Credit cardholders are having a tough time as most card issuers are becoming stringent in their norms and reducing on the benefits availed by the customers.
Besides reducing the credit limit on the credit cards, card issuers are retaining the basic cash withdrawal facility, or lowering them. They are also restricting the reward programme connected with the credit cards. They are making a cautious move in this phase of slowdown because the delinquency rate is increasing in the industry.
Lenders including HSBC have reduced the credit limit and the amount of cash a card holder can withdraw, by more than 50% for some of its customers. Even the card arm of the Barclays group, Barclaycard has notified to some of its cardholders that the cash limit has been reduced to zero "to help manage the credit situation". The issuer has informed its customers through text messages and a customer care executive said that all the cardholders will witness a reduction in their credit limit.
Even, the largest credit card issuer in India, ICICI Bank is expected make similar moves in its credit card division. The bank is likely to lower cash limit and cash withdrawing limit in the coming weeks. Besides the issuer is also cutting back the rewards programme offered to its cardholders and it has already informed its customers about the withdrawal of certain benefits through the monthly statements. The Bank informed that ‘Xpress Rewards Programme' has been withdrawn for all credit cardholders but the basic reward programme can be still availed by the customers.
Similarly HDFC Bank has also informed its customers that ‘MyRewards programme' will be updated from next month. This information was too displayed through the monthly statements.
Following the slowdown, banks are calculating their unsecured loans again which comprise mainly of credit cards and personal loans and this is the reason credit card issuers are coming with such norms.
Banking analyst at Brics Securities, Deepak Agrawal said, "By reducing the credit and cash limits, the banks want to ensure that their exposure to unsecured loans is kept at a minimum and the risk of rising defaults is mitigated. As the chances of job losses increase, the customers are likely to go for aggressive spending on credit cards going forward. This raises the chances of higher non-performing assets (NPAs) in the banks' loan books, which urged the credit-card issuers to lower the credit limits."
The high level of delinquency in the segment may also induce banks to reduce the interest-free period on credit cards, said another analyst in the industry. From the past one year, the delinquency rate in the industry has more than doubled to over 10%. Also the banks are worried about a high degree of hike in the credit card rollover. The total credit outstanding increased by around Rs 13,500 crore to Rs 29,000 crore at the end of August 2008.
India has an overall credit card base of around 27 million and out of this over 9 million credit card holders belong to ICICI Bank alone.
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