INDIA banks are pushing plastic again, hoping that credit card sales will lift profits in a market where the competition is tough, the opportunity large, and the risks high.
Fewer than 18 million of India’s 1.2 billion people use credit cards. In China, a country with a slightly higher population, more than 200 million credit cards were in use as of a year ago.
Lenders in India say a focus on higher end customers will be key to the success of a second credit card push, but if history is a guide, it still faces high hurdles.
India’s banks cancelled millions of cards when a wave of customer defaults followed aggressive growth pre-financial crisis. Banks vow to be more selective this time as they tap rising spending power and the high interest rates and fees they can charge on cards.
“You won’t find our guys standing at the airports and asking for your boarding pass and issuing a card free of cost,” said Bipin Kabra, chief financial officer of Dhanlaxmi Bank, a small lender in Kerala that began issuing cards in 2010 and only targets existing customers.
“We know what it is, we have seen that cycle,” said Kabra, who previously worked at ICICI Bank.
ICICI was India’s most prolific card issuer during the boom but halved its cards portfolio to about Rs48bn ($1.08bn/£669m) at end-March 2011 versus 2008.
Private lender HDFC Bank and foreign banks such as Citigroup and Standard Chartered are the most active card issuers in a country where state banks have 70 per cent of the overall loan market.
Indian consumers, on the whole, have not fully embraced the idea of using credit cards, preferring debit cards instead, with roughly 230 million in circulation.
