure safety and security of card transactions, the central bank had, in December last year, directed all banks that processing of recurring transactions (domestic or cross-border) using cards or Prepaid Payment Instruments (PPIs) or Unified Payments Interface (UPI) under arrangements/practices not compliant with AFA would not be continued beyond March 31, 2021.
However, non-readiness of some of the players had forced the RBI to extend the deadline on recurring payment till September 30. The rule is applicable to all types of recurring payments like utility bills, phone recharge, DTH and OTT, among others.
As per the guidelines, banks will send a one-time password (OTP) to customers for payments above Rs 5,000.
The pandemic has hit individual borrowers more than industries and businesses, going by the recast of loans announced under the government’s one-time restructuring scheme.
The eight banks that have declared second-quarter results have announced reast of Rs 27,708 crore worth of loans under the One-Time Restructurig 2.0, of which 80% recasts are personal loans and the rest 20% availed for business and by MSMEs.
The highest loan recasts were at HDFC Bank at Rs 17,395 crore, followed by another private lender ICICI Bank at Rs 4,156 crore.
The recasts by MSMEs was smaller, possibly due to other forms of emergency credit available to them.
Of the total restructured loan book of Rs 2 lakh crore for the banks as on June 30, 2021, the restructuring under the first coronavirus wave is estimated at 51 per cent of the total restructuring of Rs 1 lakh crore, while restructuring under the second wave is estimated at 31 per cent of the total restructuring or Rs 0.6 lakh crore, it said.
Considering that 30-40 per cent of the loan book was under moratorium during Q1 FY2020 across most banks, the loan restructuring at two per cent of advances after the second wave is a positive surprise and much lower than its earlier estimates, rating agency Icra said.
Resolution Framework 2.0
In May this year, the Reserve Bank announced a slew of measures including loan restructuring for individual and small businesses hit hard second Covid wave.
This recast was for those who had not availed restructuring under any of the earlier frameworks, including the Resolution Framework 1.0 of RBI dated August 6, 2020, and who are classified as standard as on March 31, 2021, shall be eligible for the Resolution Framework 2.0.
Amidst increasing bullishness about the credit card market, a handful of top domestic banks including HDFC Bank and Kotak Mahindra Bank are being seen as front runners to acquire Citi’s credit card division in India.
According to sources, about 5-6 banks are in the fray to bid for Citi’s credit card business in India. These include HDFC Bank, ICICI Bank, Kotak Mahindra Bank and DBS Bank India, the sources said.
HDFC Bank, ICICI Bank and Kotak Mahindra Bank did not respond to an e-mail from BusinessLine.
DBS Bank India and Citi declined to comment on a similar e-mail query sent by BusinessLine.
Many Indian lenders have been looking to scale up their credit card business and Citi’s high-quality customer portfolio will be a useful addition, noted a source.
Opportunities
Brokerage firm Jefferies said in in a note in April that Citi’s exit from the retail business in India may open opportunities for Indian private banks, credit-card players and foreign banks in the country.
Citigroup had in April this year announced its decision to exit its consumer banking operations in India as part of an ongoing strategic review, which was part of strategic actions in the Global Consumer Banking space across 13 markets.
Citi has, however, been losing its market share in the country and valuations could prove to be an issue.
Market share
According to data from the Reserve Bank of India, Citi Bank had 25.93 lakh outstanding credit cards at the end August 2021, compared to 26.21 lakh at end of April 2021 and 27.39 lakh at the end August 2020.
It is estimated to have about a 4 per cent market share in the credit card segment in terms of numbers and 5 per cent in terms of spending.
Any sale of assets willrequire approval from the RBI and is likely to take at least another 4-5 months.
HDFC Bank, MastercardUSAID, and DFC today announced a $100-million credit facility for micro, small and medium enterprises, which will help promote small businesses in India to digitise and recover from the economic impacts of the pandemic, Mastercard said in a statement.
“HDFC Bank is proud to join hands with Mastercard, USAID, and DFC in the endeavor to support small businesses in India”, said Rahul Shukla, Group Head, HDFC Bank.
HDFC Bank will reach beyond its current customer base to make at least 50% of this credit facility available to new small business borrowers and women entrepreneurs, while Mastercard will provide skills training and education on digitisation options, and DFC and USAID will facilitate the extension of the credit facility by de-risking HDFC Bank’s lending to small business owners.
Furthermore, the credit facility will be made available exclusively to new credit customers, with a goal of at least 50% being women entrepreneurs.
“At USAID, we believe gender equality and women’s empowerment are not just a part of development but are its core”, said Veena Reddy, mission director, USAID India.
The new credit facility aims to expand lending to small businesses that need financing to maintain and expand their operations, and enable recovery through digitisation. It also aims to support women-led businesses.
HDFC Bank, Mastercard, US International Development Finance Corporation (DFC), and US Agency for International Development (USAID) on Thursday launched a $100 million credit facility. This is aimed to promote and encourage small businesses in the country to digitise, while also helping Indian businesses, particularly those that are women-owned, to recover from the economic impacts of the pandemic.
“The new credit facility aims to expand lending to small businesses that need financing to maintain and grow their operations, and enable recovery through digitisation, with an emphasis on supporting women-led businesses,” they said in a statement.
Extending nationwide branch network
HDFC Bank will reach beyond its current customer base to make at least 50 per cent of this credit facility available to new small business borrowers, with a goal of at least 50 per cent of the facility being used for lending to women entrepreneurs, it further said, adding that the lender will channel the credit via their extensive nationwide branch network.
Mastercard will provide skills training and education to small business owners on their digitisation options through existing collaborations with the Confederation of Indian Industry and the Confederation of All Indian Traders.
“This initiative is part of Mastercard’s $33 million commitment to enable small businesses in India to recover from the impact of Covid-19,” the statement said.
Meanwhile, DFC and USAID are facilitating the extension of the credit facility by de-risking HDFC Bank’s lending to small business owners.
“This program is part of USAID’s Covid-19 response in India as well as its global Women Economic Empowerment Fund initiative,” it further said.