Happy Friday! In light of the slowdown in the unsecured credit sector, banks are increasingly focusing on secured credit cards, backed by term deposits. Here are the details:
What’s Happening: Large banks like Axis Bank and HDFC Bank are now promoting secured credit cards, joining the ranks of Utkarsh Small Finance Bank, SBM Bank India, and others. This shift is also being supported by fintech startups aiming to partner with banks to source these customers, thereby avoiding regulatory scrutiny associated with the growth of unsecured credit.
What Are Secured Credit Cards? Secured credit cards are backed by a fixed deposit (FD) made by the customer with the bank, allowing them to perform transactions and earn rewards like any other credit card. Unlike unsecured credit cards, these cards require collateral.
Industry Insights
Issuance Rates: Around 70,000 to 100,000 secured credit cards are issued monthly by banks.
Overall Trends: The issuance of new credit cards has slowed. RBI data indicates that between March and May, 500,000 to 800,000 new cards were added, compared to 1 to 1.2 million during the same period last year.
This trend highlights how banks are adapting their strategies to navigate the current credit environment while providing customers with secure credit options.