Outstanding credit card balances have surged by 30.1%, reaching Rs 154,137 crore as of May 2022, marking the fastest growth within the personal loan category. This growth stands in stark contrast to the 14.3% expansion recorded a year earlier at Rs 118,512 crore.
Data from the Reserve Bank of India reveals that monthly credit card spending has surpassed Rs 1 lakh crore, with May’s spending reaching Rs 1.13 lakh crore, compared to Rs 1.05 lakh crore in April and Rs 1.07 lakh crore in March. This represents nearly a twofold increase from the previous year when monthly spending was Rs 59,000 crore in April 2021. The significant surge in card spending serves as an indicator of increased consumer spending in 2022, signaling economic recovery. This uptick in consumer spending has also contributed to a rise in retail inflation.
Point-of-sale (PoS) transactions constitute 40% of credit card spending, while online purchases make up the remaining 60%. In contrast, spending through debit cards amounted to Rs 65,062 crore in April 2022 and Rs 64,052 crore in March. However, cash withdrawals through ATMs using debit cards totaled Rs 2.85 lakh crore in April 2022, dwarfing the Rs 303 crore withdrawn through credit cards. As of April 2022, there were 7.52 crore credit cards and 92 crore debit cards.
The trend suggests a likelihood of further increases in credit card spending, particularly with the Reserve Bank of India proposing the availability of credit cards through the UPI network on Rupay-based credit cards. This move is expected to enhance digital transactions and impact the average ticket size, potentially raising the UPI ticket size to Rs 3,000-4,000.
Mandar Agashe, Founder and MD of Sarvatra Technologies, sees this development as accelerating digital transactions and increasing credit card acceptability at many merchants, especially those lacking credit card PoS terminals, particularly in semi-urban and rural areas. However, there are skeptics who question the success of this development, expressing concerns about the convenience and confidence of consumers and merchants in accepting credit transactions via UPI, especially given the associated Merchant Discount Rate (MDR).
In terms of overall non-food bank credit, there has been a year-on-year growth of 12.6% in May 2022, compared to 4.9% a year earlier, according to the RBI. Credit to agriculture and allied activities grew by 11.8%, and credit growth to the industry accelerated to 8.7% in May 2022 from 0.2% in May 2021. Medium industries saw a notable growth of 49.3%, and micro and small industries registered accelerated growth of 33.0%, while credit to large industries increased by 1.9%.