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Credit card default rises by 14%
By Zhang Fengming |
May 19, 2010, Wednesday
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Online Edition
Online Edition
CREDIT card default in China rose 14.4 percent in the first quarter, the central bank said today.
The value of outstanding defaults of more than six months surged to 8.8 billion yuan (US$1.3 billion) at the end of March, the People's Bank of China said today on its Website.
"Bad loan risks on credit cards are rising on the growing defaults," the central bank said.
In China, defaults accounted for 3.5 percent of total outstanding lending on credit cards, up 0.4 percentage points from a quarter ago.
"The default rate is rising, but it's with still within control," said an industry watcher declined to be named.
In general, a default rate of 4.5 percent is acceptable in the United States, the birthplace of credit cards. In the worst time of the global financial crisis, the default rate in the US increased to about 10 percent.
The combined line of credit available on credit cards in China rose 42.9 percent year on year to 1.48 trillion yuan by the end of March, while outstanding credit jumped 50 percent than a year ago to 248.6 billion yuan.
"When banks accelerate their credit card issuance, it doesn't come as a surprise to see rising defaults," said She Minhua, a Haitong Securities Co analyst.
China is encouraging non-cash payment options such as plastic to boost domestic consumption and curb tax evasion.
And credit cards are expected to be the second most lucrative retail credit business for lenders by 2013, following individual mortgages, said McKinsey & Co in an earlier report.
"Bank card consumption has been a driver to boost domestic demand as the cards are gaining popularity among the public," the central bank said.
Banks in China have issued more than 2.2 billion cards, including credit and debit card, up 14.9 percent from a year ago. The growth was 4 percent down from a year ago.
Bank card penetration rose to 32 percent at the end of March, up 4.3 percentage points from the year earlier.
More than 1.67 million merchants had card payment machines at the end of March, a year-on-year growth of 7 percent. Automatic teller machines grew 3 percent to 221,600 in the period.
Meanwhile, the central bank yesterday issued a regulation on integrated circuit bank cards, with more security than the current magnetized cards.
The value of outstanding defaults of more than six months surged to 8.8 billion yuan (US$1.3 billion) at the end of March, the People's Bank of China said today on its Website.
"Bad loan risks on credit cards are rising on the growing defaults," the central bank said.
In China, defaults accounted for 3.5 percent of total outstanding lending on credit cards, up 0.4 percentage points from a quarter ago.
"The default rate is rising, but it's with still within control," said an industry watcher declined to be named.
In general, a default rate of 4.5 percent is acceptable in the United States, the birthplace of credit cards. In the worst time of the global financial crisis, the default rate in the US increased to about 10 percent.
The combined line of credit available on credit cards in China rose 42.9 percent year on year to 1.48 trillion yuan by the end of March, while outstanding credit jumped 50 percent than a year ago to 248.6 billion yuan.
"When banks accelerate their credit card issuance, it doesn't come as a surprise to see rising defaults," said She Minhua, a Haitong Securities Co analyst.
China is encouraging non-cash payment options such as plastic to boost domestic consumption and curb tax evasion.
And credit cards are expected to be the second most lucrative retail credit business for lenders by 2013, following individual mortgages, said McKinsey & Co in an earlier report.
"Bank card consumption has been a driver to boost domestic demand as the cards are gaining popularity among the public," the central bank said.
Banks in China have issued more than 2.2 billion cards, including credit and debit card, up 14.9 percent from a year ago. The growth was 4 percent down from a year ago.
Bank card penetration rose to 32 percent at the end of March, up 4.3 percentage points from the year earlier.
More than 1.67 million merchants had card payment machines at the end of March, a year-on-year growth of 7 percent. Automatic teller machines grew 3 percent to 221,600 in the period.
Meanwhile, the central bank yesterday issued a regulation on integrated circuit bank cards, with more security than the current magnetized cards.
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