NEWS & ADVICE : CREDIT CARDS
Credit card industry faces an eight year low growth rate
By Ankit Sharma
Dec 24, 2008
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The credit card issuers have been facing a crunch in their business and this can now be reflected in the industry reports that claim a substantial amount of decline in the growth rate of credit card industry to be witnessed in the coming months.

For the last few years, the industry had been observing a steady growth of 30% but this rate is going to come down by a huge amount by the end of the current fiscal. The growth rate until now has dipped to an eight year low level of 15%. This deceleration is attributed to the economic slowdown following which most of the issuers held back their portfolios.

A senior official form Citibank said that the bank has reduced on both its hard selling method and the number of "cold" calls that are made to the customers. "There has been a conscious attempt to reduce the number of calls for selling the product and naturally there will be dip in sales," said the official.

Industry sources inform that the numbers of direct selling agents (DSA), employed by the card issuers are also coming down due to the adverse situations in the industry. The banks and card issuers are reducing their DSA in order to cut down their cost of issuing a credit card. They are resorting to such a practice because defaults in the industry are expected to rise and hence they want to play safe and hold back from issuing new cards to the doubtful customers.

The slump in the credit card industry does not even spare a major players like ICICI Bank and SBI Cards. An executive from SBI Cards said, "The point is not to increase sales. At this point recovery is most critical."

Recently the credit cards business of most companies and banks is scaling down because of the higher level of risk associated with the cards at this time of downturn. In fact in India credit card usage is still not up to the world standards. To overcome this problem, "The card issuers must assess the credit worthiness of the customers and they should try and increase usage of the existing cards," said Vijay Mehta, Director of Credit Card Management Consultancy.

 


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