Credit card market cracks modest rebound after sharp dip in March
Tuesday, 31 December 2013 02:09
The credit card market is showing signs of a modest revival in recent months, after suffering a sudden slip in March.
As per the latest Central Bank data, the active total card base in May amounted to 937,130 up from 926,649 in March when the industry saw the numbers dip substantially as opposed to February, which was a high 960,100.
Those tracking regular release of Central Bank data however observed that at one point in time the March card base was indicated at a high 966,399 but was subsequently revised to 926,649. Maintenance of the lower figure as well as similar numbers in subsequent months suggest there had been heavy cancellations in March and the high original figure was an aberration.
Despite the pickup in April and May, the total card base remains lower in comparison to the 2012 end figure of 952,256. The plunge in March was over 25,000 cards from end 2012 base.
The outstanding balance as at end May amounted to Rs. 46.25 billion, down from Rs. 46.4 billion a month before but up by Rs. 1.81 billion from end of 2012. At the time when March number was indicated at a high 966,399cards, the outstanding amount was Rs. 44.97 billion.
The mixed performance of credit card market has caused some worries within the industry. Some pinned the market scenario to difficult times experienced by consumer segments that use credit cards or those segments which graduated to using a card.Lower disposable income given the higher cost of living and overall lower than anticipated economic growth are other reasons. Trends in the credit card market apparently checkmate claims from the Government that the economy has expanded and per capita income is on the rise.
However, other analysts said the first half did experience difficult economic conditions but the economy and consumer spending picked up in the third quarter as shown by 7.8% growth in GDP, as against 4.8% growth a year earlier.
Last year the credit card market enjoyed a new high with an all-time record base nearing the one million mark and outstanding balance topping Rs. 44 billion.
The number of new cards issued in 2012 amounted to nearly 90,000 or 10.4% to 952,256. In 2011, the growth in the number of active cards was 11% or near 84,000. Last year also surpassed the previous highest active card base of 917,418 that prevailed in 2008. In 2011, the figure was 862,340.
The sustained high growth for the credit card industry for the second consecutive year came amidst challenging market conditions and consumer sentiments. In that context, industry analysts have commended the 2012 performance whereas in 2011 the growth was after the market contracted in 2010.
In 2011, credit card users benefitted from lowering of interest rates to an average of 24%.
In 2010, the average interest rate charged on credit cards ranged between a low of 22% and a high of 36 for cash and 22% and 26% on credit.