Credit card default rate makes banks wary

  • Mahua Venkatesh, Hindustan Times, New Delhi
  • Updated: Apr 07, 2014 01:39 IST

The economic slowdown and rising prices have increased the default rate on credit cards and banks pulling out all stops to ensure it does not go out of control.

Though the default rate stood at about 1.75% in 2013-14, a marginal increase compared to 1.5% in the previous fiscal year, card issuers have started taking all steps to ensure that it doesn’t go out of control, considering lending on credit card is unsecured.

In 2009, most card majors had seen default rate rising to an unmanageable level.

“Unlike the 2009 scenario, this time the increase in default rate is not due to wilful and reckless usage but because of the economic slowdown and that is understandable but we are taking all steps to ensure that it doesn’t increase any further as it is unsecured lending,” said Pallav Mohapatra, CEO, SBI Cards — a joint venture between the country’s largest lender State Bank of India and GE.

“There is no immediate cause for concern at this moment, but since these are unsecured loans, we need to take cautious steps,” a senior executive at a large private sector bank told HT.

In fact, most card issuers are now focusing on cleaning up their plastic money portfolio and cards that are not being used for months are getting deactivated or closed, sources added.

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