ICICI Bank’s credit card division has been in the news recently – for the wrong reasons. There have been controversies surrounding its recovery agents and the methods they have used to get the bank’s money back. The courts, regulators and the media have been engaged with this issue during the past few months.
The bank has nearly 9 million cards in an industry that has about 24 million credit cards. The industry is growing fast and new players are getting into the fray.
How is the credit card market growing? Is there a sign of the slowdown that we hear in other sectors of the economy?
The credit card industry has about 24 million cards. If you take unique customers, (since many have two or three cards), I would put it at about 18 to 19 million – even that is bullish. The industry is growing at 22-25 per cent. It used to grow much faster.
New players such as Barclays and LIC are getting into it. We genuinely believe the field is open for much greater growth.
Why are interest rates not coming down as more players enter the market?
As the market matures, the interest rate (rack rate) should become much more flexible as we go along. You will see new products with different types of rates and features.
The reason you are still not seeing them is that the credit bureau is in its infancy. As it becomes stronger and as pricing becomes risk-based, the volumes will also grow. A lot of people do not revolve (their credit limit) today because of the cost.
Spends on credit cards seem to be at about Rs 30,000 per annum per card (or about Rs 2,500 per month). Why is it low and doesn’t seem to be growing fast?
That is an overall average. We have to categorise the market into 3 broad categories — high-end evolved customers (who average Rs 1.5 lakh per annum), the middle and the lower segment. The higher segment is pushing the average up. At the lower end of the segment, the spends are only in the range of Rs 10,000-15,000.
Do you see any danger of more people falling into a debt trap?
I don’t see that happening. Banks are very conservative here compared to the UK for instance. Yes, there would be those who are over leveraged. But we are trying through education, building awareness and transparency to convey the message that there is a difference between the flat rate of interest and the revolver rate. We are telling them, please understand what you are getting into. Don’t be naïve. As a culture, Indians don’t read — forget the fine print, even the core print. Please understand what you are getting into. In the developed world, education is mandated. We have started that process of trying to educate the customer.
How do you think you can avoid the controversies that surround your recovery agents and the methods they employ?
There is a trend of change on the recovery side, from unorganised sector to an organised sector. This is happening at the ownership level of the agencies. But at the agent level, we still don’t attract good people — it doesn’t have the status as an industry.
But where things are within our control such as call centres — we are managing it well by ensuring all calls are recorded. People are monitored closely because technology helps you do that. When a customer has skipped a payment (sometimes because of records not being updated), we treat it as a service issue. But when it becomes a question of intent to repay, not capability, we have no option but to hand it over to an agency. I can only say now service is the problem. One or two cases turn negative. We are sorry about it. We condone it. But if you look at the total number of complaints — it is in double digits — compare that with the total base of customers of 25 million. If we take 3 per cent as NPA, then we have about 7.5 lakh customers who have collection issues. I have got only about 50 complaints. When these things happen to go overboard, we are unhappy.
How much has the credit bureau helped since its launch?
Tremendously. What it tells us is whether a customer has defaulted or not. It doesn’t tell you whether he is good or bad. That is our judgment. Till now we had only our own scorecards and tools. Now, we get an external reference point. I wouldn’t start counting the benefits immediately.
Some cases that we would have rejected earlier, I am able to take a call now. Some cases where the behaviour in my book is good — but past behaviour with someone else is bad — I get to take a second look. Till now I could judge only ICICI Bank customers. Now I can do that with the other customers.
The credit bureau, as it becomes stronger, will help bring in more controls in terms of responsible lending. We hope one or two more will come in and there is healthy competition. They will give better output and that will help banks make better decisions.
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