New Delhi: In a notable shift this festive season, banks are significantly slowing down the issuance of new credit cards. The driving force behind this cautious approach is the increase in delinquencies associated with credit card receivables. According to data from the Reserve Bank of India (RBI), the number of new credit card additions dropped to 620,000 in September from 920,000 in August, reflecting a decrease of nearly one-third. Furthermore, this figure represents a staggering 64% drop in new card issuances compared to the same month last year.
Industry experts predict that this trend may continue as banks grow increasingly wary of potential defaults in the unsecured credit segment. As of September, the total credit card count in India stood at 106 million. Major players like HDFC Bank and SBI Cards have been leading in new card issuances, with HDFC adding 430,000 cards and SBI contributing 140,000. In contrast, ICICI Bank experienced minimal growth, adding only 4,000 new cards.
A concerning report from Macquarie Capital reveals that default rates for credit cards may be as high as 6%. It highlights that individuals in the middle-income bracket are facing difficulties, particularly as the options for taking personal loans to settle credit card debts are diminishing due to regulatory clampdowns. The RBI has expressed apprehensions regarding the growing risks in the unsecured loan market and has advised banks to exercise caution when offering personal loans for consumer expenditures.
Moreover, millennials have been flagged for using their entire credit limits without rolling over balances, which has contributed to the rising non-performing assets (NPAs) in banks. In spite of these challenges, total card spending increased to ₹1.77 lakh crore in September, up from ₹1.69 lakh crore in August, showcasing a complex landscape of cautious lending and increased consumer spending.
