Higher interest rates and inflationary pressures are yet to impact discretionary spending on credit cards, said Sanjeev Moghe, President and Head – Cards and Payments, Axis Bank.In an interview with BusinessLine, he also spoke about the bank’s strategy to grow its cards portfolio and recent developments in the sector. Edited excerpts:

Q

How is Axis Bank’s credit cards portfolio doing?

The business is looking fairly positive. Our momentum is definitely up. We did very well in the third quarter of last fiscal and even better in the fourth quarter with 11 lakh issuances. Risk is under control. Spends are looking good and are growing. Our balance sheet is clean. Indicators look good. Obviously, one can never take the foot off the accelerator or off the monitor in terms of risk. 

Q

Almost all banks are very competitive on credit cards. What’s your strategy going forward?

We closed last fiscal at 90 lakh plus cards. The RBI regulation to close cards that have been inactive for more than 12 months, will have an impact. If we were to leave those out, we should close this year at roughly 1.2 crore cards. At some point of time, the Citibank portfolio of 25 lakh cards will also get added. Together, we would have close to 1.45 crore cards, which is a formidable number. 

Q

Apart from the Citi deal, how do you plan to gain marketshare in credit cards?

Two to three things are playing out. We have built on our digital capabilities, which will further evolve. Our risk remains under control. Third, our partnership businesses are acquiring more momentum. Our partnerships with Flipkart, Airtel, are scaling up. More partnerships will happen in the course of the year. The organic side of the business is growing. 

Q

Are inflationary pressures, interest rates, impacting discretionary spends on credit cards?

Right now, we do not see any adverse trend. Discretionary spends remain high. People are stepping out, spending again. Domestic travel and entertainment is back, international travel has started on a limited scale. The only note of caution is a prolonged phase of interest rate tightening, if there is one, could change the outlook. As of now, it’s very temporary. Let’s see how long it continues and how steep it is. Without those caveats, spends look fine right now in terms of recovery in the travel and entertainment category. Unless there is something dramatic on the health front, like Covid, or on the economy and macro, the trend should continue. June data should also be good.

Q

What is your view on the proposal for UPI on credit cards?

It’s exciting in terms of payment experience and also because it is a convergence of UPI and cards, which are powerful payment instruments on their own. What is relevant is how do you solve this conundrum -- the fact that UPI has zero MDR and credit cards have MDR ...one easy solution is to keep credit card MDR also at zero …but because it’s a payment product with a credit line, there has to be an MDR. Second, there will be challenges  in terms of IT architecture -- where does the transaction originate, where does it go?

Q

What is your view on the RBI guideline to non-bank prepaid payment instrument (PPI) issuers not to load their wallets and cards from credit lines? Is it an advantage to banks?

RBI has clarified it cannot be done. People will have to transition and close what they were doing. I don’t know what advantage a bank gets because we have our hands full in terms of competition within banks itself. We work closely with lots of fintechs. Many of our partnerships are with fintechs. But it is not like there is any competition, that if they do something detrimental to them, then we benefit.

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