Banks upbeat on credit card biz

Foreign, private sector banks announce a slew of initiatives, explore inorganic opportunities.

After a gap of nearly three years, banks are once again planning to aggressively expand their credit card portfolios in India.

Foreign and private sector banks have announced a slew of initiatives and are exploring inorganic opportunities to ramp up their card businesses.

Bankers are confident that unlike the last time, there would not be significant erosion in asset quality, since their expansion strategies are backed by rich information on borrowers' credit histories.

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"In the last couple of years, the one factor that has changed the whole approach of banks in unsecured lending, especially in credit cards, is the ability to underwrite customers far more intelligently than ever before.

"The quality of the credit bureau in India has improved significantly. Also, banks are not going for unbridled expansion.

"The growth is measured and researched, without compromising the credit quality," said a senior official of a foreign bank in India.

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HDFC Bank, largest issuer of credit cards in India, aims to double its portfolio in the next couple of years.

The bank, which accounts for 5.05 million cards, expects its portfolio to touch 10 million in two years, including two million cards exclusively for women customers.

In July, the bank had launched 'Infinia' cards for the uber-rich community, positioning it against the American Express, or Amex, cards.

Infinia cards, which are 'by-invitation only', have no spending limits and offer a host of benefits, including a Rs 3-crore (Rs 30-million) air-accident cover, unlimited access to 600 airport lounges globally and dining options at hotels managed by Taj Hotels Resorts and Palaces.

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The interest rate is fixed at 1.99 per cent per month, one of the lowest in the industry.

HDFC Bank has decided to issue 5,000 Infinia cards for now.

Cardholders would have to pay a joining fee of Rs 30,000 and a renewal fee of Rs 10,000 every year.

"We have positioned it directly against Amex, and I believe our card is a better product. . . We are confident Infinia would soon be the card of choice for India's rich," Aditya Puri, managing director, HDFC Bank, had said, while launching Infinia cards.

While current players have started consolidating their positions, the domestic credit card market is also witnessing the entry of new players.

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Mid-sized private sector lender, IndusInd Bank, had acquired Deutsche Bank's 200,000-credit card portfolio, including the foreign lender's operating platform, technology and staff.

The deal value was estimated at around Rs 250 crore (Rs 2.5 billion).

The private sector bank launched 'IndusInd Credit Cards' on June 1, and aims to grow the portfolio four-fold to Rs 800-900 crore (Rs 8-9 billion) in the next three years.

"We believe after three to four years of bloodbath and washout, the credit card industry is now ready to take off once again.

"This is a high-risk, high-reward business, and we think if we manage the risks properly, the rewards would be higher now," said Romesh Sobti, managing director and chief executive of IndusInd Bank.

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In September, the number of outstanding credit cards rose for the first time in 17 months in September.

According to Reserve Bank of India data, the number of outstanding credit cards stood at 17.63 million in September, compared with 17.59 million a year ago.

Axis Bank, which was believed to be in the race to acquire the credit card portfolios of both Deutsche Bank and Barclays Bank, is eyeing a 25 per cent rise in its credit card base this financial year.

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The bank aims to close this financial year with 800,000 cards, compared with 600,000 cards last year.

"The quality of our cards' portfolio has improved tremendously.

"While we are open to inorganic opportunities, we believe there is also a huge opportunity in growing the cards business organically," said Jairam Sridharan, senior vice president and head (consumer lending and payments).