The Reserve Bank of India (RBI) on Friday said it is worried over rising defaults on credit card payments that reflect gaps in the client selection process by banks and high interest rates.
If banks issue cards without proper scrutiny, there will be growth in defaults, RBI Deputy Governor V Leeladhar told reporters on the sidelines of a seminar organised by the Indian Banks’ Association.
Banks have to take into account paramters like financial capability while issuing cards, he added. The latest RBI data show that credit card outstandings rose 87 per cent to Rs 26,596 crore, with Rs 12,375 crore added between May 25, 2007, and May 23, 2008. Till May-end last year, the rise was 45 per cent.
Economists and bankers look at a sharp rise in the outstanding balances on credit cards with caution as the risk of default goes up.
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