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Coronavirus lockdown puts March credit card spends in negative territory

The credit cards business has been showing the highest growth of over 20 per cent year-after-year, but negative growth in the last month of financial year is clearly on account of the COVID-19 lockdown

twitter-logoAnand Adhikari | May 1, 2020 | Updated 02:52 IST
Coronavirus lockdown puts March credit card spends in negative territory

The first six days of coronavirus lockdown in the month of March had an impact on credit card spending, which is related to impulsive buying, in terms of a lower outstanding amount of Rs 2,844 crore between February 28 and March 27, 2020, the reporting days for Reserve Bank of India (RBI) sectoral deployment of credit.

This figure is without the 20 per cent growth shown by the card business for the entire industry. In fact, card holders continue to use cards for online purchases, but a large part of purchases happens offline for the card industry.

The credit card business has been showing the highest growth of over 20 per cent year-after-year, but negative growth in the last month of financial year is clearly on account of the COVID-19 lockdown.

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The month of March had first six days of lockdown, which started from March 25 for 21 days. There was a weekend in March end, which normally sees people eating out and making purchases in malls and other stores. But that week turned out to be a big loss for the credit card industry. Figures for April are not out yet.

SBI Card recently disclosed that the average run rate of retail spends for the last 15 days of March (including six days of lockdown) were lower by 31 per cent when compared with the first 16 days of March.

The credit card outstanding for the entire industry slipped from Rs 1.10 lakh crore in February 2020 to Rs 1.08 lakh crore in March 2020. However, the card outstanding grew by 22 per cent in the entire year of 2019-20.

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But the figures for April will show a big decline. There are multiple reasons for that, apart from lower or no spending.

In post COVID-19 era, banks are already reviewing credit card limits as well as cash limits. There are instances where banks have reduced the limits on account of future delinquencies. In the last five years, unsecured loans, including personal loans and credit cards, have seen the highest compounded growth of more than 20 per cent.

While the banks have given the cards mostly to salaried customers, the risk has increased manifold due to slowdown, job losses and salary cuts.

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