Credit card outstanding in India surged by 31 per cent or Rs 45,866 crore to reach Rs 1.94 lakh crore in the fiscal year ended March 31, 2023, reflecting the growing discretionary spending by consumers using unsecured loans. The Reserve Bank of India‘s (RBI) data showed that credit card or unsecured loan outstanding had jumped by 13 per cent to Rs 1.48 lakh crore from Rs 1.32 lakh crore in FY2021. The share of credit card outstanding in the overall retail loan stood at 5 per cent in the 12 months ended March 2023, a marginal increase from 4 per cent in FY22.
During the covid pandemic, the restrictions on movement and job uncertainty had hit consumer spending on discretionary items such as vacations, cars, and online purchases badly. However, post-covid, consumer spending has increased on these activities. In FY2023, credit card spending stood at Rs 14.33 lakh crore compared to Rs 9.72 lakh crore in FY2022, and the number of credit card transactions was around 291 crore in FY2023 compared to 224 crore in FY2022.
In FY2022-23, banks added 1.17 crore credit cards, taking the total credit outstanding to 8.53 crore as of March 2023 from 7.36 crore as of March 2022. Recently, the RBI expressed concerns over rising non-performing loans in the credit card segment. The RBI said in the ‘State of Economy’ article published in the monthly bulletin for April 2023, “Delinquencies are reducing in the 90+ days past due bracket across all categories of consumer credit, barring credit cards and education loans.”
In the quarter ended March 2023, SBI Cards and Payment Services, the pure-play credit card player, reported a 13 basis points jump in its gross non-performing assets (GNPA) to 2.35 per cent compared to 2.22 per cent in the year-ago quarter. During the fourth earnings call with analysts, SBI Card’s Managing Director and CEO Rama Mohan Rao Amara said that the company had identified the areas that contributed to higher slippages in the last few quarters, impacting the NPAs and write-off numbers, and portfolio actions to address the issue have been taken.
Despite these concerns, banks have said that the credit card segment is not showing any signs of stress so far. ICICI Bank’s Executive Director Sandeep Batra said, “Our personal loan book is about Rs 88,000 crore, and our credit cards book is about Rs 37,800 crore, and we are very comfortable with the quality of the book that we have built over the years.”
The risk of banks offering unsecured loans is high as there is no collateral to recover in case of borrower defaults. Personal loans, credit cards, and education loans are the different types of unsecured loans. Credit card outstanding accounts for a small share of the overall retail loan in India, but its high growth rate and concerns over non-performing loans in this segment highlight the need for banks to monitor and manage their credit risk effectively.
According to analysts, the credit card outstanding figure is likely to grow further in the current fiscal year. This is because credit cards have become a preferred payment option for many consumers, who are looking to buy products and services without having to pay upfront.
The RBI has been taking several steps to regulate the credit card segment, including mandating banks to issue only contactless and EMV chip-based credit cards from January 2023. The central bank has also capped the interest rate on credit cards at 3% per month or 36% per annum, to protect consumers from being charged exorbitant rates.
Despite these measures, credit card fraud continues to be a concern for banks and payment operators. In the first seven months of the current fiscal year, payment frauds worth Rs 1,750 crore were reported by banks and payment operators, according to the RBI.
