Credit Cards Industry in India

6 Point Analysis of Credit Cards Industry in India

Introduction:

Credit Card Sector is highly under-penetrated in India. In this blog, we will discuss the credit card sector in India under the following headings:

1) Total Credit Card Base (As of February 2021):

• The total credit card base has grown by 8% YoY from 5.72 Cr. in February 2020 to 6.16 Cr. in February 2021.
• Over time, it has increased from 5.78 Cr. in August 2020 to 6.04 Cr. in December 2020, and 6.16 Cr. in February 2021.

2) Major Credit Card Issuers in India- Credit Card Base & Market Shares

• As of February 2021, HDFC Bank Credit Card division is the biggest player which has issued over 1.51 Cr. Credit Cards in the given month.
• SBI Cards comes next to HDFC Bank with 1.17 Cr. Credit Card Issuances.
• Issuance of Credit by other banks like ICICI Bank, Axis Bank, RBL Bank, Kotak Mahindra Bank, IndusInd Bank, and IDFC First Bank are 1.03 Cr., 70 Lakh, 28.9 Lakh, 23.7 Lakh, 15 lakh, and 1.73 Lakh respectively.
• And as per this Credit Card Issuance by the following banks, HDFC Banks grabs the highest market share in Credit Card of 24.7%, while SBI owns the second-highest 19% market share.
• Other Bank Majors with significant market share are ICICI Bank (16.8%), Axis Bank (11.4%), RBL Bank (4.7%), and Kotak Mahindra Bank (3.9%).
• There are several other foreign players in the market, with a minimal credit card issuance and hence low market share in the same.
• RBI has restricted American Express Bank to issue new credit card banks.

3) Issuances of New Credit Cards (Monthly Trend of Industry):

• The new credit card issuance was 10.37 lakh in February 2020 which has fallen from 47% YoY to 5.49 Lakhs in February 2021 due to a rise in covid-19 cases in the country.
• Insurance of New Credit Cards market the level of 8.63 Lakhs in September 2020 due to Pent-up Demand post opening of Economy and Festive Season also played a key role.
• Issuance of credit cards in October 2020 was 7.25 Lakhs, 7.30 Lakhs in November 2020, 2.84 Lakhs, and 7.01 Lakhs in December 2020 and January 2021 respectively.

4) Who Leads New Issuances? (Incremental Market Shares)- February 2021:

• SBI Cards with an issue of 99,630 fresh cards and a market share of 18.1% tops the list.
• While HDFC Banks who was the leader in terms of the credit card sector in the above discussions has reported a fall in market share of 10.4% in new issuances of cards due to restrictions imposed by the RBI on the bank for further issuance of credit cards.
• Here, ICICI Bank is the clear winner among the other players with the issuance of the highest 1,98,531 new credit cards in February 2021  and thereby gained a market share of 36.1% in the same period as per the new issuance concerns.
• ICICI Bank is leading Issuances for the last 5 months with consistent issuances of around 1.98 Lakh to 2.70 Lakh credit cards between October 2020 to February 2021.
• Axis Bank has issued 98,783 new cards in the same period and has got a market share of 18%.
• Restriction by RBI on HDFC Bank for issuance of new credit card has benefitted the other private banks especially ICICI Bank and Axis Bank.

HDFC Bank Market Share in New Issuances:

• Market Share of HDFC Bank was 29.2% in November 2020 in terms of New Issuances.
• Post Bank by RBI on HDFC Banks for Insurance of New Credit Cards, company is not able to issue new cards hence market share is in negative territory i.e., 27.4% in December 2020, 7.7%, and 10.4% in January 2021 and February 2021 respectively.
• The negative market share in credit cards shows the impact of Ban by RBI and closure of existing credit cards by the credit holders of the bank which is not a positive sign.

5) Credit Card Monthly Spends:

• In Feb-21, Monthly Spends declined to Rs.60,357 Cr down 4% YoY.
• While, Total Spends for 11M FY21 declined to Rs.5.6 Lakh Cr, down 18.4% YoY (from Rs.6.86 Lakh Cr in 11M FY20)
• ICICI Bank reported a 10% growth in spends in 11MFY21.

6) Monthly Spends per Card (Rs.):

• Monthly spending per card for the industry declined to Rs.9,791 from Rs.10,500-11,000 over the past 4 months.
• Monthly Spends per Card was Rs. 9,791 Cr. in the
• This drop was primarily due to a decline in the number of transactions per card to 2.6 from an average of 2.9 over the last 4 months.
• The surge in COVID cases and resulting lockdown in various states could slow down the recovery momentum.

Conclusion:

In Credit Card Business, SBI Cards is the only listed player in the market. Hence, it will always have an upper hand considering there is no pure credit card play for Investment in the stock market. This will provide this stock a scarcity premium and therefore may trade-in premium valuation. But one should go through proper research and study before investing in any of the stocks.