The rising default and liquidity crunch has prompted the credit card issuers in the country to slow down on their credit card business. The major credit card companies are now reducing the credit limit of the existing customers.
The leading banks in the country including ICICI Bank, SBI Card, Citibank and HSBC said that they will revise the borrowing limit of their customers after reviewing the credit history of the customer.
The CEO of SBI Card Diwakar Gupta said that there have been a huge number of delinquencies in the credit card industry and the major reason for this is that companies are extending huge amount of credit limits to the customers without realizing the customer's ability to repay. Therefore the industry is now reviewing the creditworthiness of existing customers. In fact all the banks are seen to implement the changes soon.
In fact a customer with HSBC recently saw his credit limit reduced from Rs 65,000 to Rs 12,000 in spite of a smooth credit history. The bank said it amends the credit limit after reviewing the credit history of its customers and when the bank was informed about the customer's creditworthiness, Dheeraj Dixit, head of credit cards, HSBC India, said: "I am not in a position to discuss any individual customer."
Bankers feel that credit card limits had to be reduced because of the rising defaults in the industry. In fact the non-performing assets (NPAs) in the credit card segment has increased to almost double in the past nine months of the current fiscal against 7% to 8% growth, a year ago.
The assessment of an individual's creditworthiness has become easy for banks as there are many financial institutions that have started sharing their customers' financial data with the credit bureau, CIBIL. Credit card issuers are taking disciplinary actions after reviewing the number of cards a customer holds. It is also reviewing the customer's loan amount and income displayed at the time of issuing the card. Banks are reducing the credit limit of customers who are holding a large number of cards.
All these steps are taken to avoid the defaults that are rising due to the financial turmoil across the globe.
Earlier also banks reported that they were going slow in their credit card business.