With over 77 million credit cards in circulation, Indian users seem to be enthusiastically returning to physical checkouts.
Between March and August, the value of monthly point-of-sale credit transactions increased by 12%. It stood at Rs 45,000 crore last month, according to data from the Reserve Bank of India.
However, the value of online credit card transactions only increased by 2.6% over the same period.
HDFC Bank Ltd. maintained its leading position as the country’s largest credit card issuer, according to RBI data. State Bank of India and ICICI Bank occupied the second and third places respectively.
Credit card spending rose steadily and stood at Rs 1.6 lakh crore in July, while it slowed slightly last month. Although a rise in credit card spending has been fueled by “revenge spending” in many geographies, different factors may be at play in India.
Revenge spending “doesn’t last two quarters,” Amit Khurana, head of equities and research at Dolat Capital, told BQ Prime. Spending in India is supported by the return to normal and strong underlying demand in the domestic market, he said. The return to normal is also evident in the growing volume of PoS transactions recorded by different banks.
According to Asutosh Mishra, Head of Research at Ashoka Stock Broking, some revenge spending might be visible in the tourism and travel sector, but this is not a top theme in India. “Wage growth in the IT sector [and the] organized sector that is growing at a very healthy rate,” Mishra said, could fuel current credit card spending.
Online spending via credit cards did not grow as quickly as point-of-sale transactions, and the value of online transactions even fell for some banks in August. But that spending is set to get a boost as the country enters a commercially important holiday season.
“Some of the higher spending can also be attributed to higher inflation,” Mishra said, adding that a rise in oil and other commodity prices is also fueling some of the rise in credit card spending. .
In total, credit card issuers in India added 2.8 million credit cards between April and August. Even though total card outstanding rose from 80 million in July to 78 million in August, industry professionals expect credit card growth in India to remain robust and benefit from the return of festival spending without restriction.