February 15, 2010 by akhilendra
Credit crisis
In the current scenario, when interest rates are soaring high & inflation is in double digits, credit card issuers are taking extra care while issuing credit card. Recently, world has witnessed the worst credit crisis. Defaults were among one of the prime reason behind collapse of the financial institution in US. This has made bankers to think many times before lending money, in any form. We use home loans, car loans, two wheeler loan, education loans & unsecured credit cards & personal loans. Credit card is one of the most common forms of lending money.
Credit card industry has grown with a rate around 35 % in India. People prefer credit card for the purchase of common things, as it helps in deferring the cash payment. Though, in India, usage of credit card is less than other countries like, china, Malaysia, etc.
Consumer in India spends a average of 4000 per month through credit card. This use is continuously increasing. As the usage is increasing, banks are become extra conscious about risk associated with unsecured loans. Banks have become skeptical at current moment as economy is slowing down & prices are going up. Banks are expecting an increase in default rates. As inflation has moved high, money is getting eroded from the pocket of consumer.
Interest rates on all kind of loans have gone up, be it home loan, unsecured personal loan, or any other form of loan. Interest rate with high inflation will have a lethal impact on the paying capacity of the customer. We are paying more for each & every things so ultimately it’s reducing the disposable amount from our pocket. Banks are now looking at bringing some changes to their strategy of risk assessment. They are focusing upon the high income group & very selective about mid income group. But, as these groups have their own expenses which are quite high then low income group, so banks can face problems in that segment also. Though, chances will be less.
User should use the credit with responsibility. One should not spend more than the paying capacity. Interest rates are very high, so they will hit hard if someone fails to pay at time. If one cannot pay at time, then it’s better to go for balance transfer. Try to maintain a good credit history. It helps in getting a new loan. Loans are integral part of today’s life. But we should not take things for granted. We should try to avoid unsecured loans, as the interest rates are higher. But, if there is any need, we should plan things as per our affordability. Best way to counter risk is to take a insurance plan. So, under all circumstances, things should remain under control. Loan in any form is a loan i.e. a liability.
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