Major credit card issuers such as SBI Card, Citi India and Axis Bank reported a sequential drop in customer spending in April, according to data from the Reserve Bank of India (RBI).
Industry experts, however, characterized it as a seasonal change rather than an overall weakness in consumer sentiment.
They said customers tend to slow down their credit card spending in the first half of a fiscal year, which rebounds in the second half, helped by the holiday season.
While overall spending decreased by 1.5% for ₹1.05 trillion in April, compared to March, some issuers saw a steeper drop.
For some issuers, the drop in spending — both online and offline — in April was above the system average over the same period. For example, spending on Citi India credit cards fell about 3% in April, even though the bank was able to halt the continued decline in cards in circulation. Between March and April, he lost nearly 600 cards.
Citi’s credit cards in circulation have shrunk from 71,008 to 2.5 million credit cards at the end of April since it announced plans to leave India in April last year.
Last March, Axis Bank announced the acquisition of Citibank’s consumer business in India for ₹12,325 crore ($1.6 billion). The consumer business includes the credit card, retail banking and wealth management divisions. The deal is expected to close within a year, although the entire integration process will take another 18 months after regulatory approvals.
Industry experts said Citi’s drop in spending could be because many users may have stopped using the card at this point, unaware of what would happen to the rewards points they accumulate.
“People don’t know how the conversion will go when these cards are transferred from Citi to Axis Bank. Generally, a Citi India credit card holder would also have other credit cards, and some of them might have shifted their high spending to these cards,” said Parijat Garg, an independent fintech expert.
Meanwhile, spending on Axis Bank credit cards fell 2.2% on a sequential basis in April, and the SBI card saw a 4% decline in the month.
Mint reported in April that the credit card industry faces the challenge of getting customers whose fees have been restructured under central bank regulation to start using their cards.
Rama Mohan Rao Amara, chief executive and managing director of SBI Cards and Payment Services Ltd, told analysts in April that many of these retail customers with recast loans were gunslingers and their reluctance to spend had had a impact on the industry.
“Most card issuers saw a drop in spend in April compared to March. For Citi, I think because they’re not increasing the card base, spend automatically goes down and appears more than the average because everyone in the market is expanding,” a financial industry analyst said on condition of anonymity.