New Delhi: Banks are reducing the attractive perks of credit cards, like reward points, cashbacks, and lounge access during the festive season, as they aim to accumulate more deposits following recent interest rate hikes. This is due to their growing focus on profitability in the loan sector, which is expanding as urban India becomes wealthier.

For instance, the HDFC Diners Club Privilege Card has stopped offering double reward points for weekend dining, Rs 1,000 vouchers for monthly spends of Rs 40,000, and has limited global lounge access from twelve to two. The SBI Cash Back Card has cut the monthly cashback in half to Rs 5,000 and discontinued domestic lounge access. Axis Bank’s Magnus card has increased its annual fee and discontinued the offer of 25,000 reward points for spends of Rs 1 lakh.

Additionally, the conversion of reward points to air miles has been limited to two air miles for every five reward points, down from the previous offer of four air miles, claimed a report by ET.

Analysts believe that banks are devaluing credit cards as a way to improve profitability, even though there hasn’t been a significant impact on card issuance or spending. Bankers assert that these changes will enhance business profitability and address anomalies, citing customers not fully utilizing benefits and unusual spending behavior as reasons for the changes.

HDFC Bank’s CFO, SK Vaidyanathan, stated that the changes aim to increase card usage and foster customer loyalty. HDFC Bank, with a market value exceeding $100 billion, is a leader in the segment, accounting for over a quarter of card spending. Asutosh Mishra from Ashika Stock Broking emphasized that these changes reflect the evolving market conditions influenced by rising inflation and prices, which affect the value of reward points offered by banks.