Weighed down by rising defaults and liquidity problems, leading credit card companies have started reducing the borrowing limit of existing customers.
Leading banks such as ICICI Bank, SBI Card, Citibank and HSBC said they will revise the credit limit selectively after assessing the customers’ credit history.
Diwakar Gupta, CEO, SBI Card, said the credit card industry is facing huge delinquencies. This is because companies have given huge spending limits to card users without assessing their ability to repay. So, the industry is reassessing the creditworthiness of current customers.
All banks seem to be making amends fast. An HSBC customer, for instance, saw his credit limit dropped from Rs 65,000 to just Rs 12,000 despite having a clean credit history. HSBC, however, said it revises the credit limit after assessing the credit history of its customers.
When told that the customer concerned never kept outstanding balance, Dheeraj Dixit, head of credit cards, HSBC India, said: “I am not in a position to discuss any individual customer.”
Banking sources said the revision in credit limits were inevitable at a time when defaults are going up sharply. The non-performing assets (NPAs) in the credit card portfolio has doubled in the first nine months of the current financial year from 7-8 per cent in the year-ago period.
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Bankers said it has also become easier to keep track of a person’s liabilities as more financial institutions have started sharing their customers’ financial data with the credit bureau, CIBIL. Citibank even changed its underwriting model recently due to availability of data on individual’s debt.
Credit companies are taking punitive actions after assessing the number of credit cards a customer holds, the existing loan amount and the income disclosed at the time of issuing the credit card. To save defaults, credit limits are being lowered specially for customers who hold multiple cards.