Risk element rising in credit card asset quality

New Delhi: The Reserve Bank of India (RBI) may have some discomfort on Personal Loan on Credit Card (PLCC) as it could lead to higher customer leverage and drive some customers into the debt trap, Emkay Global Financial Services said.

Amid the central bank’s current clean-up drive, card ecosystem players suggest the RBI may have some issues (e.g. customer KYC and data proliferation) around rising partnerships with Fintechs to onboard customers, and possibly may call for some rule-based guidelines from the regulator.

Factoring the aggressive growth in unsecured loans, including credit cards (particularly low-ticket CC) and rising customer leverage, the RBI had already raised risk weights on CC to 150 per cent from 125 per cent and, thus, forced players to temper growth/set aside higher capital, the note said. The RBI’s concerns are already manifesting via rising delinquencies across card players.