Even as weak monsoon and lower growth estimate hints at dull economic condition in the country, the credit card companies have a reason to cheer.
Default rates from the credit cards holders has come down to as low as about 5-6 per cent in 2011-12, much less than the 20-23 per cent default rate witnessed during the global economic downturn in 2008-09. "In spite of weak economic conditions in the country, the default rates have not grown. This is positive indication for credit card companies. Now, the average default rate for the industry as a whole is about 5-6 per cent. While that for SBI Cards is around 5 per cent of the total outstanding on credit cards issued in the last financial year," said Kadambi Narahari, CEO, SBI Card.
"The recent default rates are much less than the average default rate of 20-23 per cent during the period 2006 to 2009. Thanks to the undermining policies, that we see responsible credit card usage in recent times," he added.
According to him, credit card users have become more matured and responsible towards spending as well as paying on time. Delinquency levels too have gone down significantly, indicating towards improving conditions default incidences. Delinquency levels, which hovered in the range of 8-9 per cent during the period 2006-2008 has now fallen to around 4 per cent. In 2008-09, it hovered at as high as 11-12 per cent. In credit cards business, delinquency is defined as failure to repay the credit card payments on the agreed day.
