In the last three years, the usage of the Credit card has risen significantly in the country.
The demand is mainly driven by the increased consumer spending while growing popularity of digital payments.
Spike In No Of Credit Card Defaulters
In the meantime, gross NPAs rose from Rs 5,250 crore in December 2023 to the current level as per the RBI data.
This represents a steep rise of nearly Rs 1,500 crore, amid a slowdown in the economy.
In the meantime, the non-performing assets (NPAs), or the amount defaulted by customers, in the credit card segment have also risen by 28.42 percent.
It has risen to Rs 6,742 crore during the 12-month period ended December 2024 represented by the latest Reserve Bank of India data.
Further showing that gross NPAs rose from Rs 5,250 crore in December 2023 to the current level, a rise of nearly Rs 1,500 crore, amid a slowdown in the economy.
In turn this would result in 2.3 percent of the gross loan outstanding of Rs 2.92 lakh crore in the credit card segment of commercial banks in December 2024.
While in the previous year, it stood at 2.06 percent of Rs 2.53 lakh crore credit card outstanding m.
It’s a significant change as the credit card NPAs have shot up by over 500 per cent from Rs 1,108 crore as of December 2020 as per the data revealed in a reply to the RTI request which was filed by The Indian Express.
Significant Increase in NPAs In Credit Cards
Segments
The development came at a time when banks managed to bring down overall gross NPAs from Rs 5 lakh crore (2.5 per cent of advances) in December 2023 to Rs 4.55 lakh crore (2.41 per cent) by December 2024.
It appears that Indian banks became successful in reducing NPAs, or loans defaulted by borrowers, over the past two years.
But in a closure look, there is a significant increase in NPAs within the personal loan and credit card segments.
Basically, it represents a spike which coincides with an increase in borrower indebtedness further casting a shadow over the sector’s progress.
It is noteworthy here that the Credit card outstanding is unsecured in nature and it carries high interest rates.
Normally a loan account becomes an NPA when its interest or principal installment is more than 90 days overdue.
In case a customer delays repayment of his credit card bill beyond the billing cycle then the bank charges a high interest rate of 42-46 per cent interest per annum on the outstanding dues and his credit score also plummets.
Here, outstanding is the amount which is due from customers once the interest-free period offered by banks ends.
It appears that the customers are luted towards the credit card segment as they offer incentives like rewards on higher spending, loan offers and lounge benefits.
According to the bank officials, “Customers should realise that if they keep card dues beyond the interest-free period, they end up paying an interest rate of up to 42 per cent in some cases. It will put them in a debt trap.”
Earlier, the RBI had increased risk weight on the exposure of banks towards consumer credit, credit card receivables and non-banking finance companies (NBFCs) by 25 per cent up to 150 per cent during November 2023.
The central bank’s move is aimed to address build-up of any risks in these segments.
Summary”
Credit card usage in India has surged, but so have defaults. NPAs in the credit card segment rose 28.42% to ₹6,742 crore by December 2024. Despite overall banking NPAs declining, defaults in unsecured credit segments like credit cards are rising sharply. High interest rates and growing consumer debt raise concerns about financial risks and potential debt traps for borrowers.
