20 May 2024 06:18 am Views - 2346
Outstanding credit card balance of the licensed commercial banking sector has little changed in March from February despite an uptick signaling the trend that would follow as the consumers grow more optimistic about the economy. The interest rates have fallen to single digit levels.
The outstanding card balance has crept up by only Rs.62 million in March from its February levels to Rs.148.7 billion, but the first quarter still shows a contraction by Rs.2.7 billion.
While the credit card spend doesn’t show the full picture of consumer spending, the outstanding balance could see tangible movements from the second quarter onwards as people were taking more trips making use of the offers and discounts offered by banks for their credit cards.
Outstanding credit card balance doesn’t necessarily reflect the true consumer spend because there are still only about 1.9 million active cards in Sri Lanka and many still prefer to transact through cash or via digital payments.
And those who do transact via cards in fact settle their accounts within their credit cycle before their balance gets accumulated.
Further, the rate charged on credit cards is also due for an immediate revision downwards from its current 28 percent levels as it doesn’t make sense when the rest of the loan rate has fallen well below 15 percent while the prime rate touched single digits two weeks ago.
Therefore, it is expected that the Central Bank would soon issue instructions for the banks, setting lower ceiling rates for cards unless banks bring their rates down on their own accord.
Meanwhile, the number of cards active remained down by 5,469 in the first three months from the levels of 2023, although the banks together have managed to approve 1,520 new cards in March bringing the new cards portfolio of the banking sector to 1,911,616.