In the Previous Article, we have already discussed about the Cash Advances Market in India on various Metrics. Today we’d like to Highlight the Profits Indian Banks Make from the Cash Advances Segment of Credit Card [CC] Lending.
As already seen, the Cash Advanced on CC was Rs 1,259 Cr spread across 21.90 Lakh Transactions in FY 2011-12. Every Bank levies two types of fees on Cash Advances – 1] Transaction fees which is Rs 300 or 2.5% of the Amount Withdrawn, whichever is Higher and 2] Interest Rate from the Day when Cash has been withdrawn – 3% per month or more
The following Screenshots show the Cash Advance Transaction fees and APR on the same for two of India’s Largest Credit Card Issuers – HDFC Cards and SBI Cards
HDFC Credit Cards Cash Advance Charges
SBI GE Credit Cards Cash Advance Charges
From the above two screen-shots from respective banks websites it is clearly evident that Rs 300 / Transaction fees and 3% Per Month Interest are conservative and applies across the Credit Cards industry in India. For the purpose of calculations, we assume the average period of borrowing to be just 30 days. Thus Indian Consumer Paid a whopping Rs 657.19 Mn / Rs 65.71 Cr as fees and Rs 377.87 Mn or Rs 37.78 Cr as Interest on the Cash Advance in FY 2011-12.
So Indian banks collectively earned a minimum revenue of Rs 103.5 Cr in 12 Months by lending Rs 104.965 Cr over 12 months [It is the Average Monthly Outstanding, i.e Outstanding for 30 Days] in the Cash Advances segment.
The following Tables Shows the Data.
| Month | No. Trans | Rs Mn | Fees INR | Interest Rs Mn |
| Apr-11 | 171978 | 963.72 | 51593400 | 28.9116 |
| May-11 | 177189 | 1002.07 | 53156700 | 30.0621 |
| Jun-11 | 172625 | 960.36 | 51787500 | 28.8108 |
| Jul-11 | 172970 | 967.22 | 51891000 | 29.0166 |
| Aug-11 | 180047 | 1088.49 | 54014100 | 32.6547 |
| Sep-11 | 178119 | 1003.55 | 53435700 | 30.1065 |
| Oct-11 | 185542 | 1078 | 55662600 | 32.34 |
| Nov-11 | 176818 | 1047.44 | 53045400 | 31.4232 |
| Dec-11 | 184298 | 1108.52 | 55289400 | 33.2556 |
| Jan-12 | 188208 | 1089.36 | 56462400 | 32.6808 |
| Feb-12 | 200762 | 1078.42 | 60228600 | 32.3526 |
| Mar-12 | 202106 | 1208.71 | 60631800 | 36.2613 |
| 2190662 | 12595.86 | 657198600 | 377.8758 |
We have had many readers asking us to upload the spreadsheet used in calculation so that they can manipulate the data on various other parameters. For your convenience, the same is uploaded here [XLS File]. In the next Article we will specifically do a case study on HDFC, SBI and Citi Cards earnings from Cash Advances segment.
Customized Data: Total Spending of Cards by means of Cash / Purchases, Monthly Bankwise Data is available for consumers research.