Indian banks have warned of a fall in forecasted credit card spending growth for the coming October 2013 festive season, with some blaming the disappointing figures on restrictive policies enacted by the Reserve Bank of India (RBI).
The growth forecast by institutions in the country’s banking system is reportedly of 10% between September and October 2013, well below the levels for the same period in 2012 (16%).
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In particular, RBI’s restriction on merchants’ 0% equated monthly instalment (EMI) credit schemes came under fire by industry members.
Critics of the policy said the move has reduced consumers’ access to easy finance, leading to a decline in credit card spending and a slow in overall consumption.
Commenting on the growth figures, the head of a leading credit card company is reported as having said: "There are several factors affecting the market. While the overall economic environment is weak and consumer sentiment is down, RBI’s regulation on subvention schemes and zero per cent interest is keeping the customer away."
Another RBI policy blamed for the sluggish spending figures has been its decision to implement new chip and pin cards across the country, despite what appears to be a lack of necessary technological support in some areas.
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By GlobalDataThe same commentator added: "Also RBI’s notification to replace all credit cards with new chip plus pin cards is leading to decline in spend as only around 50 per cent of the old point-of-sale terminals have been replaced."
"Therefore in several cases, transactions are declining because the infrastructure is not fully in place."
Another official claimed the effect of RBI’s policy on business were already tangible.
"Banks had already stopped EMI scheme on jewellery purchase and a ban on zero per cent EMI just before the festive season is definitely impacting the business. The growth in October over September this year may only be around 10 per cent," said the official.
Figures between September and November are considered representative of growth in the Sub-continent’s festive period, with both the season’s main festivities, Diwali and Vijayadashami (or Dusshera), falling within the same cycle in 2013.
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