Credit cards swipe big time festive biz for banks

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Indian consumers seem to have given credit card companies a lot to cheer this festive season. Banks said indeed they have clocked higher consumer spending in October, especially before Diwali - the biggest festival in India- compared with the same period last year.

ICICI Bank, HSBC and HDFC Bank all admitted to recording an increase in credit card transactions. Sachin Khandelwal, head of cards product group, ICICI Bank, said there has been a 15% growth in point of sale transactions this October versus last year.

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"This may be because new cards have been issued especially debit cards, approximately 12 million of which were added since Diwali last year," Khandelwal said.

Rise in debit cards and increase in point of sale terminals especially in the new shopping malls in the cities are changing the mode of spending in India. Aditya Puri, managing director, HDFC Bank told CNBC TV18 in an interview this week that the bank recorded its highest-ever POS - or point of sale - card swipes this year. The bank recorded 90 lakh point of sale transactions in October up from 60 lakh recorded in the same period last year, an all time high in term of per month transactions for the bank.

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An HSBC spokesperson also confirmed higher transactions but refused to give details.

The spokesperson for a large US-based bank, which is a strong player in the cards business in India, concurred with the trend on the condition that neither the bank nor the spokesperson is named.

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"Our volumes are up and because our minimum transactions are higher the value of transactions may also be up," the spokesperson said. However, private banks like ICICI have not seen an increase in the value of transactions. "The average ticket size more or less remains the same. But there is a possibility that cash spends have come down.

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The normal break up is 95% cash and 5% through cards but in some places like Big Bazaar and other large retail outlets we are beginning to see close to 50% of the transactions through cards," Khandelwal said.

But will this trend continue? Unlikely says Khandelwal. "Do not expect this to continue, there will be a slow down, as already seen from August.

This was a festive season aberration, that too since most festivals came all together in the month of October this year, unlike last year when they were spread across both October and November," he said.

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