The lifting of the regulatory embargo on issuance of new credit cards by HDFC Bank will provide some relief to the lender ahead of the festive season. At the exact same time, the continuing bar on fresh digital launches and the ban on 3-card networks may well pose troubles for the bank.
In a letter to HDFC Bank’s staff on Wednesday, managing director and CEO Sashidhar Jagdishan is understood to have stated that the ‘rap on the knuckles’ from the regulator has made the bank reimagine its IT systems and processes and turbo-charge the speed of technologies transformation.
“On Digital 2.0, the restrictions will continue till further review by the regulator. We shall continue to engage and ensure full compliance as we move forward,” Jagdishan stated, adding that HDFC Bank will regain and develop its credit card client market place share and income market place share in the time to come.
Analysts viewed the development as a positive for the bank. Motilal Oswal Financial Services (MOFSL) stated in a report on Wednesday: “HDFC Bank typically adopts an aggressive stance during the festive season and offers various discounts on consumer durable products to drive spends and accelerated growth in consumer durable financing.” Therefore, the lifting of RBI restrictions just before the festive season augurs effectively and the bank is probably to turn more aggressive on credit cards more than the next couple of months.
In his letter to his colleagues, Jagdishan stated in the coming months, HDFC Bank will aggressively go to the market place with not just its current suite of credit cards but also new offerings in the type of co-brands and partnerships.
As per the MOFSL report, HDFC Bank has lost practically .6 million cards considering the fact that the date of the embargo in December 2020. On the other hand, ICICI Bank, SBI Card and Axis Bank added about 1.3 million, .75 million and .3 million new cards respectively more than the exact same period. “Therefore, other players such as ICICI Bank/ SBI Card have sharply ramped up their incremental market share at ~49%/~28% during this period,” MOFSL stated.
On June 30, HDFC Bank had stated it had acquired a considerable quantity of shoppers on the liabilities and assets sides. It planned to continue with the tactic to target 75-80% of internal shoppers for the card base. These shoppers had been pre-authorized and the lender had observed their behaviour for six months. Now that the ban on issuances has been lifted, these shoppers are probably to be issued new cards.
However, the Reserve Bank of India’s (RBI) ban on new card issuances by 3-card networks may well pose yet another challenge for HDFC Bank. A Nomura report dated July 15 stated HDFC Bank has 60% of its card schemes tied to Mastercard, American Express and Diners Club International. The lender’s Millennia Prepaid Card, Regalia ForexPlus Card and ISIC Student ForexPlus Card have been on the MasterCard network and fresh issuances in these categories may well be impacted.