MUMBAI: Reflecting the rising indebtedness of individuals and households, delinquency rates among credit card issuers or the portfolio at risk in banking parlance have risen by 110 basis points to 7.6% as of June 2024, up from 6.5% in June 2023.
According to an analysis by credit information bureau Crif Highmark, the numbers for the June quarter indicated that banks did not report significant stress. However, in the second quarter, almost all issuers, led by Kotak Mahindra Bank, IndusInd Bank, RBL Bank, and Axis Bank, reported higher delinquencies.
The average balance per card rose to Rs 32,233 by June 2024 from Rs 28,919 in June 2023, further highlighting the rising indebtedness of cardholders. Crif Highmark noted that default or delayed repayment of credit card dues in the 91-180 days past due (DPD) bucket was persisting beyond 180 days. Delinquencies in the 181-360 days bucket increased from 0.7% to 0.9%, while defaults exceeding 360 days rose from 1.3% to 1.7%.
Credit card issuers typically charge 3.75% or more on unpaid balances on a monthly basis, translating to an annualised rate of 45%. Failure to make timely payments incurs additional penalties ranging from 0.5% to 1% of the minimum payment due, which gets amortised into the principal outstanding, thereby compounding the debt.
The value of credit card transactions has tripled over the past three years, growing to Rs 18.31 trillion in fiscal 2024 from Rs 6.30 trillion in fiscal 2021, according to Reserve Bank of India (RBI) data. The transaction value stood at Rs 9.71 trillion in fiscal 2022 and Rs 14.32 trillion in fiscal 2023. Of the Rs 18.31 trillion in total credit card transactions in FY24, Rs 6.51 trillion was attributed to point-of-sale transactions involving merchants and shops.
Monthly spending by card users has also seen a significant increase, surpassing Rs 1.50 trillion and reaching Rs 176,202 crore in September 2024, up from Rs 72,319 crore in March 2021. Meanwhile, the number of credit cards issued rose sharply to 10.61 crore as of September 2024, compared with 9.3 crore in September 2023, 7.36 crore in March 2022, and 6.20 crore in March 2021. However, a private report last week revealed that card issuances halved in October 2024.
Credit card outstanding balances have also surged to Rs 2,81,392 crore as of October 2024, compared with Rs 2,49,635 crore in October 2022. In November 2023, the RBI raised the risk weight on credit card receivables by 25 percentage points to 150%, fearing a bubble was forming in this portfolio. Since then, growth in card spending and issuances has shown signs of moderation.