Up until now, we’ve been dealing with the history and evolution of credit cards. We learnt that the first ever modern credit card was conceptualised in the 1950s in the U.S.A. However, there’s something really important that we haven’t explored. We haven’t taken a look at how this incredible little financial tool has impacted one of the biggest economies in the world - India. And so, that’s exactly what we’re going to do in this chapter of Smart Money. Let’s begin. 

When was the first ever credit card launched in India?

You were probably thinking of this question right from the start of this chapter, weren’t you? Well, here’s your answer. We got our first ever credit card in the year 1981, putting us around 30 years behind the U.S. in this regard. That said, we also need to understand that we were a developing country at that time without a strong banking and financial services industry. 

Okay so, now that we’ve gotten that out of the way, can you guess the bank that introduced the very first credit card in the country? Here’s a clue - it was a nationalised bank. No guesses? Okay, here’s the answer - it was Andhra Bank. Just a year after it was nationalised by the then Prime Minister Indira Gandhi, Andhra Bank came out with the country’s first ever credit card. Amazing, isn’t it?

How’s India faring now?

Unlike the U.S., where credit cards took off as soon as they were launched, it took India a long time to open up to the idea. One of the many reasons for this slow start was the lengthy application and approval process. Not everyone who applied was able to get their hands on a credit card. And so, it was viewed as something extremely exclusive, reserved only for the rich and the elite. Since the Indian middle class wasn’t getting free access to credit cards, the adoption rate remained quite low for decades.  

As time passed, the application and approval process started to get more and more relaxed. Also, the eligibility criteria is now set low to ensure better financial inclusion. As a matter of fact, currently, it is extremely easy for a regular individual to apply for and get a credit card. All it takes is a few minutes and can be done online. This has led to a significant rise in the number of credit cards in India. 

Thanks to millennials running the show, credit cards aren’t the only ones gaining in popularity. The trend of purchasing products on credit and paying for them later or in instalments has also caught on nicely.  

So, how is the credit card market in India? 

Although we’ve come a long way in terms of the number of active credit cards, the credit card penetration in India is very low compared to that of the U.S.A. Despite having around 55 million issued credit cards as of December 2019, credit card penetration in India stands at just around 3%. This effectively means that there are only around 3 credit cards for every 100 people in the country. When we compare the credit card penetration in India with the penetration rate of the U.S.A., where there are 32 credit cards for every 100 people, the difference is very clear. 

That said, since we’re one of the fastest growing economies in the world with a diverse and unique market, our credit card growth in the near future is likely to be exponential. The ever-increasing number of e-commerce transactions and growing focus on semi-urban markets are sure to add more fuel as well. In the next few years, the Indian credit card industry is likely to grow by around 25% CAGR. Well, that’s something to look forward to.   

The Indian credit card business has shown excellent year-on-year growth in the previous two years, due to the government's recent push towards digital payments and its plans to drive India towards a paperless society. The number of credit cards issued increased by roughly 27 percent in the previous year, from 38 million to 49 million. With the ongoing growth in the number of credit card providers as well as credit card users in India, the sector is likely to continue to grow in the next few years as well.    

Wrapping up

Well then, that’s about it for this chapter on the Indian credit card market. In the next one, we’re going to be looking at yet another unique feature that credit cards of today come with - rewards and returns. Again, this is going to be another interesting chapter, so stay tuned!    

A quick recap

• Unlike the U.S., where credit cards took off as soon as they were launched, it took India a long time to open up to the idea. 
• As time passed, the application and approval process started to get more and more relaxed. Also, the eligibility criteria is now set low to ensure better financial inclusion. 
• Although we’ve come a long way in terms of the number of active credit cards, the credit card penetration in India is very low compared to that of the U.S.A. Despite having around 55 million issued credit cards as of December 2019, credit card penetration in India stands at just around 3%. 
• But the number of credit cards issued increased by roughly 27 percent in the previous year, from 38 million to 49 million. 

With the ongoing growth in the number of credit card providers as well as credit card users in India, the sector is likely to continue to grow in the next few years as well.