After years of diffidence among users, credit cards hit a record high in India

Cards, cards, everywhere.
Cards, cards, everywhere.
Image: EPA/Justin Lane
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With more people using plastic money instead of cash, the number of credit cards circulating in India has hit an all-time high.

Some 29.8 million credit cards have been issued as of March 31, 2017, according to the Reserve Bank of India (RBI). This is higher than the previous record of 28 million cards in March 2008.

Rising rate of defaults during 2007-2008 led to a drop in the credit card user base in Asia’s third-largest economy. After the 2008 economic downturn, the number decreased to 17.65 million in March 2012. Now, again, credit card usage has risen.

And it’s not just the volumes. Transaction value, too, has shot up. At the end of March 31, 2017, credit card spending in India stood at Rs33,619.6 crore, a 275% jump over Rs8,958 crore in March 2012, RBI data shows (historical data for 2008 isn’t available on the RBI website anymore). This indicates that credit card holders, too, are now more open to using them, unlike in the past.

What’s driving the growth?

Indian banks are now more comfortable with issuing credit cards to customers as credit scores are easily accessible from firms such as CIBIL. These scores determine the borrowers’ financial discipline and default possibility. Also, most banks have restricted issuing cards to their own customers, keeping them better informed.

The e-commerce boom is helping, too. With more people shopping online, the use of digital payments, including credit cards, has become popular.

“Also, because the offers on credit cards are more lucrative in terms of cash-backs and reward programs, increasingly, it is emerging as a preferred medium for making payments online,” said Vijay Jasuja, CEO, SBI Cards, one of India’s largest credit card issuers and a part of the country’s  biggest lender, the State Bank of India (SBI).

With more people becoming comfortable with spending online, e-payments is expected to grow 10 times to $500 billion by 2020, according to a Google-BCG report.

Besides the ease and convenience it offers, plastic money can also help the Indian economy avoid huge losses.  The RBI and commercial banks lose upto Rs21,000 crore in currency operations every year, a study by Impetus Research, a market research agency, pointed out.

So it is good that India’s swiftly swiping for a cashless economy.