Large credit card issuers see decline in spending in April

Leading credit card issuers such as SBI Card, Citi India and Axis Bank reported a sequential drop in customer spending in April, data from the Reserve Bank of India (RBI) showed.

Industry experts, however, termed it as more of a seasonal shift instead of an overall weakness in consumer sentiment.

They said customers tend to go slow in credit card spending during the first half of a fiscal year, which rebounds in the second half, aided by the festive season.

While aggregate spending declined 1.5% to ₹1.05 trillion in April, when compared with March, some issuers saw a steeper fall.

For some issuers, the decline in spending—online and offline—in April was more than the system average in the same period. For instance, spending on Citi India credit cards dropped about 3% in April, even though the bank has been able to arrest the ongoing decline in outstanding cards. Between March and April, it lost close to 600 cards.

Citi’s outstanding credit cards shrunk by 71,008 to 2.5 million credit cards as of April end since it announced plans to exit India in April last year.

This March, Axis Bank announced the acquisition of Citibank’s consumer business in India for ₹12,325 crore ($1.6 billion). The consumer business comprises credit cards, retail banking, and wealth management divisions. The deal is expected to close within a year, although the entire integration process will take another 18 months after regulatory approvals.

Industry experts said the drop in spending for Citi could be because many users might have stopped using the card at this juncture, unaware of what would happen to the reward points they accumulate.

“People do not know how the conversion is going to be when these cards are transitioned from Citi to Axis Bank. Typically, a Citi India credit cardholder would have other credit cards as well, and some of them might have shifted their high-ticket spends to those cards,” said Parijat Garg, an independent fintech expert.

Meanwhile, spending on Axis Bank credit cards declined 2.2% on a sequential basis in April, and SBI Card recorded a 4% decline during the month.

Mint reported in April that the credit card industry is faced with the challenge of getting customers whose dues were restructured under a central bank regulation to start using their cards.

Rama Mohan Rao Amara, managing director and chief executive, SBI Cards and Payment Services Ltd, told analysts in April that a lot of these retail customers with recast loans were revolvers, and their reluctance to spend has impacted the industry.

“Most card issuers have seen a decline in spending in April, as compared to March. For Citi, I think since they are not growing the card base, the spends are automatically shrinking and appears more than the average because everybody else in the market is expanding,” said a financial sector analyst on condition of anonymity.