A study by the Indian Cards Council (ICC) revealed that the non performing assets in India's credit card business have mounted up to four times. Although the cost of attaining new credit cardholders is very low for the domestic card issuers yet the credit losses are very high as compared to international standards.

A study by the Indian Cards Council (ICC) revealed that the non performing assets in India's credit card business have mounted up to four times. Although the cost of attaining new credit cardholders is very low for the domestic card issuers yet the credit losses are very high as compared to international standards.

Conversely the annual credit losses in India on per active card were about Rs 3,420 against Rs 3,070 in the US and Rs 1,220 in Australia. This is despite of the fact that the purchasing power of Indian cardholder is less than the consumers using credit cards in these markets. Also the frequency of using the cards is less amongst the Indian customers.

Meanwhile the study stated that there are a high number of inactive cards among the Indian issuers. There were only 56% active cards in India as compared to 80% and 75% in Australia and Singapore respectively.

The non performing assets (NPAs) in the segment have been continuously rising and reached over 20% against only to 5-6% in the previous fiscal. As a result the card issuers have been going slow in issuing new cards and are adopting a cautious approach. They are blocking inactive cards in order to reduced cost related to communication and billing.

Further the card issuers fear that the inactive cards are been used by potential defaulters who use credit cards to get funds at times of financial trouble.

The RBI data also reveals that the credit card number has gone down to 25.51 million in February end. On a year-on-year basis, the card population fell by 5% or 1.36 million between February 2008 and 2009. Meanwhile the credit card base also shrank by 359,000 in February.

Further the study noted that the markets where the card issuers were charging annual fees from the cardholders have more number of active cards. In India most card issuers do not charge an annual fee on their basic credit cards.

However the rising default rate is prompting banks to restart the annual charge. "It is a good time to bring card fees back," said an executive with a foreign bank.

ICC is an association of Mastercard Worldwide's banking partners in India.