Credit cards: ICICI Bank capitalises on HDFC Bank's rough patch

The credit card market has seen a paradigm shift in 2021, and this is something that cannot be attributed to the Covid-19 pandemic alone. In December 2020, the Reserve Bank of India (RBI) had asked HDFC Bank to temporarily suspend the launches of all digital business activities and the issuing of new credit cards.

This move by RBI was undertaken after taking cognizance of the incidents of outages in HDFC’s internet banking, mobile banking and other payment features over two years. In November 2020, HDFC customers faced outages owing to disruption in service caused due to a power failure in its primary data centre, following which RBI issued the order asking for the temporary suspension.

ICICI Bank gains

According to RBI data, between December 2020 and May 2021, HDFC Bank’s credit card segment saw a decline of 528,447 cards, while rival bank ICICI saw an increase of nearly 1.6 million, which was the highest for any lender in that specified period. State Bank of India witnessed an upsurge of 661,950 credit cards, while Axis Bank issued 243,527 new cards.

One of the big reasons for this massive surge in ICICI Bank’s numbers is the bank’s co-branded credit card that it has launched with Amazon. Owing to this new product, ICICI has succeeded in acquiring close to a million customers in the past nine months.

Charting a comeback

HDFC Bank has assured that the embargo imposed by RBI on issuing new credit cards is temporary and the bank will be back stronger once it is lifted.

“We have got very aggressive plans to get back in the market with a big bang… You will rapidly see HDFC Bank not just regaining market share but also significantly increasing our spend market share,” Parag Rao, Head of HDFC’s Consumer Finance, Digital Banking and Information Technology told PTI. Rao said that a correction is expected in three to four months after the embargo is lifted. He expects the bank’s market share to go back to pre-ban levels within that period.

Other lenders like RBL Bank, YES Bank, IndusInd Bank and Bank of Baroda have also seen a growth in the number of their outstanding credit cards, while Kotak Mahindra Bank, Citi Bank, and American Express have witnessed a decline in the same. Overall, the number of outstanding credit cards grew between December and May by 3.79% or 2.2 million, from 60.11 million to 62.3 million.