India’s consumer spending has steadily improved this year as the effects of the covid-19 pandemic faded.
From April to August, credit card purchases reached 5.56 lakh crore rupees ($67.2 billion), up 70.36 percent from the same period last year, the The Indian Express newspaper reported yesterday (October 24).
In September alone, transactions amounted to Rs1.22 lakh crore (pdf), mainly driven by online sales, according to data from the Reserve Bank of India (RBI). Of this, Rs 45,287 crore was spent through merchant POS machines.
Credit card spending has even exceeded the use of debit cards.
“The increase in credit card usage is significant because the interest rate charged by credit card issuers is around 38-42% per year. If you carry the balance over to the next billing cycle, the outstanding amount will increase and the cardholder will fall into a trap if it is postponed again and again,” the newspaper quoted a banking source as saying.
In September 2022, 77.7 million credit cards were in use, up around 20% from a year ago, according to RBI data.
An increase in consumer morale
Despite a spike in consumer prices, most Indian households spent on essential items.
Almost three-quarters of respondents to the latest RBI consumer confidence survey expect overall spending to increase over the next year, while 20% expect it to stay like it is now.
The Current Situation Index, which indicates consumer sentiment regarding current business and labor market conditions, improved to 80.6 in September from 77.3 in July.
Some banks therefore aim to expand the credit card business to semi-urban and rural markets.