The slippage ratio of Axis Bank’s credit card portfolio has remained under control even though the lender saw some impact during Covid, an official with the private lender told Moneycontrol on May 9.
Going ahead, the bank plans to expand the portfolio, the official said, adding that the impending entry of non-banking financial companies (NBFCs) in the space is not a cause for worry.
“What we have seen is the impact of Covid waves one and two. But since then, whether you track it by entry rates (customers going delinquent for the first time) or by early delinquency of new bookings, both of these look very much under control,” said Sanjeev Moghe, president and head, cards and payments at Axis Bank.
“We are confident that we can keep expanding scale without necessarily adding to incremental risk from here on. The book is very clean right now,” he added.
Indian banks have been aggressively chasing growth in the high-return but exposure-wise unsecured credit card business. Most banks have been upbeat about their credit card portfolios and are engaging in partnerships and tie-ups to add more customers. Axis Bank on March 30 had announced the acquisition of Citibank’s India consumer business for $1.6 billion in an all-cash deal.
On its part, HDFC Bank, after a good chunk of major market share in the credit card space due to a temporary ban on new digital offerings last year, has ramped up its business to gain market share.
Axis Bank is also confident its outstanding credit cards will be higher than what they were in the previous financial year, Moghe said.
The private lender had issued around 1.1 million credit cards in January-March, taking total card issuances in financial year 2022 to 2.7 million.
Axis Bank will continue to gain share in the merchant acquiring space and is also looking to launch some cards in partnership with other companies, Moghe said.
“We are looking at some co-branded credit cards. We launched one with Airtel in March, we have (another) one coming up this week,” Moghe said.
“Beyond that, there are discussions happening in the co-branded space. We will see those fructifying, but those will take six to 12 months,” he added. “Similarly, in the acquiring space, we are looking at a few things and will come by as we go through the year
The Reserve Bank of India (RBI) on April 21 announced new norms on credit and debit card issuance for 2022. The central bank said NBFCs with minimum net owned funds of Rs 100 crore can also issue credit cards provided they have a certificate of registration, apart from specific permission from the RBI to enter this business. The RBI also said that charges and interest rates on credit cards shall not be exorbitant and shall be connected with the cost incurred and reasonable expected returns.
The likelihood of NBFCs entering the credit card market will not lead to an incremental business disruption at Axis Bank, Moghe said.
“We are ready to face whatever competition we see in the market, whether it is from banks or NBFCs or fintechs,” he said. “I don’t see any incremental business disruption for Axis Bank.”
Although the impact of this circular on banks’ margins will be “marginal” going forward, it is unlikely to impact the long-term profitability of the banking sector, Moghe said.
In December 2020, the RBI had imposed restrictions on HDFC Bank after repeated outages at the lender's data centre. The restrictions barred HDFC Bank from launching any of the activities planned under its Digital 2.0 programme as well as the sourcing of new credit cards. The regulator revoked the ban completely in March.
When asked about the learnings for the bank from this debacle, Moghe said that Axis Bank continues to watch this space closely and is mindful that one cannot grow only when the competition takes a hit.
“We have put in investments in technology, we upgraded our cards platform some time back,” Moghe said.“Whether it is the UPI (Unified Payments Interface) space or the cards space, we continue to invest in technology infrastructure. Having said that, we need to be very watchful about downtime incidents,” he added.