'Credit card delinquencies rise in June even as issuance growth drops'

According to CRIF Highmark report, highest delinquency was in credit cards with limits less than Rs 50,000

Delinquencies in the credit card segment increased across all days past due (DPD) bands in June 2024 from the year-ago period, even as the rate of growth of new card issuances and credit card balances dropped, credit bureau CRIF Highmark said in a report on Wednesday.

 

According to CRIF data, delinquencies in the 91-180 DPD category increased to 7.6 per cent in October 2023, up from 6.5 per cent in June 2023. The DPD rate in the 31-90 days’ category rose to 2.3 per cent from 2.2 per cent, while the 181-360 DPD rate increased to 0.9 per cent from 0.7 per cent last year. Additionally, the 360+ DPD rate climbed to 1.7 per cent from 1.3 per cent.

 

The DPD rate of the top five card issuers (TCI) in 91-180 days rose to 1.7 per cent from 1.5 per cent, while the medium card issuers (MCI’s) DPD rate dropped to 2.2 per cent from 2.4 per cent.

 

The report also noted that the highest delinquency was in the credit cards with limits less than Rs 50,000. 

 

New credit card originations in the industry dropped by 34.4 per cent in Q1FY25 to 4.4 million from 6.7 million in the corresponding period a year ago. The year-on-year (Y-o-Y) growth rate of cards in circulation has dropped to 13.5 per cent as of June 2024 against 18.7 per cent a year ago. The total cards in circulation as of June 2024 stood at 10.1 crore. The share of medium issuers in new card originations rose to 29.7 per cent in Q1FY25 from 23.7 per cent in FY23, while the share of new card originations of top issuers dropped to 65.2 per cent in Q1FY25 from 67.8 per cent in FY23.

 

Medium issuers focused on top-tier cities for new issuances, increasing to 48.7 per cent from 43.2 per cent in Q1FY24, while the top card issuers had higher penetration beyond the top 8 cities. The share of credit cards with a limit of above Rs 1 lakh is gaining traction among the top card issuers, while the medium card players focus on the less than Rs 1 lakh limit.

 

The limit of new cards issued by top card issuers rose to 31 per cent from 27 per cent in Q1FY25 while the share of new cards issued by medium card issuers in less than Rs 1 lakh limit rose to 37 per cent from 32 per cent in Q1FY25.

 

Even in the July–September quarter, most private banks reported significant slippages to non-performing assets from unsecured loans like credit cards. Issuers have resorted to measures such as tightening credit score requirements and curtailing spending limits to reduce defaults in the segment. In its November bulletin, the Reserve Bank of India (RBI) attributed the stress in small-ticket advances, credit cards, and personal loans to a rise in over-leveraged clients and increased provisioning. More broadly, banks have reined in lending to retail and services sectors.

 

In November last year, the RBI raised concerns over the rapid growth in certain components of consumer credit. It increased the risk weights for bank lending to consumer credit, including personal loans but excluding housing loans, education loans, vehicle loans, and gold loans, by 25 percentage points to 125 per cent. This regulatory move led the majority of banks to calibrate growth in their unsecured portfolios.