The rising default in the credit card segment has become a one of the major concerns for the card issuers. Industry's largest card issuers, ICICI Bank and SBI Cards have reported an increased card default for the second year in a row.
As a result, both the issuers have been continuously tightening their credit card norms. Banks have stricken the salary structure and other such norms so as to avoid the rising number of defaulters. They are delivering the cards to only those applicants who have the ability to repay.
Although SBI Cards and Payment Services Ltd has been cautiously moving ahead in issuing the credit cards yet it is expected to report more losses during the current year, stated a detailed study by global rating agency, CRISIL.
On the other hand, ICICI Bank may be at a better stand as compared to SBI but there was a huge gap between their profits and investments. The bank recorded a profit of only Rs 85.7 crores against an investment of Rs 5683 crores.
Moreover the current economic slowdown that has reduced monetary conditions of people has exposed banks to more credit losses. Therefore SBI Cards have raised their credit checks and also increased the salary margins from Rs 1.44 lakhs to 2.4 lakhs per annum in the current financial year.
However the ICRA statistics said that even though SBI Cards suffered a loss of Rs 150 crore in the year 2007-08 but the segment still remains as one of the best business capacity for SBI.
ICRA feel that SBI Cards should infuse in capital so as to meet the newly formed rules and norms for credit issue.