There is good news for the banks issuing credit cards. The general skepticism about his business seems to be coming to an end. Indian credit card holders owe their banks 2 trillion outstanding by April, a milestone. This comes after a year of record growth – with high interest rates that don’t pay off with credit cards, banks have a lot to cheer about. Credit card transaction entered 14.3 trillion in 2022-23, and an increase of over 20% in all years except 2020-21, when they declined. The number of cards has increased sixfold compared to a decade ago. Nevertheless, even a large amount of outstanding balance on an unsecured debt instrument creates a burden for the banks. Mint looks at the data.
rise up the ranks
With 4.8% share, credit card dues is the fourth largest segment personal loan, This stock is at the highest level of 14 years. Till 2017-18, this segment was the fifth largest, but has moved up the ranks with rising consumer confidence and attractive loyalty programmes. Credit card dues have grown at the fastest rate among major lending segments over the past few years. Whereas is i Credit cards have overtaken debit cards in the field of card-based payments as many debit card users now prefer UPI.
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India’s 33 scheduled commercial banks have over 86.7 million credit cards by May 2023. Average transaction amount per credit card across all banks in May was 16,071. Among 13 banks with ten lakh plus credit cards, IndusInd Bank tops the list with average transaction value 30,754 in May. Only three out of these 13 banks had average transactions 20,000 or more in May. State Bank of India had the highest per card transaction average among public sector banks.
Growth potential…and a note of caution
The move to link credit cards with UPI may help more people adopt plastic money in the years to come. However, the high value of credit card outstanding also calls for caution as it means an increase in unsecured loans in the banking system. according to a recent newsmint reportThe central bank may increase the risk weight of unsecured loans, including credit card receivables, by measuring the asset quality of banks to curb reckless lending.
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UPDATE: July 10, 2023, 12:39 AM IST