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Credit card numbers shoot up 30% to 14 million

Average credit card spend in India has seen a marginal increase of just 1-1.5% in the last one year. In contrast, the credit card industry — in terms of number of plastics — grew at a phenomenal 30% in 2005-06 to 14 million.

According to industry estimates, the credit card user continues to spend just about Rs 2,000-2,500 a month on an average. Despite rising consumerism, the total card spend in 2005-06 was more or less flat at Rs 18,000 crore compared to Rs 17,500 crore the previous year.

Industry analysts said, a major reason for the poor growth in average spend was the huge number of inactive cards. Over 40% of the total cards pushed into the market by credit card issuers or 5.6 million cards were inactive.

Vijay Mehta, director, Credit Card Management Consultancy, said most card issuers were focusing on “arbitrary distribution” of the product primarily in the urban markets. “Often, people hold multiple cards, but prefer to use one brand. This trend is causing damage to the industry,” he added.

S.P. Garg, managing director, Bobcard, a subsidiary of Bank of Baroda, said the industry must focus on increasing spends and encourage a shift towards cashless transactions. For this, card companies must target first time users.

According to Mr. Mehta, cash is still the most prevalent and important mode of payment for people in India. “The trends on spends is also linked to the culture here, and people prefer to undertake all their transitions in cash,” he said, adding that in other developed markets like the US and the UK, the consumers prefer swiping the plastic.

Analysts also said that the level of bad loans in the credit card industry is around 6%, which is a major cause of concern. “Therefore, while devising ways to increase the spend, card issuers and banks must also keep in mind that recovery should be on track,” they said.

(www.financialexpress.com)

 
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