Credit card attraction goes beyond big cities; loan growth remains flat

Even as overall loan growth remains flat for most banks, online sales are driving credit card spending.

While most sectors saw negative growth in loan dues, it grew 31 per cent year over year as on end-March, at Rs 686 billion against Rs 521 billion a year before, according to Reserve Bank of India (RBI) data.

At BankBazaar.com, an online marketplace for financial products, the number of credit card application rose more than twofold in the past year, says Navin Chandani, its chief business development officer. The site saw nearly 57 million searches for credit cards in 2017-18, almost double those in the previous year.

Customer addition included people from tier-II and tier-III cities, and lower to middle income group segments. With e-commerce companies linking specific credit cards with steep discounts, a lot of the young middle and lower middle income salaried class are opting for credit instead of debit cards. “While numbers of merchants in not only tier-I but tier-II and III cities are now accepting credit cards, the availability of credit card scores have also led to an increase in issuance. There is also higher interest in credit cards among people whom banks are not serving, from the self-employed and young salaried class, with monthly income of Rs 15,000-20,000,” said Chandani.

“E-commerce has opened the gates to premium brand shopping in even tier-II and tier-III cities, where people have money and aspirations but lack access to physical stores and malls. Online spends constitute 45-50 per cent of the total spends on credit cards and is growing at a rapid rate,” says Prasad. The rate of delinquencies for the sector is around two per cent.