HDFC Financial institution, the biggest issuer of bank cards within the nation, expects to see advantages of the brand new playing cards it has issued put up the Reserve Financial institution of India (RBI) embargo from this month itself.
It’s because there’s a 6-8 months lag for spends to choose up on new playing cards, stated Parag Rao, nation head, funds enterprise, digital banking & client finance, HDFC Financial institution.
Regardless of the RBI lifting embargo on HDFC Financial institution for issuing new bank cards in August 2021, the financial institution has not been in a position to recoup its market share in bank card spends. Since August 2021, HDFC Financial institution’s market share — by way of spend — is down 170-basis factors (bps).
And, when in comparison with the pre-embargo interval, spends market share of the financial institution has gone down from 31 per cent to 25 per cent as of January 2022.
“The 9 months of embargo interprets into little over 10 months of non-issuance of playing cards. This impacts the market share and, in all probability, a bit of extra by way of cumulative impact of spends in the marketplace place. We are going to slowly begin seeing the affect of the brand new issuance, which now we have been doing since September, as a result of they are going to now begin contributing to the spends. The partnerships, which now we have introduced in December and January, may even begin kicking in,” Rao stated.
RBI had positioned an embargo on the financial institution, barring it from issuing new bank cards for near 10 months.
Rao stated, “The embargo has impacted us on our incremental development charges and it has impacted us on our market share (quantity and spends). It is going to take us at the least 3-4 quarters to get again to our development in market share run charge.”
In the meantime, at a time when HDFC Financial institution is shedding market share, its friends — ICICI Financial institution and SBI Playing cards — have gained share by way of spends.
Whereas HDFC Financial institution misplaced 170 bps since August 2021, ICICI Financial institution and SBI Playing cards gained 130 bps and 180 bps of spend market share, respectively, over the identical interval.
Analysts say they continue to be watchful of HDFC Financial institution’s efficiency on this section, given the financial institution reported a 30 per cent year-on-year (YoY) decline in card charges in Q3. This was not seen in different card gamers.
“HDFC Financial institution is lagging our expectations by way of recouping its misplaced market share in bank cards. We stay watchful of its efficiency right here, the place it had dominant market share previously. That is particularly vital since HDFC Financial institution reported a 30 per cent decline in card charges in Q3, which was not seen in different card gamers,” stated Suresh Ganapathy, affiliate director, Macquarie Capital.
In response to RBI information, HDFC Financial institution noticed spends fall 8 per cent in January, adopted by SBI Playing cards with 6 per cent fall, and ICICI Financial institution with 5 per cent dip.
Nonetheless, Axis Financial institution and Kotak Mahindra Financial institution had been the one banks that didn’t see a drop in spends in the identical interval.
Total, bank card spends in January dropped 7 per cent on a month-on-month (MoM) foundation as Omicron impacted journey and discretionary spends.
In January 2022, bank card spends (at PoS & ATMs) totalled Rs 87,499 crore in comparison with Rs 94,202.44 crore in December 2021, and Rs 89,492.68 crore in November 2021. In October, bank card spends totalled Rs 1.01 trillion. That is the primary time such spends crossed Rs 1 trillion.
Though January noticed a 7 per cent contraction in spends on MoM-basis, on YoY, spends had been up virtually 35 per cent.
On a two-year compound annual development charge (CAGR)-basis, spends had been up 14 per cent in January.
Analysts stated, whereas the third Covid wave had an affect on card spends in January 2022, they’re optimistic on discretionary spends selecting up.
The banking system reported a web addition of 1.3 million bank cards in January 2022, led by wholesome traction in ICICI Financial institution, Axis Financial institution and HDFC Financial institution.