Mumbai: In signs of improvement economic activityCredit card spending has hit a new high while bounce rates have dropped to a three-year low.
The data released by the Reserve Bank of India (RBI) shows that credit card spend 1,14,000 crore in May, which was an increase of 8% month-on-month (MoM) and 118% over May 2021.
As per data analysis by Motilal Oswal, card spends have been growing at a compound annual growth rate (CAGR) of 23% over three years. “IndusInd Bank and Kotak Bank saw the highest MoM growth of 17% and 15% respectively, while all other players grew in the range of 4-9%. amexOn the other hand, a decline of 2% MoM was observed,” the report said.
On a three-year CAGR basis, ICICI Bank grew the most at 48%, with RBL Bank registering a growth of 38% on the back of its partnership with Bajaj Finance, while IndusInd grew at 28%. One-time foreign giants Citi and Amex saw their spending decline between 2% and 17% in the same period.
According to bankers, travel was a major spending category for cards, which had fallen over the past two years. Rising travel and increased fares helped drive sales in this category. In addition, activity at malls and shops has gone offline. However, online shopping continued to outpace spending in retail. Against Rs 71,429 crore spent online, cardholders spent only Rs 42,266 crore in stores. In April, it was Rs 65,652 crore online and Rs 39,806 crore in stores.
“The latest RBI data release shows that credit card spending has been very strong, touching an all-time high (8% MoM) in May 2022. Value wise bounce rates are also at 3-year lows. These figures indicate that the retail economy is strong. However, with interest rates expected to rise sharply over the next few quarters, we need to see if the current trends are sustainable,” said Suresh Ganapathy, head (financial research) at Macquarie Capital.
Bounce rates refer to failed auto debit transactions reported by the National Automated Clearing House. An unsuccessful debit would mean that the standing instruction to pay the bill or subscription every month failed on the first attempt for lack of funds. It does not indicate a default because a repeat attempt may be successful. However, an increase in unsuccessful debits is seen as a sign of financial stress.
“Monthly spend per card for the industry increased by 5% MoM to Rs 14,800, which is much higher than the pre-Covid levels. The ticket size remained stable at Rs 4,700-4,800, while the number of transactions per card increased to 3. 1. All players saw an increase in monthly spend of up to Rs 1,100 per card, except for Amex, which saw an increase. Rs 3,900,” said the Motilal Oswal report.
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