Credit card dues cross Rs 2 lakh crore for the first time – Times of India
The surge in credit card dues is not just due to rising indebtedness but is a reflection of their increased use for payments and inflation. “The balance sheet growth in credit cards is trending in line with the increase in consumer credit card spends. Over the last year, consumer spending has also gone up,” said Sanjeev Moghe, president and head (cards & payments), Axis Bank. In April 2023, the total value for which credit cards were swiped or used online was just over Rs 1. 3 lakh crore.
While the increase in credit card transactions is usually seen as a measure of consumer confidence, growth in outstanding balances can also be because of inflation as people pay more for the same purchases.
As share of overall bank credit, card balances stand at 1. 4%. Among personal loans, they are the third-largest segment after housing (14. 1%) and auto loans (3. 7%).
The share of credit card dues had hit a high of 1. 2%, just before the global financial crisis of 2008. After de-faults in small-ticket personal loans and the subsequent clean-up, the share of card dues remained below 1% for the next decade. They crossed the 1% mark again in August 2019 and have risen steadily since then.
However, bankers say that card issuances are limited tocreditworthy customers today unlike in 2008. Data availability through credit bureaus, account aggregators, tax, and other platforms has made appraisals more efficient. Also, since most customers are on-boarded digitally, banks now have a wider reach than target-driven directselling agents.
Despite the rising spending and multiple card ownership, credit card penetration in India is among the lowest in the world. “As a percentage of the population, less than 5% hold credit cards, which is lower than in many developing countries,” said an executive with a private bank.
According to RBI, in the 12 months that ended in April 2023, the share of the industry in bank credit has dropped to 24. 3% from 26. 3%.
For all the latest business News Click Here