Surge in Credit Card Usage and Regulatory Measures

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The value of credit card transactions in India has surged over the last three years, reaching Rs 18.31 lakh crore in the year ended March 2024, compared to Rs 6.30 lakh crore in March 2021. This significant increase is attributed to the country’s economic recovery from the Covid-19 pandemic and the steady rise in consumer confidence.

Growth in Credit Card Usage

According to Reserve Bank of India data, the value of credit card transactions rose to Rs 9.71 lakh crore in the year ended March 2022 and further to Rs 14.32 lakh crore as of March 2023. Monthly spends by card users have now exceeded Rs 1.50 lakh crore, reaching Rs 164,459 crore in March 2024, up from Rs 72,319 crore in March 2021.

Surge in Credit Card Issuance

The number of credit cards issued by banks has seen a rapid increase, reaching 10.18 crore as of March 2024, up from 8.53 crore in March 2023, 7.36 crore in March 2022, and 6.20 crore in March 2021, as per RBI data.

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Credit Card Outstanding and Market Dominance

However, credit card outstanding has risen to Rs 267,979 crore as of May 2024 compared to Rs 161,512 crore in 2022. Private banks dominate the credit card segment, with HDFC Bank leading as the top card issuer, followed by State Bank of India, ICICI Bank, and Axis Bank.

Regulatory Impact and Customer Behavior

The RBI’s move to increase risk weight on certain segments of consumer credit, including credit card receivables, has impacted the growth rate of overall consumer credit. Incentives such as rewards, loan offers, and lounge benefits have lured customers to the credit card segment, but there is a warning about the potential debt trap if card dues are kept beyond the interest-free period.

Consumer Confidence and Spending Patterns

Out of the total credit card transactions in FY24, Rs 6.51 lakh crore was attributed to point of sale transactions, indicating an increase in consumer spending. Despite a marginal decline in consumer confidence, the RBI’s consumer confidence survey suggests an expectation of higher overall spending over the next year.

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Regulatory Changes and Customer Benefits

The RBI has directed credit card issuers to offer customers the option to choose from multiple card networks, restricting exclusive arrangements with a single card network for the issuance of credit cards. This move is seen as beneficial for customers, providing them with the freedom to select from various card networks.

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