Lack of credit monitoring hits card repayments

MUMBAI: The lack of proper credit monitoring systems in India, coupled with exponential growth in credit card issuances, has resulted in an increase in late repayments for large players like Citigroup, according to officials. The issue has been dragged into the limelight again, with Citigroup���s head of international credit cards, Ed Eger, commenting in Hong Kong that the bank���s Asian credit card operations are doing pretty well, with the exception of India.

Bank officials have blamed the lack of a robust credit monitoring system for the rise in delinquencies. Agency reports on Wednesday quoted Surath Chatterjee, head of card products for Citi���s Asia-Pacific operations, as saying: ���The lack of an agency to assess credit-worthiness in tandem with rapid growth has led to late repayments by some Indian card customers.��� While the official spokesperson for Citi���s Indian credit card operations could not be reached, sources familiar with the matter said: ���Banks will continue to face such issues till the time a robust credit bureau is set up.���

Citi was the leading player in the credit cards business in the country until recently. However, it has lost ground to domestic competition from ICICI Bank, HDFC Bank and State Bank of India. With the rise in competition, card issuers have been issuing cards free of charge and in the process, compromising on the required due diligence. In fact, the central bank has also recently come down heavily on banks, which have been issuing unsolicited credit cards and have not been transparent with their charges. Credit card delinquencies have also risen as a consequence of rising interest rates and inflation in the recent past. Further, the lack of formal credit monitoring has enabled delinquent customers to obtain cards from various banks at ease.



At present, banks report delinquent customers to CIBIL (Credit Information Bureau of India) ��� the country���s only functional credit bureau ��� but clearly, bankers are not entirely satisfied by the way it has been functioning. Credit bureaux play a major role in developed economies, as they draw up complete borrower profiles for each individual, making it almost impossible for a delinquent customer to access credit from other banks as well.

Earlier this year, the finance ministry and RBI had drafted guidelines for setting up of private credit information bureaux in the country, which prompted foreign players like Experian to set up shop here. According to recent reports, IDBI Capital and CARE (Credit Analysis and Research), have also joined hands to set up a credit information bureau in the country.