Interest rate on credit card rises

ICICI Bank increases its credit card interest rates from current 3.1% per month ( 37.2% annualized) to 3.40 per month (40.8% annualized)  effective from June 1, 2008. The Bank has one third of the market share. This is something which is unhealthy for the credit card industry.

In an industry high rates is sure sign of trouble. The rising interest rates could be because of the rising defaults. In card industry the default rates were 5-7% which has double now, says Shameek Bhargava, Managing Director, Head of Cards, Asia Pacific, Deutsche Bank, India.

It is very hard to understand why the card industry is in soup. When the economy is growing by 9% plus 15% growth has been found in wages and salaries for the past 3 years.

As reported by Business Line a credit card official who did not want to be named said, "About 80 per cent of due diligence is being done on their own by all major banks. A verification of data from CIBIL is being taken up on an optional basis. CIBIL may become popular only three to five years from now going by the present use."