Credit card defaults on the rise

Credit card defaults across the industry have been on the rise for months, but are now starting to reach worrying levels.
Latest data shows that outstanding amount on credit cards has nearly doubled over the past year.
The outstanding amount on credit cards rose by 87% over the past year to Rs 26,000 crore.CRISIL estimates that 17% of this portfolio is now in default. The highest default rate among all loan and credit portfolios.
"Defaults in all the unsecured portfolios are starting to rise and the credit card segment is seeing the sharpest increase,” said Tarun Bhatia, CRISIL.
While rising defaults are the worst in the credit card portfolio, banks are dealing with higher non-performing assets in most of their retail portfolios.
CRISIL expects NPAs in the overall retail portfolio to rise to 4% over the next two year. Car and commercial vehicle portfolios are seeing defaults upto 4% of total portfolio, while defaults in small ticket personal loans have reached 9%, a figure, which could rise to 13% soon.
Experts say the situation is only set to get worse and interest rates rise and rising prices make it tougher for consumers to meet their monthly loan and credit card payments.
No wonder then that a cautious RBI governor has warned banks to be careful about rising defaults across the retail loan segment, a warning that banks are now heeding.
"At the industry level, I think in the last few quarters, you've seen signs of some deterioration at an over-all banking level. Well the credit card product is a higher-risk product, which is why it has a high yield as well, " added Paresh Sukhtankar, ED, HDFC Bank.
Bankers are scrutinizing every customer who walks through their door very careful now. Interest rates are rising and so are defaults. That means that not only is getting credit becoming more expensive, it’s also getting a lot tougher.