Credit Card Dues In India Surpass Rs 2 Lakh Crore Milestone For The First Time

Credit card outstanding crossed Rs 2 lakh crore mark for the first time in April, revealed the latest data from the Reserve Bank of India (RBI). The credit card outstanding balances soared to Rs 2,00,258 crore, reflecting a substantial 29.7 per cent increase compared to the corresponding period last year.

Moreover, the total value of credit card transactions, including both swiped and online transactions, exceeded Rs 1.3 lakh crore in April 2023, reported Times of India.

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The significant rise in credit card dues cannot be solely attributed to mounting debt; it also indicates the expanding utilisation of credit cards for payments and the impact of inflation.

Sanjeev Moghe, president and head of cards and payments at Axis Bank, acknowledges that the balance sheet growth in credit cards is in line with the increase in consumer credit card spending. Over the past year, consumer spending has also witnessed an upswing.

The surge in credit card transactions is often considered a positive sign of consumer confidence. However, the increase in outstanding balances can also be attributed to inflation, as people end up paying more for the same purchases.

In terms of overall bank credit, credit card balances currently account for 1.4 per cent, making them the third-largest segment after housing loans (14.1 per cent ) and auto loans (3.7 per cent).

Prior to the global financial crisis of 2008, the share of credit card dues had reached a peak of 1.2 per cent. Following the crisis, following defaults in small personal loans and subsequent corrective measures, the share of credit card dues remained below 1 per cent for the next decade. However, it crossed the 1 per cent mark again in August 2019 and has steadily increased since then.

Lenders emphasise credit card issuances are limited to customers with good creditworthiness, unlike in 2008. The availability of data from credit bureaus, account aggregators, tax records, and other platforms has made the evaluation process more efficient. Additionally, with most customers now on board digitally, banks have a wider reach compared to the target-driven direct-selling agents of the past.