Mumbai: Eye-popping reward points, hefty instant purchase cashbacks and innumerable benefits ranging from accessing airport business lounges to exotic vacations at little cost were, until recently, the perquisites of swiping a credit card. These perks haven’t gone away entirely, but banks straining to garner deposits after recent rate increases are far less generous with such offers this festive season.
Data collated by ET showed that banks have raised spending thresholds and caps while giving benefits, indicating their profitability focus in a loan segment that’s climbing in lockstep with increasing affluence across urban India.
For instance, HDFC Diners Club Privilege Card discontinued its double reward points on weekend dining, vouchers of ₹1,000 on spends of ₹40,000 per month and reduced lounge access from twelve across the globe to two.
SBI Cash Back Card halved the amount of cashback per month to ₹5,000 and discontinued domestic lounge access to customers. SBI Card did not reply to an email seeking comment.
Axis Banks’ Magnus card raised its annual fee and discontinued its 25,000 reward points on spends of ₹1 lakh, which was a major attraction. Conversion of reward points into air miles has also been restricted to two air miles for every five reward points, compared with four air miles for every five reward points earlier.
Analysts say that the move by banks to essentially devalue cards also signals that they want to tighten their belts.
“They have built a customer base probably with offers that were too good, but now there is some pressure on banks’ profitability,” said Karhtik Srinivasan, group head, financial sector ratings, at ICRA. “One way to look at it is banks are consolidating their customer base, but there has been no real impact on either card issuances or spends so far.”
Bankers acknowledged that the changes would boost profitability for the business but also added that they were necessary to ensure some anomalies were fixed.
“There have been changes because we felt that some customers were not using the benefits fully and others were showing some abnormal behaviour in spending,” said Sanjeev Moghe, head of cards & payments at Axis Bank. “These changes will help us deal with the abnormal behaviour and also boost profitability for our business.”
HDFC Bank CFO SK Vaidyanathan said the changes were aimed at increasing usage and developing loyalties for the card business. “This is a dynamic segment so things cannot remain static. They are always tuned up and down to encourage usage and deepen relationships,” he said.
HDFC Bank, the country’s only lender with a market value exceeding $100 billion, is the segment leader, cornering more than a quarter of card spends.
“These changes reflect the changing market scenario. Inflation has been increasing, prices have risen and that impacts the value of reward points offered by banks,” said Asutosh Mishra, head of institutional equities at Ashika Stock Broking.
