Most banks are anticipating higher loss ratios and are building it into their accounts. Loss ratio indicates the portion of credit card loans not being paid by subscribers.

ICICI Bank, the country’s largest private bank and second only to the government-owned State Bank of India, in fact, has been less aggressive in increasing its credit card book. This shrunk from Rs 8,100 crore in the first nine months of 2007-08 to Rs 7,800 crore during April-December 2008. ICICI Bank, with about 7.5 million subscribers, has a 30 per cent market share in the credit card business in the country. The business had been growing at a phenomenol 30 per cent on an average during the last three years.

ICICI Bank’s strategy to check delinquency by slowing down on the credit card business itself bears from a conscious decision it took in the beginning of the year, says Chanda Kochar. In her first detailed interview after being named the Chief Executive Officer and Managing Director-designate of the bank, she told The Indian Express that the loss ratio on its credit card business has touched double digits this year.

“The increase in loss rates is here to stay,” Kochar said. “Individuals prioritise their repayment commitment during an economic downturn and paying credit card bill is last in the priority,” she noted, adding banks would have to build this into their calculations.

The total credit card outstanding for the industry as a whole jumped 69.3 per cent to Rs 29,359 crore in the 12 months ending December 19, 2008.