An unsteady revival of the consumer economy has set off a discounting war among leading banks in partnership with online platforms and brands, as ecommerce is one among a handful of sectors that are expected to see growth in the festive period.

Bankers and ecommerce executives ET spoke to said tight competition to gain a share of limited demand for credit is causing banks and other lenders to make more aggressive offers than previous years. The tie-ups between banks and online platforms are aimed at offering customers no-cost EMIs, cashbacks and instant discounts on purchases.

“While the lucrative offers will help customers with affordability, competition among banks is also dictating these trends,” said Harjeet Toor, the business head of retail and small businesses at RBL Bank which is among the largest credit card issuing banks in the country.

“In the market all leading banks are offering exclusive value deals, which will further push the competition on best rates,” Toor added.

Historically, the period between Navratri and Diwali sees a 20% jump in spending on credit cards compared with the rest of the year, but this time the jump is expected to be only 14-16%, he said.

A weak recovery in offline retail amid continuing worries over the pandemic is also forcing banks to double down on their partnerships with ecommerce majors and consumer electronics, appliance and smartphone brands.

Amazon last week said it was partnering with HDFC Bank to offer a 10% instant discount on all purchases made using the lender’s cards during its month-long festive sale. Its Walmart-owned rival, Flipkart, has partnered with public sector State Bank of India and Paytm to offer a similar discount.

“The top 100 million consumers that drive most of the sales on ecommerce have multiple cards and we wanted to give them multiple reasons to shop and save this festive season,” said an executive from an ecommerce marketplace. “Banks and NBFCs are looking at ecommerce as one of the only categories where consumers will increase spending this season, as travel, hospitality and other sectors have still not recovered.”

Usually, smartphones are one of the top-selling categories during the festivals when many consumers exchange their old handsets that make the new ones more affordable. But this time, because of study and work from home, consumers are holding onto their older device. Marketplaces and brands hope in the absence of such exchanges, the bank offers will help make the devices affordable and drive sales.

“There is a lot of suppressed demand in the system and we are quite confident that customers will continue with spends during the festive season,” HDFC Bank country head (payments business) Parag Rao said earlier this month.

The private sector lender has tied up with all leading online majors such as Amazon, Flipkart, Myntra and top consumer brands like Samsung, Godrej and Panasonic for cashback up to 22% with an option to convert purchases into no-cost EMIs.

Others are not behind. State Bank of India, Axis Bank, ICICI Bank and RBL are all offering cashbacks of over 10% in partnership with top brands and ecommerce platforms.

“This year, more than before, affordability is going to play an important role in easing consumers’ buying journey on online platforms, especially during the upcoming festive season,” said Smrithi Ravichandran, Flipkart’s vice president of payments, consumer & commercial lending & insuretech.

She added that by partnering with SBI and Paytm for its upcoming Big Billion Days sale, Flipkart would have access to more than 700 million customers. “We have enabled access to credit to about 70 million new customers through Debit Card EMIs, pre-approved EMIs through our 20+ partners,” Ravichandran added.

Amazon said it was focusing on expanding its own Amazon Pay Later programme to provide easy access to credit to 100 million Indians who otherwise do not have this facility, apart from working with other partners.

“We are adding more lending partners to our credit programmes and working with them to offer credit at the lowest cost to our customers. We are already offering the widest range of EMI options for purchasing high-value items in partnership with over 25 lenders,” an Amazon spokesperson said.

While the festive season between mid-October and November has always been crucial for retail banks, doing well this year is especially important as they’ve seen their loan books contract. According to Reserve Bank of India’s data, Indian banks’ consolidated retail loan portfolio has shrunk 0.2% in FY21 up to August, as against 3.7% growth a year earlier.

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