Consumer spending has shown some signs of improvement as credit card spends have grown for the first time since March 2020. As per RBI's latest data, credit card transactions, in value terms, have grown 3.4 per cent, year-on-year, in the month of November. The data registers the total value of card spending that includes both retail and corporate cards. Spending through credit cards ran out of steam since a nation-wide lockdown was announced. It deaccelerated from Rs 67,402 crore in January 2020 to Rs 64,892 crore in October. In volume terms, they have fallen from 203.8 million to 172.3 million and are still below its pre-covid levels.
"This growth is driven by multiple factors, such as, festival demand, new product launches by consumer durable businesses, growth in online, e-commerce, and some normalisation of the Covid situation. There is an element of pent-up demand in apparel and consumer durable category," says Ashwini Kumar Tewari, MD & CEO, SBI Card,
According to the central bank's latest report, credit cards are considered taboo and are viewed more as products for the elite. Over the past 10 years, the number of debit cards issued increased from 22.78 crore to 82.86 crore while the number of credit cards grew from 1.80 crore to 5.77 crore. There were 6.01 crore credit cards outstanding as of November. From a long-term perspective, Indian credit card market has enormous potential to expand further, as even now the penetration levels are quite low, says Tewari.
Credit card spends are a mix of discretionary and non-discretionary expenses, though the pandemic has blurred the lines of this categorisation. We had seen a huge movement towards non-discretionary spends during the lockdown and multiple phases of unlock has brought discretionary spends back into reckoning, he adds.
The average spends per credit card transaction has gone up too, by 13.5 per cent, to Rs 3,754 in November, from Rs 3,308 in January. But are these trends sustainable?
Tewari of SBI Card remains cautiously optimistic on the future outlook. "We noticed that online spends proportion in the overall spends has increased to 53.4 per cent for 9M FY21 compared to 44.2 per cent for FY20. We see online spends to continue, across newer and traditional categories. What is noticeable though is that with unlock measures well underway during Q3, even the offline spends have gained momentum and should improve further," he adds.