Nearly a year after Prime Minister Narendra Modi's much-debated demonetisation, India has witnessed an exponential growth in using credit card.
Nearly a year after Prime Minister Narendra Modi’s much-debated demonetisation, India has witnessed an exponential growth in using credit card, according to Indian Express report. There is rise of outstanding balance of 38.7 per cent during the 12 months ended September 2017, according to Indian Express report. It has been learnt that the total credit card outstandings surged to Rs 59,900 crore at the end of September 2017, against Rs 43,200 crore in the same period last year, according to data released by the Reserve Bank of India (RBI) on Tuesday. The outstanding is money spent by card holders and not repaid to the card company or bank.
In fact, card outstandings have shot up by 77.74 per cent in the last two years, from Rs 33,700 crore in September 2015. The rise in card usage was more pronounced in the last 12 months as the banking system witnessed a shortage of cash during the November-January period of fiscal 2016-17, after the government and RBI withdrew Rs 500 and Rs 1,000 notes from circulation, according to Indian Express report.
According to the RBI, the number of credit cards also rose sharply from 26.39 million in August 2016 to 32.65 million in August 2017. Banks normally charge an interest of 3.49 per cent per month (41.88 per cent per annum) on card outstandings. This means banks should earn an interest of close to Rs 2,090 crore on the outstanding amount of Rs 59,900 crore. Besides this, banks also charge 18 per cent GST on the amount. Interest rates are high on card outstandings as incidents of defaults are very high in the segment, said a bank official.
Yesterday, there is improvement in India’s ranking in the World Bank’s ‘ease of doing business’ report to 100th position, bankers and experts today expressed hope that implementation of the GST will strengthen the country’s position in the future. “Going forward, GST’s incorporation in next year’s assessment will provide another significant leap in doing- business rankings for India,” Yes Bank managing director Rana Kapoor said in a statement. It is to be noted that the latest Ease of Doing Business report by the World Bank released today did not take into consideration the implementation of Goods and Services Tax (GST) from July 1, 2017.