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Banks are turning upbeat about credit cards as the festival season nears, launching several new cards and dangling offers at a time customers traditionally loosen their purse strings.

While lenders remain cautious on unsecured loans, they are making calculated bets on credit cards. Apart from market leaders such as SBI Card and HDFC Bank, which are launching new cards, banks that did not offer credit cards so far are also entering this extremely competitive market. Many lenders are zooming in on their existing customers about whom they have enough historical data.

Kochi-based private lender Federal Bank entered the credit card business in September in association with card network Visa. A few days later, the lender launched another card, this time with homegrown card network RuPay.

“We had said our credit cards will be an existing-to-bank product (or product for existing customers). The reason is that a couple of years ago, we said our foray into unsecured will be on existing customers, and that is what we did in our personal loan business," Federal Bank chief executive Shyam Srinivasan said in a recent interview.

While banks have realized the importance of tapping the young population and getting them hooked on to an aspirational product like a credit card, they are now fine-tuning their offerings.

“India has traditionally been a debit card market. However, the growth in credit card issuance in the last decade has changed this narrative, and credit cards are being used prominently," PwC said in a note in August.

According to the note, this growth is accelerated by various products and services being offered by financial institutions, and such products are being increasingly used by customers, especially the millennial population.

According to the Reserve Bank of India (RBI), the total number of credit cards stood at 63.4 million at the end of July.

On 29 September, India’s largest credit card issuer, HDFC Bank, announced the revamp of three of its existing cards to offer more to customers as it looks to regain lost market share in the next three to four quarters.

The bank had lost ground owing to an embargo by the Reserve Bank following glitches in its e-banking services.

Just about a month since the ban was lifted, HDFC Bank issued over 400,000 credit cards till 21 September.

“I think more responsible financial institutions coming into the credit card space is welcome as it will help grow the market. Like I said earlier, a whole new set of customers is coming in, like the millennials and people who are newcomers to the workforce but are digital-savvy customers, and are a strong target segment for cards," said Parag Rao, group head for payments, consumer finance, digital banking and IT, HDFC Bank.

The enthusiasm on the part of banks also comes at a time when buy now-pay later (BNPL) products have caught the fancy of many customers, especially the youth.

BNPL essentially offers around 15 days of interest-free funds to small borrowers.

While some see it as a competitor to credit cards, others believe these products act as the first step towards assessing a borrower’s creditworthiness

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