Shrinking Interest Income Hits Indian Credit Card Issuers
· Business · Economic Times
Indian banks are facing declining profit margins as credit card users increasingly treat cards as payment tools rather than borrowing products. Interest-bearing balances, including revolving debt and EMI loans, have dropped to approximately 11% of annual card spending, down from 21% several years ago. While total card spending has grown at a compound annual rate of nearly 27% since 2021-22, the shift away from high-interest revolving debt has reduced profitability per rupee spent. Analysts at Bernstein report that the ratio of revolver balances to total card spending fell to about 2.8% in the June quarter, compared to 7% in 2019. Major lenders such as HDFC Bank and SBI Cards are among those impacted by this structural change in the credit card business model.
Why it matters
The decline in interest-earning assets forces banks to seek new revenue streams or adjust their credit card offerings as the traditional high-margin 'revolver' model loses momentum. This shift directly impacts the profitability of major Indian retail lenders and may lead to changes in card reward structures or fee policies for consumers.
Read the original report — Economic Times
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