Credit card spends and new issuances made a surprise growth in July. Spendings through credit cards jumped by 5.5% to `1.93 lakh crore, and new card issuances rose to five-month high of 4.25 lakh, indicating a revival in unsecured lending, according to the latest data from the Reserve Bank.
This growth indicates a resurgence in unsecured lending, with major banks like HDFC Bank and SBI Cards, which are the industry leaders with over 24.8 million and 21.2 million customers, respectively, contributing to the expansion.
HDFC Bank led the growth drive net-adding 3.15 lakh cards, expanding its customer base to 24.8 million. SBI Cards, the second largest player in the segment net added 66,640 cards taking the total customer base to 21.2 million.
Third-largest issuer ICICIC Bank, which saw sharp decline of 2.87 lakh cards in June, recovered in July and added 67,664 new cards, taking up its base to 18 million. Axis Bank, which had also seen losses in June, had net added 1.22 lakh cards. Kotak Bank, which had seen worst drop of 2.86 lakh cards in June, managed to remain in the green despite the addition being only a paltry 1,759 cards. Since November 2023, when RBI asked banks to set aside 150% risk capital against their credit card outstanding, up from the previous 125% as this segment of the unsecured loan books of the banks were growing in the 30% plus bracket.
As a whole the unsecured books of banks at the system level were clipping at 25% per annum between FY21 and FY24, making the regulator worried about a credit bubble. So the RBI also hiked the risk capital requirement of all other unsecured loans as well as bank loans to non-banks by 25 percentage points to 125%. These were reversed last December after the red hot growth moderated to single digits.