The credit card companies that have been going slow in their fresh issues also see fall in the usage of credit cards. The spending through credit cards has dropped by almost 8% in the first month of the year 2009.
Credit card issuers that have facing rising delinquencies have also witnessed a fall in the spending via credit cards by 7.85% to Rs 5,171.06 crore in January 2009 as compared a spending of Rs 5,611.38 crore in April 2008.
A public sector bank executive said, "Due to the economic downturn, people are restricting unnecessary spending."
"It may be partly due to the fall in card population, but the average spend is also coming down," added the retail banking head of a large private bank.
As per the RBI data, the credit card outstanding in the past one year has increased by nearly 70%. The outstanding at the end of December 2008 increased to Rs 29,359 crore from Rs 17,306 crore, a year ago. This indicates that many consumers were resorting on credit cards for their transactions but to check the losses in their credit card portfolio, issuers have reduced the total number of credit cards in circulation by 282,000 during January.
Senior vice-president for retail banking at Axis Bank, Sujan Sinha said, "Consumer spending on almost all fronts has come down, and there has also been a lot of culling in the industry."
Also the latest data by RBI says that the credit cards number at the end of January 2009 decreased by 8.62% to 25.87 million against 28.31 million at the starting of the fiscal.
"Credit cards of marginal customers and defaulters have been cancelled, and credit appraisal mechanisms have also become more elaborate. NPAs for almost all players in the industry have risen," added Sinha.
Meanwhile the Country Head for retail banking at Standard Chartered Bank, Shyam Srinivasan said the credit card population in his bank has remained almost same and they do not even plan to scale up amid the slowdown.
The non-performing assets (NPAs) in the segment have increased to more than 20% against 5-6% during the last fiscal. SBI Cards has reported 21.22% NPAs as on September 30th, 2008.
Issuers have going strict with their norms related to credit cards and have increased the threshold salary limit from Rs 8,000-10,000 to Rs 20,000-30,000. Bankers want play safe and are more inclined towards customers who make timely payments of their bills.