Banks have seen the growth in outstanding loans on credit cards steadily decline over the last six months. According to Reserve Bank of Indias (RBI) data,credit card dues grew just 2.1% to Rs 23,500 crore y-o-y in September 2013 against a 21.8% growth in September last year.
Data from RBI showed that banks have not been growing their credit card portfolios since May 2013 and the total outstanding loans in the systems have been hovering at about Rs 23,000 crore. Credit card loans had been showing y-o-y growth in the range of 20-27% before May 2013.
Bankers say credit card spends have decreased since May and,hence,their portfolios are not increasing. Overall spends in the system have been muted due to the slowdown in the economy and spends on credit cards are linked to peoples disposable income. Even in the festival season,there seems to be no increase in spends, said Sumit Bali,executive vice-president for consumer loans,Kotak Mahindra Bank.
RBI data showed that in August 2013,y-o-y growth in credit card spends decreased to 12.18% to Rs 10,887.84 crore. This is far lower than the peak of 39.73% growth seen in November 2012.
Credit card spends are the amount of money transacted in a particular period,whereas outstanding loans is the money that the customers owe to a bank,which includes the interest.
Banks are not being aggressive in growing their credit card portfolios. Moreover,the RBI has curbed 0% EMI schemes,which was the main driver for growth in credit cards, said A Surendran,head of retail and international banking at Federal Bank.
Meanwhile,bankers also say that transactions on debit cards are gaining more momentum and popularity.
RBI data showed the total amount of transactions on debit cards for August grew 19.09% to Rs 1,64,896.72 crore from Rs 1,38,462.25 crore a year ago. In terms of number of transactions,the growth in August stood at 19.65.
A report by investment management company Jefferies & Co recently noted that customers are paying off their dues owed to banks rather than revolve their credit.
This means that the outstanding amount in the banking system is coming down and banks will not be able to earn interest on it. According to the report,the share of revolving credit has come down to 53% over the last 12 months,indicating that customers are becoming more risk-averse.
A falling percentage of revolvers also highlight risk-aversion by customers who would rather pay off high-interest debt. This is particularly more likely given the current economic slowdown,slowing corporate profitability and no visibility in wage hike and risk of job losses, noted Jefferies.