Credit card spending witnessed a slight moderation in January 2025 because of the tail-end of holiday season and wedding-related spending. According to InCred Equities, spending dropped by around 2.1 per cent on-month at approximately Rs 1.8 trillion. The fall in credit card spending had started in November 2024 after a strong demand in October 2024. Spending through Point-of-Sale (PoS) transactions fell by around 5.1 per cent MoM whereas online spending was flattish on-month.
Going forward, the brokerage firm said, the spending is expected to remain sluggish for the next few months as lenders continue to move in a measured manner. It added that the changing spending and asset quality trends will be the key monitorable, given the seasoning of the books.
Who lost most market share?
Per the analysis report, HDFC Bank shed its market share in spending by 80 bp on-month due to volatile online spends. It is worth noting that HDFC Bank has a strong hold in the PoS segment. SBI Card and ICICI Bank, meanwhile, gained market share by 70 bp and 80 bp MoM, respectively, given that these players have a strong presence in the online spending space. In terms of transaction volumes, SBI Card recorded a 1.2 per cent uptick as against the industry’s 0.6 per cent drop in January. Additionally, the company reported a 18.8 per cent share in the total number of active cards. Furthermore, Axis Bank witnessed a drop in its market share by 50 bp on-month. IndusInd Bank shed market share by 20 bp MoM.
The card spending market share of top five credit card players – HDFC Bank, SBI Cards, ICICI Bank, Axis Bank and IndusInd Bank – was flat at around 78.4 per cent in Jan 2025, InCred Equities stated.
A tally on card issuance
According to InCred Equities, total credit card issuance (cards in force or CIF) continued to moderate at around 109 million (+0.8 per cent MoM) due to stricter scrutiny by the Reserve Bank of India (RBI). Per analysis, HDFC Bank has been issuing new credit cards at a more intense pace than the other players, gaining a 1.3 per cent market share over Jan 2024 whereas players like SBI Card gained 0.1 per cent market share, while ICICI Bank shed 0.3 per cent market share over the same period. On a MoM basis, HDFC Bank witnessed an expansion of approximately 11 bp on-month to around 21.5 per cent whereas ICICI Bank had a flat market share at 16.6 per cent. SBI Card witnessed around 10 bp improvement in market share to 18.8 per cent. “We remain optimistic about the presence of credit cards improving across new geographies. However, considering the recent track record, the overall trend in NPAs is likely to remain volatile as mis-selling of credit cards has been a common phenomenon,” InCred Equities said.
Even the RBI had earlier taken note of the problem of mis-selling. RBI Governor Sanjay Malhotra, on February 7, in his post-MPC meeting presser, had cautioned banks against mis-selling of products and said any violation in this regard will be taken “very seriously”. The RBI governor came down heavily on regulated financial entities, including banks and insurance companies, many of whom have been accused of mis-selling their financial products under pressure to meet their sales target.
Asset quality trends seems to be weak
As seen in the caution exercised on new card issuance by most players, InCred Equities said, the asset quality trend seems to be weak. “There are heightened concerns about asset quality stress building with the rise in 90+dpd bucket by ~20bp QoQ to 2.0 per cent in Sep 2024, as per TransUnion CIBIL India. We are witnessing rising defaults by new-to-credit (NTC) customers who are facing difficulty in paying their dues on time, specifically in Tier-2 cities and beyond. Consequently, we are witnessing a higher focus on premium cards by select players,” the report stated.
Now with SBI Card witnessing rising stress in its asset quality, with gross non-performing assets or GNPAs down by 3bp QoQ to 3.24 per cent and credit costs surging by 40bp QoQ to 9.4 per cent, InCred Equities reiterated its ‘high conviction REDUCE rating’.
“We continue to believe that SBI Card cannot sustain its premium valuation amid rising concerns over slowing growth, increase in the cost of funds and deteriorating asset quality. We expect SBI Card to continue to lose market share in overall spending due to its weak capital adequacy ratio and tighter risk weights. We expect the cost of funds for SBI Card to increase, despite probable monetary easing, amid an increase in risk weights,” it concluded.
