As credit card spends rise 26% YoY in February, analysts remain watchful of banks' asset quality

The rising credit card transactions comes despite RBI's higher risk-weights on unsecured consumer credit exposures on banks and non-bank lenders

India's credit card spends surged 26 percent year-on-year (YoY) in February to Rs 1.5 lakh crore, showed data from Reserve Bank of India (RBI), despite some regulatory embargo on some business payments and higher risk-weights on unsecured retail lending. With such sharp rise in credit card transactions, brokerages remain watchful of banks' asset quality going ahead.

Around 1.1 million credit card net issuances were done in February, with HDFC Bank leading from the banking pack, said analysts at JPMorgan. The industry cards outstanding (total amount of money owed on credit cards) was up 21 percent YoY. "We believe asset quality will be key to monitor with such sharp rise in issuances," analysts underlined.

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However, some issuers were more impacted due to restrictions on commercial card arrangements, pointed out analysts at HSBC. They see a notable market share loss for SBI Cards. It reported a sharp decline in spend market share - down 285 basis points (bps) month-on-month (MoM).

In the prior month too, credit card spends were up 30 percent YoY to Rs 1.7 lakh crore as e-commerce transactions and bill payments formed more than half of the total transactions.

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The rising credit card transactions come despite RBI's higher risk-weights on unsecured consumer credit exposures on banks and non-bank lenders, including credit card receivables and banks lending to NBFCs.

Additionally, the RBI had also upped its scrutiny on co-branded credit cards - a sector seen strong growth recently - aimed at preventing backdoor entry into the credit card industry. The central bank told all co-branded issuers to prominently carry name of the issuing bank and asked co-branded partner to not have access to any transaction information of customer using the card.

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