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Plastic purchases in India may grow over 50% in 5 years

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Pratik Bharti
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Plastic purchases in India may grow over 50% in 5 years - September 26th, 2007

In the last two years, the spending pattern through plastic money has changed drastically. Travelling, dining and jewellery are the top three purchases that Indians make through credit cards. Two years ago, it was jewellery and apparel purchases that formed the largest chunk of purchases through plastic money.

Fuel accounts for a very small portion of credit card purchases as it is largely paid through debit cards. The credit card companies say consumers spend Rs 50,000 crore annually, which is expected to grow at 50% over the next 4-5 years.

“Travel has definitely become much larger a segment than what it was two years ago. Airline tickets, both domestic and international, are now bought through credit cards making it the largest category for credit card purchases,” said ICICI Bank head (credit cards) Sachin Khandelwal. With air travel becoming affordable and eating out a regular feature in Indian households, the trend will only gain momentum in future feel experts.

“Travel and dining corner about one-fourth of the total credit card purchases which signifies the shift in Indian spending habits. Earlier, purchases of both consumer durables and jewellery items were larger than the hospitality segment. Going forward, this trend should continue,” said an industry expert.

Agrees, HDFC Bank V-P and head (credit cards and product portfolio) Parag Rao: “Jewellery, consumer durables, fuel purchases and apparel are much smaller segments than travel and dining which comprise the largest chunk of credit card purchases. Eating out has in fact become a big concept now.”

Experts say while travel and hotel bills, along with dining, account for about 25-35% of the total value of purchases through credit cards, purchase of jewellery accounts for 10-11% of purchases. Apparel purchases account for 8-10% and consumer durables such as TV and mobile phones account for nearly 6-7% of purchases through plastic money.

Two years ago, the figures were largely skewed in favour of jewellery and apparel purchases while travel and hospitality was a small component.

With 87% of all transactions in plastic money happening through credit cards, debit cards in India
continue to be used largely for cash withdrawals.

There are about 65 million debit cards in India, of which SBI alone accounts for 25 million debit cards. ICICI Bank is said to have 11 million cards. This is largely in line with the fact that both players are the biggest banks in India and will have the highest number of savings accounts.

Utility payment is another segment where more payments are being made through plastic money in the last two years. “In the last two years, the number of customers paying their electricity and water bills through credit cards has risen though the overall customer base is still small,” added Mr Rao.

Credit card is one of the fastest-growing businesses in financial services in India. There are currently 25 million credit cards in India and ICICI Bank is the largest player with 8.5 million cards issued. Citibank, SBI-GE Card and HDFC Bank are the other prominent players and each have issued around 3-3.5 million cards so far.


SOURCE: http://economictimes.indiatimes.com/Personal_Finance/Credit_Cards/News/Plastic_purchases_in_India_may_grow_over_50_in_5_y ears/articleshow/2388216.cms
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