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RBI's new norms could hurt banks’ outstanding credit cards, margins: Axis Bank Official

Axis Bank issued around 1.1 million credit cards in January-March, taking total card issuances in financial year 2022 to 2.7 million.

April 30, 2022 / 03:16 PM IST

The Reserve Bank of India’s new guidelines for issuing credit cards could impact the number of outstanding cards and margins of the banking sector, an Axis Bank official said on April 28.

“It (the RBI circular) will have some impact on two aspects. One is just in terms of the number of cards, second, it will impact the margins,” Sanjeev Moghe, EVP & Head, cards & Payments at Axis Bank, told reporters in a conference call on quarterly results. “However, we have seen that when we have cycles of regulatory changes and credit cycles, the business inherently bounces back.”

Moghe added that the circular may not impact the bank’s co-branded card segment. The bank’s strong momentum in issuing credit cards is likely to continue going forward, Moghe added.

Axis Bank issued around 1.1 million credit cards in January-March, taking total card issuances in the financial year 2022 to 2.7 million.

The RBI on April 21 came out with a fresh set of guidelines for credit and debit card issuance for 2022. These guidelines will come into effect from July 1 and are applicable to all banks excluding payments banks, state cooperative banks, and district central cooperative banks. These norms are aimed at protecting the interests of retail consumers.

Meanwhile, Axis Bank will explore capital raising for the Citi Bank deal only when it approaches the timeline, its managing director and chief executive Amitabh Chaudhry said.

“As a prudent management team, we will explore capital raising. Let's come closer to some timeline when the transaction actually happens. There is no point in raising capital if the transaction keeps getting postponed.”

Chief financial officer Puneet Sharma said that the bank will continue to see improvement in net interest margins (NIM) in a rising interest scenario only over the coming quarters.

“NIM is a journey for us, it’s an eight to twelve-quarter journey,” Sharma added.

Axis Bank on Thursday reported a massive 54 percent year-on-year growth in standalone profit largely driven by a significant fall in provisions and improved asset quality performance for the quarter ended March 2022. Profit increased to Rs 4,117.8 crore during the quarter, compared to Rs 2,677 crore in the same period last year, the bank said in its BSE filing.

Provisions and contingencies in Q4FY22 declined sharply by 54.4 percent to Rs 987.2 crore compared to the corresponding period last fiscal, while the sequential decline was 26 percent.

The bank said it has not utilised COVID provisions during the quarter. It holds cumulative provisions (standard + additional other than NPA) of Rs 12,428 crore at the end of Q4FY22.)

Net interest income, the difference between interest earned and interest expended, grew by 16.7 percent year-on-year to Rs 8,819 crore with credit growth of 15 percent and deposits growth of 19 percent for the March 2022 quarter.

Siddhi Nayak is correspondent at
first published: Apr 28, 2022 08:23 pm