Financial institutions in India by 2014 will issue a combined 28 million credit cards, which would represent a 13% increase from the 24.7 million cards they issued as of March 30 this year, according to a new research report released Dec. 13.
Credit card penetration is much lower in India than in developed countries and in some other developing countries, such as China, according to Shushmul Maheshwari, president of India-based market trends research firm RNCOS E-Services Pvt. Ltd. and the lead author of the report.
“Per our research, just over 20% of the affluent people have credit cards in India as compared to more than 80%” in such countries as the United States and United Kingdom, or Hong Kong, he tells PaymentsSource.
Among the significant obstacles to adoption, most consumers in second- and third-tier cities are unfamiliar with credit cards, Maheshwari says. In addition, those who do use credit cards use them sparingly.
According to the RNCOS report, Indian shoppers make only 1% of their total purchases using credit or debit cards, which compares with the 9% global average. Total monthly bankcard spending averages less than 3,000 rupees (US$66 or 50 euros) per card, the report notes.
This is beginning to change, as consumers are becoming familiar with using credit cards to pay for travel, dining and jewelry, Maheshwari says.
Meanwhile, charge-offs have been going up in India, to 50.9 billion rupees in March 2009 from 28.5 billion rupees a year earlier, he says. “Furthermore, the defaults in the credit card industry are up 70% to 100%” over the past year, Maheshwari adds.
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