Credit card delinquencies have increased during the festive season resulting in banks slowing down the issue of new cards during the season. The data from the Reserve Bank of India (RBI) revealed that the speed of new card issuances declined significantly to 620,000 in September.
Comparatively, the new cards issued during August stood at 920,000, reported Business Standard. In comparison to last year, new credit cards issuances slumped by more than 64 per cent, while the overall active credit cards touched 106 million.
A report by The Economic Times revealed that financial experts projected that this trend could persist as banks get more cautious by the day about the unsecured lending segment, specifically credit cards.
Citing Bunty Chawla, analyst, IDBI Capital, the report noted that new card issuances was driven by HDFC Bank and SBI Cards. However, in the near term, the analyst noted that new card additions are expected to slow down owing to an increase in delinquencies in credit card receivables.
Notably, HDFC bank issued 430,000 new credit cards in September, while SBI cards issued 140,000 cards. Meanwhile, Axis Bank issued 53,000 new cards and ICICI Bank’s additions in the segment touched only 4,000.
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Macquarie Capital revealed that default rates in banks’ credit card portfolios surged to touch almost 6 per cent. This remained unseen in years.
The overall card expenditure climbed to Rs 1.77 trillion in September, in comparison to Rs 1.69 trillion in August. This expense rose 4.7 per cent on a month-on-month basis and a 23.8 per cent rise on a year-on-year (YoY) basis.
The RBI has voiced concerns regarding the unsecured lending segment, asking banks to move ahead with caution with personal loans distributed for consumption. As such, the central bank, earlier in November 2023, also increased the risk weights on unsecured credit such as personal loans and bank credit given to non-banking financial companies (NBFCs).