6 million credit cards cancelled in 2009-10

Source: BL May 13,2010,N.S. Vageesh

Rising defaults, tighter norms make banks wary.

Banks cut down sharply on issuing credit cards and also closed a number of cards in 2009-10. Six million credit cards or about a quarter of the total number of cards a year ago went out during the last fiscal.
The number of cards in circulation as of March 2010 was 18.3 million, a level last seen about five years ago, data from the Reserve Bank of India show.

SLIDE STARTED TWO YEARS AGO

The slide began just about two years ago, after the credit card industry touched a peak level of 27 million cards in June 2008. In the next nine months, the industry cut about three million cards.
The pace then accelerated last fiscal particularly in March 2010, when nearly two million cards went out of use.

Rising defaults in the credit card industry as well as unsecured personal loans portfolio by customers as a consequence of the slowdown in the economy a year ago forced a number of banks to rethink their growth strategy. Besides, regulatory warnings and court strictures about aggressive recovery practices of many banks also forced them to go slow in this business.

DE-RISKING EXERCISE
Apart from cutting down new issuances, banks also began to cut credit limits for existing customers as part of a de-risking exercise.

Accounting rules that required banks to set apart more capital against unused credit limits also forced banks to cull out inactive and risky cards.

Some of those measures are reflected in the 4 per cent drop in card spends in 2009-10. Total credit card spends fell to Rs 62,852 crore.

TOP GUN PIPES DOWN
Reflective of the decline in the card industry, ICICI Bank, the top card issuer, cut the number of its cards by a third during the last one year.

Today, it has about five million cards against a peak of about nine million cards two years ago.
Tighter norms

As part of its tighter norms, the bank issues cards very selectively — only to customers with whom it has a long-standing relationship.

At its peak, the bank was issuing over two lakh cards a month.
That's down to less than a thousand a month now.

The days of having unsolicited credit cards thrust on you are now over. In fact, getting a card may actually become a bit difficult!