Axis Bank, Kotak Mahindra Suddenly Cuts Credit Limits By 90%: Banks Losing Trust In Customers?

Axis Bank and Kotak Mahindra Bank have reduced credit card limits of their customers upto 90% so as to reduce repayment risk.

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Credit Card Limit Slashed!

The private lenders have reduced the credit card limits of its customers between 30-90%. The customers living on credit due to salary cut or job loss are facing difficulties.

According to a report in the ET, Axis Bank has trimmed the credit card limits of nearly 2,00,000 customers with effect from April 15. According to Axis Bank’s quarterly report in December 2019, the lender had a 12.6% market share while it had 10.7% share in the total credit card spending.

Kotak Mahindra Bank has also reduced credit card limits of its customers.When enquired about the matter, a Kotak Mahindra Bank official told the business daily that this is a routine exercise.

Additionally he said, “Analysing credit worthiness and card spend behaviour of credit card holders is our regular ongoing exercise and is not unique to the current period,” the business daily quoted Ambuj Chandna, president – consumer assets, Kotak Mahindra Bank as saying. “Based on credit card spends and repayment data, we analyse credit limits of customers, and offer to increase a customer’s credit card limit or reduce the credit limit in certain cases.”

Ajay Srinivasan, director, Crisil Research, an economy and market research agency, said, “The correction in the credit card limit is a self-correcting process for banks. Since the credit limit is entirely at the bank’s discretion, it is the most obvious tool to lower business risk.” 

According to Reserve Bank of India’s (RBI) data, the outstanding amount on credit card reached an all-time high of Rs 1.1 lakh crore at the end of February, 2020, rising by 26% over last year. There were more than 56 million credit card customers in India at the end of January 2020. Credit card loans accounted for 1.2% of total bank credit in the first 11 months of FY20 compared with 0.5% in FY15. 

We hope this crisis will be lifted soon!

Customers Upset!

An Axis Bank customer from Mumbai maintaining anonymity told ET, “Credit limit on my Axis Bank Vistara card was slashed to just Rs 50,000 from Rs 5,00,000 despite paying dues on time. When I inquired with their customer care, I was told that it was a technical glitch that would be rectified in a few days.” 

Another customer who also didn’t wish to be identified said his limit was lowered to Rs 1.5 lakh from Rs 7 lakh.

A Kotak card customer said, “My credit limit has been revised to Rs 44,000 from Rs 75,000…the reason given is regular account review process.”