Increasing number of defaults in the unsecured segment of loans has led banks to become more cautious about this segment of products including credit cards. The resultant is that the credit card base of banks is showing a dip.
There has been a steady decline in the number of credit cards in the country from 2.75 crore as on March 2008 to 1.88 crore in March 2010. The numbers have further shrinked to 1.82 crore as on November 2010.
The major reason behind this dip has been the winding up of the credit card portfolios by banks. Major players in the field like ICICI Bank have undergone as much as 40% shrinkage in their credit card base and have also become sceptical in issuing new cards too.
"The decline in card numbers is an outcome of a slew of developments, including issuers closing delinquent and inactive cards and going slow on new issuances," said Uttam Nayak, country head, Visa India.
However, even though the card base is seeing a decline, there is no such behavior experienced in merchant outlets which are still open to accepting card payments. The debit card base is increasing as so are the number of transactions using debit cards in merchant locations, said Amrish Rau, country head, First Data.