India Credit Card Spends Cross Rs 1 Lakh Crore In October

Credit card spends in India crossed the Rs 1-lakh-crore mark in October, hitting a new high.

Helped by festive season spending, the value of credit card transactions rose 26% month-on-month to hit Rs 1,00,943 crore in October, data by the Reserve Bank of India showed. In September, the value of credit card usage was at Rs 80,228 crore.

In terms of monthly average spends, October registered a 49% increase over the average of the last six months, reflecting a strong recovery in spending after the second wave of the pandemic.

"Digital transactions have increased a lot this year, in turn, boosting credit card usage. At the same time, e-commerce companies offered lucrative discounts and deals amid the festive season, further boosting spending," said Parijat Garg, a former credit bureau official and an expert on digital lending.

Garg expects November spends to be strong as well. The festive season spillover and high demand for travel and hospitality will help support the momentum.

Credit card spends are rising more than debit cards, the data showed. This, Garg said, is because debit card spending is getting diverted to payments via UPI. "Debit cards and UPI have a very similar use-case, but the latter has deeper penetration (for both users and acceptance points) and is even suitable for low-value transactions. So, we're seeing mobile payments with zero MDR take over the debit card volume gradually," he said. "Credit cards are still relevant for high-value transactions since they offer a line of credit, unique offers, and even reward points."

Sumit Bali, president for retail lending and payments at Axis Bank, said the increase in travel has contributed majorly to the increased spending in recent months.

"October was a unique month and was well placed to take advantage of festivities like Dussehra and Diwali. At the same time, the number of credit card users is also rising, thanks to easy EMI conversion availability and a plethora of offers," he said.

October also saw a spike in new credit cards issued and this may be because of the return of HDFC Bank Ltd. to the market after eight months. In mid-August, the RBI lifted an embargo placed on the bank against issuing new cards.

According to a report by Macquarie Research, HDFC Bank managed to add 13,66,000 cards in October, a first in two years. However, it continues to lose market share to ICICI Bank Ltd. and State Bank of India.

"It will take around two to three quarters for HDFC Bank to regain its lost ground in credit cards," the report said. "ICICI's co-branded card with Amazon has helped it to scale up its credit card business significantly."