Public sector banks (PSBs) had a bank card dangerous mortgage ratio of 12.7% at finish of September 2024, far increased than 2.1% reported by non-public banks, present Care Scores knowledge.
“Larger dangerous mortgage ratios in public sector banks might be attributed to the extra aggressive distribution of bank cards,” stated Sanjay Agarwal, senior director at Care Scores. “State-run banks promote monetary inclusion by extending credit score to a broader section of the inhabitants with restricted credit score histories, whereas non-public sector banks goal customers with stronger credit score profiles.”
Whole excellent bank card mortgage dues within the nation stood at Rs 2.9 lakh crore as on January 24, 2025, up 13% year-on-year, in accordance with the Reserve Financial institution of India (RBI).
The sector-wide total bank card dangerous mortgage ratio stood at 2.2% as of September 2024, in accordance with Care Scores.
PSBs account for about one-fourth (24%) of some 109 million bank cards in circulation. Amongst them, SBI Playing cards, BoB Playing cards and Canara Checking account for 94% of the full bank card outstandings of state-run banks, in accordance with RBI knowledge.
SBI Playing cards, the nation’s second-largest bank card issuer, noticed its gross credit score price rise to 9.4% on the finish of December 2024, whereas its gross non-performing asset ratio stood at 3.2%.
BoB Playing cards reported gross dangerous mortgage plus write-off ratio of 6.8% on the finish of December, although this was an enchancment from 9.6% in March 2024.
Publish-Covid Increase
The elevated stress in PSBs’ bank card portfolios stems largely from the post-pandemic growth in unsecured lending.
“A lot of the ache is coming from decrease ticket-size playing cards that have been issued primarily throughout September 2021 and October 2023,” stated Dhaval Gada, fund supervisor at DSP Mutual Fund. “It was a interval when aggressive stress from fintechs had compelled a few of these banks, massive PSUs in addition to mid-sized non-public lenders, to develop aggressively. Some gamers had additionally ventured into markets past the highest eight cities by easing underwriting filters.”
In accordance with analysts, after the preliminary rise in delinquencies throughout the first Covid-induced lockdown, fintechs launched progressive credit score merchandise that mimicked bank cards – equivalent to check-out financing for ecommerce purchases and purchase now-pay later choices – to push the post-pandemic ‘revenge spending.’
Throughout this era, state-owned lenders used their in depth department community to onboard new bank card prospects past the standard markets of metros and bigger cities, to compete with these fintechs and money in on the consumption growth pushed by pent-up demand. Giant non-public banks, although, have been cautious and restricted onboarding to current financial institution prospects.
Nonetheless, the RBI crackdown on fintechs affected the unsecured lending surroundings, business insiders stated.
“The regulatory crackdown on fintechs and, subsequently, on total unsecured lending, meant that prospects – primarily within the sub-Rs 50,000 class – couldn’t avail credit score services for rolling over,” a senior official with a mid-sized non-public sector financial institution stated on situation of anonymity. “At the moment, the stress is enjoying out primarily on this class.”
The worst is probably not over. Gada of DSP Mutual Fund believes the credit score prices within the card portfolio of PSU banks are but to peak out.
RBI had responded to emphasize within the unsecured mortgage section by rising threat weights on unsecured shopper credit score and financial institution credit score to non-banking finance corporations (NBFCs) on November 16, 2023. In early 2024, the regulator cracked down on fintechs issuing co-branded bank cards that didn’t prominently show the title of the banking accomplice.
“Mid-sized banks proceed to take care of warning and take a pause from their aggressive disbursement of playing cards,” stated Akshay Tiwari, AVP and fairness analysis analyst, BFSI, at Asit C Mehta Funding.