Strong consumer sentiment coupled with higher credit card penetration in non-metro cities has pushed up spending via credit cards in India by nearly 35 per cent in the first six months of the year, according to Nitin Gupta, country manager (south Asia), MasterCard.
The total spending through cards is estimated to reach Rs 17,500 crore (Rs 175 billion) at the end of 2004 from Rs 13,000 crore (Rs 130 billion) last year.
"In 2003, the growth rate in spending was around 17-20 per cent. So the credit card industry has nearly doubled the growth this year," said Gupta.
The total spends through MasterCard in 2003 was Rs 4,950 crore (Rs 49.5 billion), and in the first six months of the year alone, spends have gone up more than 20 per cent.
"The banks themselves had projected a 20-25 per cent growth in spending this year. But the summer season proved to be good with very high domestic and international holiday spending," said Pushpendra Mehta, senior consultant with credit card consultancy, CCMC.
An American Express spokesperson too said that the company was on track to maintain its 30 per cent growth rate both in terms of billings and the number of cards issued.
"Another reason for the significant uptake is that credit card companies and banks have marketed the cards very aggressively in the last one year," said Gupta.
The number of credit cards in the market now is estimated to be more than 11 million -- a 22 per cent increase from 9 million cards at the end of 2003. Out of this, nearly 6 million are MasterCard users.
However, duplication of users is a concern for the industry, which can exaggerate the number of active users. According to Gupta, since the business is largely concentrated in the metro cities, the average user holds 2.5 cards.
"For a more even spread the credit card companies must ensure wider acceptance in smaller cities," he said. With the fast proliferation of cards, default rates too are on the ascendancy ranging from 8-12 per cent. "Quality of issuance is certainly a problem," said Mehta.
"Delinquent accounts are a perfectly accepted part of this business and I don't think 8 per cent is too high for the Indian market," said Gupta.
MasterCard shares its negative list or the database of more than a million defaulters with its partner banks, and there are nearly 200,000 queries made on the database every month.
