ICICI Bank issues record credit cards as ban hurts HDFC Bank

ICICI Bank’s cardholder base grew by 672,911 during the period while HDFC Bank’s portfolio contracted by 322,999 in the same period, latest data released by the central bank showed.

SBI Card and Axis Bank added 331,523 and 273,310 cards, respectively.

In December, the Reserve Bank of India (RBI) ordered HDFC Bank to freeze new digital banking initiatives and credit card issuances until it addressed the lapses that had caused multiple glitches in its internet and mobile banking systems over the past two years.

Before the ban, it had been adding over 100,000 credit card customers every month of the last financial year.

That said, HDFC Bank, the country’s largest private lender, remains India’s largest credit card issuer, with 14.9 million cards outstanding at the end of March, followed by SBI Card with 11.8 million and ICICI Bank with 10.6 million.

While credit cards are riskier for banks, given their unsecured nature, they fetch better returns. Primarily, there are two kinds of credit card customers based on their repayment habits—those who pay the entire dues in one go and are called transactors, and those who pay a portion to avoid default and are known as revolvers. The latter fetch more interest to credit card issuers.

“The money that we make on revolvers depends on what kind of revolvers we have. We always like episodic revolvers who are people who revolve from time to time, buts they are not chronic revolvers,” ICICI Bank executive director Anup Bagchi said on 24 April.

The private sector lender’s approach is not just to grow the book on the credit card but wants a healthy mix of large spenders and episodic revolvers, he said.

“We don’t like chronic revolvers on our books; chronic revolvers, in general, do badly over a cycle,” he told analysts.

A person aware of the development said HDFC Bank added seven million customers in FY21 and hopes to add a significant number of new customers once the embargo is lifted. This data was also cited by Srinivasan Vaidyanathan, the bank’s chief financial officer, on a call with analysts on 17 April.

“This loss of new customers can normally be made up within a few quarters of stoppage being lifted since the bank continues to source liability customers who will be pre-approved, about three-fourths of our sourcing comes from existing customers of the bank,” said Vaidyanathan.

In the meantime, the lender wants to focus on engaging with existing card customers who are dormant or inactive, to try and revive them.

Emails sent to HDFC Bank and ICICI Bank remained unanswered.

Meanwhile, IDFC First Bank, a new entrant in the credit card space, managed to add 175,753 cards in the fourth quarter, coming in fourth after ICICI Bank, SBI Card and Axis Bank in terms of new cards issued.

The bank’s strategy, as articulated in January, is to grow its credit card business with two unique offerings—interest-free cash advances for 48 days and dynamic interest rates on revolving credit.