HDFC Bank
HDFC Bank
Picture for Representation

RBI's temporary restrictions on HDFC Bank on new credit card sourcing have directly benefited its competitors. In the last few months, larger banks have managed to gain market share in the absence of competition from HDFC Bank.

Among the major players, ICICI Bank reported strong (15.7% YoY) growth, followed by IndusInd Bank (13.1%) and SBI Cards (12.3%). RBK too reported a healthy (10.4% YoY) growth.

SBI Cards and ICICI Bank improved their market share to 19%/16.8% in February 2021 from 18.3%/15.8% in FY20. HDFC Bank lost its market share by 46 basis points. Despite that, it continues to be the largest player with a market share of 24.7%.

Slow Pace of New Client Acquisition

In February 2021, the pace of new credit card acquisition slowed. And the banking system added around 5.49 lakh new credit cards. It is down by 47% from February last year.

With the net addition of new cards, the total number of outstanding credit cards stood at 6.16 crore in the system, a growth of 7.9% from February last year.

ICICI Bank was the most aggressive market player in February. It added around 1.98 lakh cards out of the overall 5.49 lakh new credit cards acquired by the industry. It was followed by SBI Card and Axis Bank, who added 99,000 -1,00,000 cards to the system during the month.

Due to the restrictions on HDFC Bank, it lost ~57,000 cards in February, affecting its market share. IDFC Bank managed to make inroads into the industry with its newly launched credit card business.

Card Spending Disrupted in Short Term

Monthly spending per card has declined to ~Rs 9.8k from Rs 10.5k-11k over the past four months. The number of transactions per card has also declined to 2.6 from an average of 2.9 over a similar period.

Credit card spends have declined in recent months due to the lower discretionary spending in the travel, tourism, and entertainment segments.

Rising acceptance of e-commerce, on the other hand, is a great enabler for credit card spends to grow in the medium term.

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