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Card snoops go on the prowl

Mumbai, Nov. 17: Watch out before you dodge that credit card bill — there’s a loan-spy lurking behind the corner to spill the beans to others who could trust you.

As brazen credit card defaulters pile debts, their litany of misdeeds and personal fact-file are carefully tabulated, filed and shared in a common data-warehouse set up by a consortium of banks. The objective: to track down habitual offenders and blacklist them.

“The project is still at a pilot stage,” a senior Citibank official said. Taking the lead in setting up the army of spies are Citibank, Stanchart, HSBC and a few Indian banks like ICICI Bank. The Hyderabad-based Satyam Information Services will provide the software to store up the shady details and the murky facets of borrowers.

Citibank officials say though the “negative credit card bureau” is in infancy, all loans extended by them are made after sifting through the sheaf of inputs with Satyam. “We use the data available with the bureau to issue new credit cards, and while extending personal loans, car loans, housing loans,” the Citibank official said.

Banks share information to stop defaulters from taking lenders who have not known them so far for a ride. The system has paid off in developed countries, where Equifax, Trans Union, and Experian are well-known credit Gestapos.

Defaults in the credit card industry are endemic as borrowers switch banks. The delinquency — that some estimates put at 6-7 per cent of the total — explains why banks charge high interest rates, a senior official said.

Foreign banks lead the pack credit-card issuers, having notched up big market shares because of the first-mover advantage. “There are 6.4 million credit card users in the country and four million of those who hold debit cards,” the official said. Now, Citibank has 1.6 million credit and 8.5 lakh debit card holders in an industry growing at 25 to 30 per cent. It hopes to enlist two million credit card holders by December 2003.

Credit card defaults in India are a few percentage points higher than in developed countries. The problem is worse with credit cards due to their unsecured nature. While no bank is willing to divulge default figures, there are indications of a manifold increase.

The credit card bureau will ensure some sort of filtering as other players in the industry slam the door on the culprits. Significantly, the credit card business is booming despite an economic slowdown, and business here is touted as the fastest-growing in south-east Asia.

A little over 0.5 per cent of India’s annual personal consumption expenditure (PCE) is spent using credit and debit cards.

In Hong Kong, the same figures are 18 per cent at Rs 8,15,000 crore. India’s credit card volumes are Rs 8,500 crore. The credit card base in India has increased to 6.4 million, but average spend remains a measly Rs 28,000.

However, this percentage can only go up as ATMs, point of purchase (POPs) increasingly accept cards. Further recent moves to allow insurance companies to accept premiums through credit cards, and also payment of services of utilities like electricity distribution will increase the spends logged by domestic credit card users.

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