Credit card usage up, outstanding payments zoom 39% a year after demonetisation

Following demonetisation, more and more people are making use of credit cards if data released by Reserve Bank of India (RBI) is to be believed. There has also been a spike in the amounts that the card holders collectively owe to banks. As per RBI data released on Tuesday, total credit card outstanding surged from Rs 43,200 crore at the end of September 2016 to Rs 59,900 crore in September 2017, registering an increase of 39 per cent.

When compared to the outstandings two years ago, the rise is whopping 77.4 per cent cumulatively. The cash crunch that followed demonetization led to people resorting to digital technologies for making payments.

Besides increase in the outstanding amount of credit cards, the number of credit cards too has risen. By the end of August 2017, the number of credit cards stood at 32.65 million against 26.39 million at the end of August 2016.

Credit card outstanding is the amount that is owed to the banks. Banks charge anywhere between 1.5 percent and 3.49 per cent per month on the outstanding balance.The high interest rates are attributed to the higher incidents of defaults in this segment.

Besides registering an increase in credit card usage and outstanding amount on it, banks have also witnessed loan growth in housing and personal loans in one-year period.

The personal loan portfolio of banks grew from Rs 3262 billion at the end of September 2016 to Rs 4468 billion at the end of September 2017, registering a growth of 19 per cent. Advances to housing sector too surged from Rs 8058 billion to Rs 9086 billion in one year period, the RBI data revealed.

However, loans for consumer durables has witnessed a fall from Rs 195 billion to Rs 178 billion in one-year period.