Credit card dues at 2 trillion by April mark a milestone



  • Indian credit card holders owed their banks 2 trillion in dues by April, the first time this milestone was reached. Banks will be delighted at the growth in this business, but high outstanding dues also present a risk.

Banks giving out credit cards have some good news. The general skepticism about their business appears to be fading. Indian credit card holders owed their banks 2 trillion in dues by April, a milestone. This came after a year of record growth—with the high-interest rates that missed credit card payments are known for, banks have much to be excited about. Credit card transactions clocked 14.3 trillion in 2022-23, and have grown more than 20% in all years except 2020-21, when they declined. The number of cards is up more than fourfold since a decade ago. Yet, a huge amount of dues on an unsecured lending tool also creates a burden for banks. Mint looks into the data.

Rising up the ranks

With a 4.9% share, credit card dues form the third-biggest segment within personal loans. The share is at its highest in 14 years. Until 2017-18, the segment was the fifth biggest but has risen the ranks with increasing consumer confidence and attractive loyalty programmes. Credit card dues have risen at among the fastest rates among major loan segments in the last few years. While UPI has become the king, credit cards have overtaken debit cards in the realm of card-based payments as many debit card users now prefer UPI.

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The leaderboard

India has over 87.7 million credit cards across 34 scheduled commercial banks as of May 2023. The average transaction amount per credit card across all banks in May was 16,071. Among the 13 banks with over a million credit cards, IndusInd Bank topped the list with average transactions worth 30,754 in May. Only three of these 13 banks had an average transaction of 20,000 or more in May. State Bank of India had the highest average per-card transaction among public sector banks.


Growth potential…and a note of caution

The move to link credit cards with UPI could help more and more people adopt plastic money in the coming years. However, a high value of outstanding dues on credit cards also calls for caution as it means an increase in unsecured loans in the banking system. According to a recent Mint report, the central bank is likely to raise the risk weights of unsecured loans, including credit card receivables, while measuring banks’ asset quality in a bid to curb reckless lending.

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