In the wake of economic crisis and stricter regulations by credit card issuers, credit card usage has declined considerably.
The count of active credit cards in India in August had decreased from 243.67 lakh in April to 219.49 in August. This decline is being attributed to the global meltdown.
A senior official from India Cards council, a body of all Mastercard issuing banks said that a large number of companies, especially in IT sector, were involved in lay-offs and salary cuts.
He said "While those people, who were thrown out of jobs, or got less pay, slashed their credit card spending, the cost-cutting measures of corporations had a demonstration effect on the rest of the economy. People got scared and altered their spending habit."
Monthly spending through credit cards is also decreasing. In August, total spending through credit cards was Rs 4,858.34 crore as against Rs 5,801.48 crore in the same month last year, a decline of 16.25 per cent.
An official of a private sector bank said that there was an increase in defaults to over 15 per cent last year from around 5 per cent in the previous years. Most of the banks are planning to recover the dues of defaulters from their salaries.
In order to lessen losses due to credit card defaults ICICI bank has decided to block all credit cards of an issuer in case he defaults on one.
The credit card spending has gone down by 12 percent. As indicated by RBI's data, till August last year, the amount of credit card transactions was Rs 27,834 crore but it started sloping down towards the end of the last financial year. The total amount of the transactions for the entire fiscal was only 65,355 crore.