Where are the pushy credit card issuers? Banks cut issuance of credit cards due to lower use, falling profits

About 80% of users of credit cards in India do not pay any interest to banks, by using the grace period, reveals a senior RBI official

Ever wondered why there are fewer calls from telemarketers offering you a platinum, lifetime free credit card? It has nothing to do with the Do Not Disturb (DND) facility from telecom operators. Credit cards have become unprofitable, especially after various banks suffered huge delinquencies in 2005-07, the boom years. Since the bankers or card issuers are not earning much money on credit cards, you now have to really struggle to get one.

Speaking at a seminar on banking services, organised by Moneylife Foundation, Kaza Sudhakar, chief general manager, customer services department, Reserve Bank of India (RBI) said, "Earlier there were complaints that I don’t want a credit card, now there are complaints that I am asking for a card and banks are not giving one. That’s because credit cards are not a profit-making business. Banks are losing money on credit cards."

On an average, there are higher interest rates associated with credit cards—ranging from 1.5% to 4% per month. However, this has not deterred people from opting for a credit card, simply because it gives a user the much-needed flexibility to repay. Credit cards also come with a grace period, where the user can pay his credit card balance in full within the specified time period which can go up to 45 days.

"There may be higher interest rates associated with credit cards, but about 80% of people don’t pay interest charges on a credit card (They may be using the grace period smartly, thus avoiding interest),” said Mr Sudhakar.

According to reports, there are about 26 million (2.6 crore) card users in India with an average person’s wallet containing at least one debit and credit card. However, out of these cards, only 50% are active or in use. Out of the active users almost 80% or about 1.04 million (10.4 lakh) users are not paying any interest on their credit cards, leaving all the issuers with just 260,000 (2.6 lakh) users from whom they can earn some money.

A few years ago or before the 2008 recession, people used to receive a lot of marketing calls for credit cards, free for life from any annual fee. Now the trend seems to have reversed. With the slowdown, many people defaulted on their credit card payments. Usually, during a slowdown, the number of defaults goes up rapidly. However, people don’t default on their home or car loans, since there is a danger of the creditor taking possession of the collateral. However, the same is not true for a credit card. Even if the user defaults on his credit card payment, the recovery takes much more time.

According to media reports, India’s second largest lender ICICI Bank Ltd has closed around 1.5 million credit card accounts, thus reducing the number of its total credit card users to 7 million. Other card issuers like State Bank of India, HDFC Bank Ltd, Citibank, HSBC and Standard Chartered Bank are also following the same route, but nobody likes to talk about it openly.

On the other hand, the number of debit card users is increasing. “We are seeing a shift in consumer behaviour as debit cards take on a greater role in everyday spending. More places that were traditionally cash only—from rail operators, to restaurants to retailers—are now accepting payment cards, so consumers can enjoy convenient access to their funds by using their debit cards with a level of control and protection not offered by cash,” said Uttam Nayak, country manager, South Asia, Visa.

Echoing the same sentiment, Piyush Khaitan, managing director of transaction management company Venture Infotek said, “Banks are going slow on credit card issuance and have been promoting spends through debit cards by offering various incentives to consumers such as loyalty rewards, discounts by select retailers and cash-back options. The increasing acceptance of debit cards at both physical and online merchants is also driving spends through debit cards."

User

COMMENTS

JAI TILAK SINGH

7 years ago

I opened an account in one of the reputed private banks for convenience of trading in stocks as well as withdrawing money whenever I need. The sales officers called me time and again for new credit card. I explained to them that I seldom use the present credit two cards and I DO NOT NEED ANOTHER ONE. Since they persisted I agreed to apply to the fresh credit card. An executive visited my residence, took all my details, and to this date he has not contacted me nor the bank has written to me anything about the credit card issuance. As such I have a credit limit of 3.85 lacs with two of my credit cards, which I keep it for emergencies and it is more than sufficient in emergencies. The question is, the bank should have informed me for not issuing the card or I do not know if the information I had provided is being mis-used.

Chetan Bordawekar

7 years ago

The main reason behind increasing Credit Card default is absence of adequate laws. Today If somebody defaults any bank & change his house, mobile number then How bank can trace him? In fact in my friend's case, ICICI Bank used fake email address of Vichare Courier & sent a mail to my stating that his important document is lying with Vichare Courier & asked him to give his new address & contact no. He immediately sent the details assuming that Vichare courier would deliver his document, instead he had to welcome Recovery Agent of ICICI Bank at his new address. These banks always give threat of black-listing name in CIBIL records. If anyone decide not to take loan/ Card in future then How he will get affected?

Srinivasalu

7 years ago

Hi,
It's not true, as by issuing credit cards bank are not making any money during interest free 50 days period, for user information on every usage bank deduct around 1.5% as service charge balance 98.5% only paid to merchant....

REPLY

Chetan Bordawekar

In Reply to Srinivasalu 7 years ago

@Srinivasalu: I don't agree with you. Many Merchant Establishment charge 2% extra on any purchase. this is because they recover this short-fall from consumer. Ultimately Consumer is always looser.

Ombudsman to get tough with misbehaving banks

The Banking Ombudsman is not in favour of banks appealing against its decisions; threatens to convert one-off cases into all-encompassing class action suits

Despite not being a quasi-judicial body, but a scheme for grievance redressal, the Banking Ombudsman (BO) derives enormous power from its ability to extend a verdict into a full-blown class action suit. The BO, which is an expeditious forum to bank customers for resolution of their complaints, is known to take a tough stand against gross violations of customers’ rights.

Now, the BO has frowned upon banks that consider an appeal against its verdicts. During an interactive session on banking services organised by Moneylife Foundation on Saturday, Kaza Sudhakar, chief general manager, customer services department of the Reserve Bank of India (RBI) vehemently discouraged banks from appealing against a decision given in favour of the customer. If a bank were to do so, the BO would consider extending the particular complaint verdict into a class action suit, applicable to the entire banking fraternity.

Mr Sudhakar said, “We are absolutely not in favour of any appeal by bankers against decisions taken by the BO. It is simply not expected. If the bank appeals, it is a case for a class action suit—as simple as that. If the appeal is not upheld, you are done.”

He cited the example of a particular complaint against State Bank of India (SBI), where repeated complaints from one customer about delay in pension payments forced the RBI to take a tough stand on the matter. The outcome was that the central bank issued a circular across the banking system, directing banks to make good the payments immediately, along with penal interest to the customers. “It was only that one person who persistently knocked on the RBI’s doors. Because the bank appealed against our decision, we had to scale the issue across all banks.” This resulted in benefits to nearly 65 lakh customers in the country. Moneylife was the only media house to reveal the action taken by RBI against banks delaying pension payments. (see here and here).

While the BO has the power to award exemplary damages in extreme cases, it is not a frequent occurrence. Mr Sudhakar pointed out that almost 50% of the complaints with the BO are non-maintainable due to a variety of reasons. Out of the remaining, almost 70% are resolved within one-two months.

Mr Sudhakar also criticised banks for the increasing number of cases where housing loan documents of customers were getting misplaced at the banks’ end. He said, “We are completely sympathetic towards the customer in these cases. This is simply not tolerable, and we will be harsh on such banks. Loss of housing loan documents is like a permanent defect in title of the customer.”

OP Agarwal, BO for the States of Maharashtra and Goa, was also present during the workshop. He also put in some words of caution for the banks. “We strongly urge banks not to keep the complaints pending beyond an acceptable time limit. Around 70% of the complaints with the BO get resolved within one or two months. In some rare cases, redressal takes more than three months.”

Mr Agarwal also pointed out that banks are required to disclose in their annual report details regarding complaints filed against them. This should include the nature of complaint, award against complaints, time taken for reverting back to the customer, etc.

User

COMMENTS

Hishaan

5 years ago

Dear Madam, In my case Indiabulls Housing Finance Ltd. after giving me a Loan against Property @ 14.5 (floating rate) in 2007 starting increasing EMIs continuously after short intervals and now they are charging me 22% interest calculated EMIs. I really need help in this matter. Hishaan +919717082128

Rahul D Jhaveri

6 years ago

I have PPF a/c. with SBI, Nepean Sea Road Branch, Mumbai 400006, in the names of 2 HUFs of which I am the Karta.

The PPF a/c. has been operative since more than 25 years...
It was renewed for a period of 5 years on 01.04.2007 by the SBI Bank. They have accepted Rs.70,000/- every year since then (up to 31.03.2010).
They have also credited interest for the original amount as on 31.03.2007 + Rs.70,000/- deposited during 2007-08
on 31.03.2008.
Similarly for 31.03.2009 and 31.03.2010

Now the bank manager says, as per the Govt. notification, they will not give me interest for 2007-08, 2008-09 and 2009-10 and also interest till date for 2010-11 !!!!

They say the notification was effective from 01.04.2005. But then WHY they renewed my PPF a/c. on 01.04.2007 ?
WHY they accepted Rs.70,000/- every year since 01.04.2007 ?
And WHY they credited interest to my PPF a/c. on every 31st March AFTER 01.04.2007 ???

Please guide me what should I do in the matter to get justice...

Thanks

REPLY

dinesh joothawat

In Reply to Rahul D Jhaveri 6 years ago

I am facing the same problem and i have positive results.
pl be in touch where more than 100 people has jonted the same.
thanks
Dinesh joothawat CS CA LL b gen
09323049764

wise customer

7 years ago

always get the payment for credit cards picked up from ur office or home after receipt .

second option :

take an acknowlegement on the photocopy of the chqs to be dropped at bank . hdfc bank provides the same , plz do avail this facality

a unhappy cvustomer

7 years ago

dear sir ,

the relationship manager of the account holder at icici bank gurgaon sec 14 .gurgaon are very very good

They only comeor call or visist for business - cash component ,

But when u call them for service they are as usual always on a busness calls , even do not attend call , mobile are ringing ..........ringing....

will the ceo try to change thei attitude ..!

manjeet singh ghai

7 years ago

Dear Sir ,

My card no is 4317 5750 7989 1124 .

PLZ INFORM ABOUT THE DETAILS OF THE TOTAL OF ALL CHARGES BEFORE 17 MAY 2008.

THE AMOUNT OF RS. 9075 WHICH IS SHOWN BY U AS OUTSTANDING IS THE TOTAL OF INTEREST & LATE FEES WRONGLY DEBITED TO OUR ACCOUNT EVEN WHEN THE PAYMENTS WERE DROPPED ON TIME IN THE DROP BOX.

MAY I PUT ON RECORD THAT THIS A NORMAL PRACTICE BY MOST CREDIT CARD COMPANIES THESE DAYS.


NEW USERS OFTEN FALL PREY TO THESE NOTOROIUS PRACTICES & TACTICS BY BANKS.

FINANCIAL MEDIA CHANNELS - CNBC ......OFTEN REPEATEDLY ADVISE CREDIT CARD HOLDER / USER TO BE VERY VERY CAREFUL & CAUTIOUS WHILE USING & DEALING WITH CREDIT CARDS COMPANIES .....!

I ENJOY EXCELLENT CREDIT HISTORY WITH 7 OTHER CREDIT CARDS COMPANIES....NOT A SINGLE PENY OF CHARGES SINCE 2000, ITS ONLY WITH SBI CARDS I HAVE BEEN HARASSED WITH NO FAULT OF MINE.

I HAVE BEEN OFTEN THREATENED OVER TELEPHONE BY VAROIUS TELECALLERS THAT TO AT ODD HOURS.

I HAD SENT OVER 20 EMAIL WHICH WERE NEVER REPLIED TO EARLIER....!

I SHALL NOT PAY A SINGLE PENNY OUT OF MY HARD EARNED EARNINGS .....!

May I also mention that I have request all my friends & relative throgh LinkedIn & other social networking sites to refrain from using, stop using the sbi cards, further more surrender the card .

I HAD REQUESTED Mr. Dua HOLDER OF
sbi card no. 4317 5750 3517 5646 , WHO HAS requested for card cancellation , which i suppose the same request has been acceded to.

i therefore request Shri OP Bhatt Ji to intervene to close this long over drawn matter good for nothing .

Regards,


Manjeet Singh Ghai
09811894400

cc: chairman,sbi
beware..network18online.com,

money life foundation

Shantilal Hajeri

7 years ago

To the best of my knowledge the decision of ombudsman is inding on the bank but not on the customer. Where is the question of appeal?

Amandeep Singh

7 years ago

I hope that these banks start behaving now..!!

vikas

7 years ago

BOs seems to be working quite effectively. This is my personal experience. Once I lost my ATM cum debit card issued by a private bank. Someone found it and misused it by the time I realised. I disputed the debit transactions in my account and put a claim. Claim was kept pending for months and then was rejected. I pursued it and threathed to approach BO / consumer court. One day I got a call from the branch manager and money was credited back in my account fully.

Avijit roy

7 years ago

It is a good omen that the Banking Ombudsman has taken a decision to be tough with the banks. The retails customers of banks, especially credit card customers, are huge sufferers. Most credit card issuing banks, till the other day, would coax and cajole unsuspecting customers into taking a credit card through unqualified agents. These agents sold cards assuring prospective customers of huge benefits and no costs. When there was an unintentional delay in making payment for card usage, the poor fellow would be made to feel like a criminal with unprintable threats etc.

I agree that many holders of credit card are intentional defaulters and these people are street-smart and normally get away. It is the unsuspecting type who gets caught in the web and is unable to extricate himself. The recovery agents employed by the bank are also trained goons who excell in extracting exorbitant amounts from the victims, by resorting to intimadation and threats.
I have come to know of an instance of a bank issuing a credit card in the name of a villager, who was a potter by profession, and didnot have the permissible income level. On default, it was found that the potter was the card holder in name only and had not recieved the card at all. It was in the possession of the local village tough who was a PEP and who used it for his personal needs. It proved that the card issuing bank did not do the verification properly and was negligent to that extent.

I understand that banks are going slow in issuing credit cards and to that extent it is good news. I do hope that the decision of the Banking Ombusman would make the bankers more customer-friendly.

K NARAYANAN

7 years ago

Most of the complaints of public sector banks could be sorted out at the branch or at best at zonal if they spare a little time to the nature of complaint.Of course they are nuisance customers(I don't believe in the philosophy that the customer is always right-it is only a slogan-otherwise there may not be many complaints).The banks can take the complaint and analyse it leisurely and inform the customer over phone -may be after a week or so except in very urgent cases.Any person who sits in authority always thinks(that incluses you and me) that he can treat the customer as he lilkes.As far as new generation banks are concerned the less said the better.The branch head advises you to email to the customer care centre where young boys and girls who do not know a,b,c,d of banking are sitting to sort out your complaints.They are faceless bankers.ICICI bank after paying a heavy price of "run on the bank"for their faceless attitude are now running a series of adverts "khyall aap kaa" where the employees are shown overdoing the customer care by chatting with an old lady till branch closing hours and spending time with a young kid giving him colour pencil to do drawings.Let them attend to genuine customer needs.

Tax of 1% on under-construction properties to extract Rs1,037 crore from Mumbai Metropolitan Region alone

The recent proposal of the State government to charge 1% for all under-construction properties will be passed on to the consumers, but will the beneficiaries get the money or will it be used for frivolous purposes?

The Maharashtra Cabinet cleared a proposal last Wednesday to charge 1% tax on all private under-construction property, ostensibly for the welfare of more than 20 lakh construction workers. This new tax has to be paid by developers, which means it will be eventually passed on to consumers.

Real estate research and rating firm Liases Foras had calculated that the amount raised under the new tax would be about Rs1,037 crore from the Mumbai Metropolitan Region (MMR) alone, taking into account 17 crore sq ft of under-construction property currently (for the fourth quarter which ended in March 2010) assuming a weighted average price of Rs6,100 per sq ft. There are a number of unsold properties in Mumbai; this new tax will again increase the unsold inventories in the city. The tax is proposed to be levied on both residential and commercial areas.
 
“Over time, developers may pass on the pressure of the 1% tax on to the consumers and property prices will also rise due to the new tax,” said Sunil Mantri, president, Maharashtra Chamber of Housing Industry (MCHI).
 
“The tax will be passed on to consumers. The proposed 1% tax on construction cost is not a big amount, but the construction cost is never revealed to consumers. It remains to be seen how the cost will be calculated, collected and used. The administrative work involved would be huge,” said Pranay Vakil, chairman, Knight Frank (India) Pvt Ltd.
 
The tax collected under this scheme will be used for workers’ welfare like insurance, training and scholarships for children. The Maharashtra Cabinet has set up a high-powered committee for this purpose; it has recommended creating a separate Board to initiate various welfare measures for them.
 
“Real-estate prices are already unaffordable in Mumbai and another 1% tax will add to the burden of the consumers as they are the ones who have to pay the tax at the end of the day,” said Pankaj Kapoor, founder, Liases Foras.

User

COMMENTS

Praful Vora

7 years ago

Is it not passe to mention that the new imposition will be passed on to the real Consumer-Buyer? Is that not how accounts and costing are done? All types of expenses are totaled to give a selling price to enable a certain net profit. So what is new about this. Such impositions have been going on since decades.
What should draw attention is, if there is any 'third party monitoring' to enable and verify that the money so collected is actually directed for the stated aim and purpose. The Construction Industry has been rather uncaring in improving the Quality of Life of the 'toilers' and the 'uprooted'. Their motto of: use-reuse-dispose has led to a number of vagrants and unemployed on the streets of the city. Let us focus on these, they usually get killed by illness or fast cars while they dwell on the streets of the city, unknown and uncared.

ashok Sharma

7 years ago

All taxes are ultimately charged to middle class flat buyer.
Govt should levy some tax on builder's profit and not on the sale value.
Like petrol pump , bulder should also disclose his inventory because builder on the first day booking says that all flats are sold but after 6 months he gives adevetisement in newspaper for fresh booking.govement must stop this speculative actitivity.
majority of real estate in mumbai are held benami by municipal engineers, state govt employees, senior tax officials and politicians of all party (they are divided among voters but united for this business)

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