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Home / Industry / Banking /  Axis Bank estimates a 17-18% hit on new cards after ban on Mastercard

Private sector lender Axis Bank estimates a 17-18% hit on credit card issuances owing to a central bank ban on global card network Mastercard, a senior official said on Monday.

Sumit Bali, president and head (retail lending and payments) at Axis Bank said on Monday that the only impact it currently sees is in the Flipkart co-branded credit card. Launched in July 2019, there are about 1.2 million such co-branded credit cards in force.

“Our sense is that since the ban came in only by 22 July, our overall impact if 17-18% in terms of issuance. Assuming that this continues in August, it impacts maybe 21-22%," said Bali.

The Reserve Bank of India (RBI) had on 14 July restricted Mastercard from onboarding new customers from 22 July for failing to comply with its data localization norms. In April, it placed similar restrictions on American Express Banking Corp. and Diners Club International Ltd. At the centre of these restrictions is a regulation from April 2018 that mandated all payments data from India to be stored in the country. This initially did not sit well with many companies, but most eventually complied.

“We are in engagement with Flipkart and Mastercard. The latter, in turn, is in touch with the regulator. Basis the understanding and the discussions we have had with partners and the networks, we do feel that post 15 September, the situation should be back to normal. That is the kind of visibility we have as of now," added Bali.

As on 30 June, Axis Bank had 7.2 million credit cards in force, up from 6.8 million in the same period last year and credit card spends stood at 14,785 crore in Q1 FY22. On a sequential basis, there was a 13% drop in spends, although it rose 84% on a year-on-year (y-o-y) basis.

“We are not assuming that Mastercard will be back in business (by 15 September) as that is not something which we can comment on. All I said was by 15 September, even if Mastercard is not operational we should be in a position to come back to normalcy," said Bali.

The bank reported a 94% rise in Q1 net profit to 2,160 crore on the back of higher other income and lower provisions. While other income grew 39% y-o-y to 3,588 crore, provisions were down 20% y-o-y to 3,532 crore.

Its asset quality deteriorated sequentially as gross non-performing assets (NPAs) as a percentage of total advances stood at 3.85% as on 30 June, up 15 basis points (bps) from the March quarter. Gross slippages during the quarter were at 6,518 crore, as against 5,285 crore in the March quarter and 2,218 crore in the June quarter of the previous year. To be sure, slippages in Q1 FY21 were moderated due to regulatory forbearances that do not exist in the current quarter. The bank said that 84% of its slippages in the June quarter originated from the retail book.

Axis Bank shares on BSE closed at 756.15 on Monday, up 0.12% from its previous close.

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