Private sector lenders witnessed robust growth in credit cards and personal loan businesses in FY14, which helped them boost top line amid sluggish corporate credit demand in a slowing economy.
ICICI Bank, India's largest private sector lender, witnessed 141.6 per cent growth in personal loan disbursement in the past financial year, according to a report by Emkay Global Financial Services. The lender also saw healthy growth of 20.8 per cent in credit card dues, the report noted.
Similarly, Axis Bank's personal loan business grew 49.8 per cent last year, while the credit card business expanded 31.1 per cent.
Jairam Sridharan, head (consumer lending and payments) at Axis Bank, agreed that the unsecured lending business, which had been going slow, had begun to pick up. "Banks were staying away from it or were going slow on it. But now there is a lot of competition in the secured portfolio amongst banks and, as a result, banks are tapping the unsecured credit area where competition is comparatively lower."
Sridharan added that banks also had a more stringent and prudent underwriting norm in place and that is also giving them the confidence to increase their unsecured lending portfolio. "Apart from this, the systematic use of credit bureaus by banks is also giving the banks confidence to extend these unsecured loans. With the credit bureaus in place now, it is much easier for us to figure out the credit history of a consumer and lend on that basis."
HDFC Bank, the largest player in the credit card business, saw growth coming back in the last quarter of FY14 with the credit card business expanding 21 per cent and the personal loans by 17 per cent.
Parag Rao, business head (card payment products and merchant acquiring services) at HDFC Bank, said: "There has been a strong growth momentum for the past few years. We have a 35-36 per cent market share on spends and our portfolio has witnessed a 40 per cent growth in spends year-on-year. Our products are specifically focused in addressing the customer needs of travel, lifestyle and entertainment."
The number of cards outstanding has also gone up in the past year. While the Reserve Bank of India's (RBI) latest data is till January, the increasing trend is clearly visible.
For example, ICICI Bank's number of outstanding credit card at the end of January 2014 was 3,180,401, up 12 per cent from 2,840,802 a year ago. Similarly, Axis Bank recorded 28 per cent growth in the number of outstanding cards from 1,036,206 in January 2013 to 1,324,790 in January 2014. The exception to this rule was HDFC Bank, which had been weeding out its inactive cards in the previous quarters.
The aggregate amount of transactions done via ATM and POS (point-of-sale) has also seen an uptick. While ICICI bank's aggregate transaction amount has gone up 31 per cent, Axis Bank has recorded a 86 per cent growth in the transaction amount.
The growth in credit card business has also encouraged some lenders to enter the business. For instance, Federal Bank has said it might join the credit card business. However, it is not only private and foreign banks but even public-sector banks that have been trying to improve their share in the credit card business.
According to a Worldline India report, a player in the payments and transactional services pointed out in a report: "Private sector banks continue to be the largest issuers, with a 54 per cent share of the credit card base. After RBI's EMV (Euro pay MasterCard Visa) mandate, there was an uptick in issuance from the public-sector banks, as a result of which their share has grown to 20 per cent (in FY14) from 18 last year (FY13)."
In fact, the credit card base has crossed the 20-million mark by the end of the last financial year, the Worldline report noted.