Credit card outstanding surged by 31 per cent or Rs 45,866 crore to Rs 1.94 lakh crore in the fiscal ended March 31, 2023, reflecting the rising discretionary spending by consumers using unsecured loans.
In fiscal 2022, the credit card or unsecured loan outstanding jumped by 13 per cent to Rs 1.48 lakh crore from Rs 1.32 lakh crore in FY2021, the Reserve Bank of India’s (RBI) data showed.
An unsecured loan is a loan which one can obtain without providing any collateral. Personal loans, credit cards, and education loans are the different types of unsecured loans. The risk of banks in offering such loans is high as there is no collateral to recover in case the borrower defaults.
The share of credit cards outstanding in the overall retail loan stood at 5 per cent in the 12 months ended March 2023. There was a marginal uptick in the share of credit card outstanding to retail loans compared to FY22 when it had stood at 4 per cent, the data showed.
The restrictions in movement and job uncertainty during the covid pandemic had hit the discretionary spending of consumers badly. However, consumer spending accelerated post covid on activities such as domestic and international vacations, cars and online purchases.
The RBI data showed that credit card spending stood at Rs 14.33 lakh crore in fiscal 2023, as compared to Rs 9.72 lakh crore in fiscal 2022. The number of credit card transactions in FY2023 was around 291 crore as against 224 crore in FY2022.
In 2022-23, banks added 1.17 crore credit cards, taking the total credit outstanding to 8.53 crore as on March 2023 from 7.36 crore as on March 2022.
Recently, the RBI expressed concerns over the rising non-performing loans in the credit card segment.
“Delinquencies are reducing in the 90+ days past due bracket across all categories of consumer credit, barring credit cards and education loans,” the RBI said in the ‘State of Economy’ article, published in the monthly bulletin for April 2023.
In the quarter ended March 2023, SBI Cards and Payment Services, the pure-play credit card player, reported a 13 basis points jump in its gross non-performing assets (GNPA) to 2.35 per cent compared to 2.22 per cent in the year-ago quarter.
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During the fourth earnings call with the analyst, SBI Card’s Managing Director and CEO Rama Mohan Rao Amara said the company has identified the areas that have contributed to higher slippages in the last few quarters, impacting the NPAs and write-off numbers. Portfolio actions to address the issue have been taken, he said.
Banks, however, said the credit card segment is not showing any signs of stress so far.
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“Our personal loan book is about Rs 88,000 crore and our credit cards book is about Rs 37,800 crore and we are very comfortable with the quality of the book that we have built over the years,” ICICI Bank’s Executive Director Sandeep Batra told reporters during the Q4 FY2023 earnings call.
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