Data collected by ET shows that banks have increased spending thresholds and limits, indicating a focus on profitability in the credit segment, which has grown alongside rising affluence in urban India.
For example, HDFC Diners Club Privilege Card has discontinued double reward points on weekend dining, vouchers of Rs 1,000 for monthly spend of Rs 40,000, and reduced access to global lounges from twelve to two. SBI Cashback Card has halved the monthly cashback amount to Rs 5,000 and stopped access to domestic lounges. SBI Card did not respond to an email seeking comment.
Credit card benefits are taking a hit
Axis Bank’s Magnus card has increased its annual fee and discontinued the offer of 25,000 reward points on spend of Rs 1 lakh. The conversion of reward points to air miles is also limited to two air miles for every five reward points, compared to the previous offering of four air miles.
Analysts suggest that this move by banks to devalue credit cards signals their desire to tighten their belts. Karhtik Srinivasan, Group Head of Financial Sector Ratings at ICRA, said: “They probably built a customer base with offers that were too good, but now there is some pressure on the banks’ profitability.” However, there has been no significant impact on card issuance or spending so far, he noted.
Bankers have recognized that these changes will increase the company’s profitability and address anomalies. Sanjeev Moghe, Head of Cards & Payments at Axis Bank, explains: “Changes have taken place as we felt that some customers were not fully utilizing the benefits and others were exhibiting abnormal behavior when spending.”
SK Vaidyanathan, CFO of HDFC Bank, noted that the changes aim to increase card usage and promote customer loyalty. HDFC Bank, the country’s only lender with a market value of over $100 billion, leads the segment and is responsible for more than a quarter of card spend.
Asutosh Mishra, Head of Institutional Equities at Ashika Stock Broking, highlighted that these changes reflect the changing market conditions, influenced by rising inflation and prices, which impact the value of loyalty points offered by banks.