Banks which not so long ago were aggressively boosting credit card sales are now on the backfoot, looking more at recoveries. As a result, growth in credit cards is set to drop further in the current fiscal year, say banking sources.
The credit card industry, which saw a 15 per cent increase in 2008-09 in the number of cards sold after a steady growth of about 30 per cent between 2002-03 and 2007-08, is likely to register about 8- 10 per cent growth in this fiscal, they said.
A senior official at Citibank told Hindustan Times that amid the current financial crisis in the world the focus was on recoveries. “Unlike the past years, we are not very keen to acquire new customers. The approach would be more conservative as this is unsecured lending,” the official said.
Vijay Mehta, director, Credit Card Management Consultancy, pointed out that the default rate was already high and this may become a cause for concern, if not addressed at the earliest. “Banks and card issuers have been focusing on expanding the market by selling cards and in a bid to do so, often the real repayment capacity is nor taken into account,” he said.
The default rate for plastic money has gone up to over 10 per cent as against 6 per cent four years back. Cold calls from banks and their direct selling agents have also dropped significantly.
India has about 30 million card holders and even though acceptance and awareness of plastic money has been going up in the last few years, average spends have been still low at around Rs 2,500-3,000 a month.