Credit Card Spending Faces Slowdown Amid Lender Caution, Nomura Report Reveals

Credit card spending and loan growth are facing pressure as lenders prioritize asset quality, according to a Nomura report. In August 2024, growth in credit card spending dropped to 13% y-o-y from 19% in July. The Reserve Bank of India also notes a slowdown in credit card issuance and spending.

Credit card spending and loan growth are under pressure as lenders prioritize asset quality, a recent report from Nomura suggests.

Credit card spending growth slowed to 13% year-on-year in August 2024, a drop from 19% in July, according to data from the Reserve Bank of India (RBI).

The report highlights a continued decline in the number of cards issued and overall spending, with FY25 year-to-date growth standing at 17%, down from 28% the previous fiscal year.

Despite the upcoming festive season, any spending boost is expected to be modest due to last year's strong base and cautious lending practices.

The number of new credit cards added has been below 1 million for five consecutive months, reaching just 0.9 million net additions in August 2024.

The growth of outstanding credit cards fell to 16% y-o-y in August from 19% in FY24, as major lenders slow card issuance due to asset quality concerns.

Average monthly spending per credit card was Rs 16,000 in August 2024, showing a 2% y-o-y decline.

Annualized spend per card for April-August 2024 stood at Rs 1.87 lakh, a marginal 1% increase compared to the 7% rise in FY24 and 27% in FY23.

This slowdown is attributed to the base effect and high-value purchases post-pandemic.

The decline in credit card additions and spending is also affecting loan growth, with a deceleration evident in Q1 FY25 financial results, a trend expected to persist.

Lenders are reducing credit card rewards, focusing on profitability over growth, with worsening asset quality indicated by increased overdue accounts.

(With inputs from agencies.)