Half of credit, debit cards in India inactive

Nearly half of credit and debit cards in India were inactive, possibly due to insufficient resources in bank accounts and a holding of more than one card, a study has said.

A study by Edgar, Dunn & Company and India Cards Council has revealed that unlike in the United Kingdom and Australia where 90 per cent cards are active, there are only 56 per cent active debit cards in India.

"There is a very low level of debit card usage at POS (Point of Sale) compared to other countries. For example: 26 per cent of active debit cards used at POS versus 86 per cent in the USA and 45 per cent in Australia," the study said.

"The very low costs associated with new cardholder acquisition may indicate that insufficient resources are being applied to checking credit worthiness of applicants," it said.

Another reason could be because of insufficient  resources in cardholders bank accounts, it added.

Debit cards are primarily used for ATM withdrawals, to support cash-based transactions, EDC said.

In the credit card segment too, India only has 56 per cent active cards against 80 per cent in Australia and 75 per cent in Singapore, the study said.

Credit losses in India also are relatively high because of low level of transaction volume and value across the card base, EDC said.

A high level of inactive cards in the portfolio can indicate that customers are holding credit cards from multiple banks, it added.

"These credit losses take into account only delinquency and not frauds," EDC, Managing Director, Lance S Blockley said.

ICC, which currently has 50 banks (public, private and foreign) in India as its members, said there is a need for member banks to stimulate more transaction activity due to low transaction frequency on active cards.