Credit cards get a festive boost, spending increases 25% in Sep

Credit card spending in September recorded strong growth of 25 per cent year-on-year (Y-o-Y), marking the highest increase in six months. Even as many banks saw higher slippages during the July-September quarter of 2024-25, spending growth exceeded 20 per cent for the first time since February.

According to the latest data released by the Reserve Bank of India (RBI), September spending reached Rs 1.76 trillion, compared to Rs 1.42 trillion in the same period a year ago. In August 2024, credit card spending was Rs 1.68 trillion.

Experts attributed this healthy growth to festival demand and a favourable base effect.

“The growth in credit card spending is driven by a lower base in the previous year and the festival season.

"There has been an increase in promotional schemes like equated monthly instalments during the festival period. Looking ahead, October is also likely to see a rise in spending due to the festival season and associated promotional activities,” said Saurabh Bhalerao, head of BFSI research at CareEdge Ratings.

“The growth appears healthy at this point.

"The early start of the festival season contributed to a pickup in spending during the second half of the month.

"We estimate industry spending to grow in the high teens for the financial year, and trends in the coming months will be crucial to assess the overall trajectory,” said Nitin Aggarwal, research analyst at Motilal Oswal Research.

RBI Governor Shaktikanta Das recently said that festival season demand presents mixed signals for India’s economic growth.

However, the positives outweigh the negatives, and the Indian economy is doing reasonably well.

Das noted that several high-frequency indicators show robust growth, indicating healthy economic performance.

Some private banks have reported a rise in stress in the credit card and microfinance segments for the July-September period.

“On the credit card front, as we guided for in the last call, certain segments are showing early signs of stress and indebtedness.

"We have taken actions, including limiting the number of new cards issued and managing our existing portfolio,” said Arjun Chowdhury, group executive (affluent banking, NRI, cards/payments, and retail lending) at Axis Bank during the post-earnings call.

HDFC Bank, the largest credit card issuer, saw a 35 per cent increase in spending to Rs 52,226.59 crore, up from Rs 38,661.8 crore in September 2023.

SBI Cards and Payment Services (SBI Card) transactions rose by 11 per cent to Rs 27,714.7 crore, ICICI Bank’s card spending grew by 24 per cent to Rs 31,457 crore, and Axis Bank recorded a 15.1 per cent rise to Rs 18,721.9 crore.

While spending picked up in September, growth in the number of cards continues to slow.

The number of outstanding credit cards in September rose by 14 per cent Y-o-Y to 106.11 million, compared to 93 million in September 2023. HDFC Bank, the largest credit card issuer, had 22.4 million cards in circulation, followed by SBI Card with 19.5 million, ICICI Bank with 17.56 million, and Axis Bank with 14.79 million cards.

Growth in cards in circulation has gradually slowed, from nearly 20 per cent Y-o-Y in January 2024 to 14 per cent in September 2024.