April credit card spend slips

• But banks expect Lankans to swipe their cards more amid soaring inflation 

Sri Lankan card holders pulled back on their spending in April resisting the months-long trend, but banks expect people to swipe their cards more as the going gets tougher as hyper inflation is eating significantly into their savings and real incomes. Sri Lanka’s inflation in the Colombo district hit an all-time high for the first time in April, recording 29.8 percent increase over a year ago before striking a fresh high in May with a reading of 39.1 percent, signalling that fixed income earners are scrambling to make their ends meet with escalating prices of their everyday essentials. 

However, the outstanding credit card balance in April slipped Rs. 627 million, bucking the months-long trend of continuously growing accumulated balance.   

As a result, the total credit card balance in the licensed commercial banking sector came slightly down to Rs.138.2 billion from Rs. 138.8 billion in March. 
In March, when the Sri Lankan economy crashed, the outstanding credit card balance added a relatively robust Rs.3.9 billion, reflecting that people have turned to their credit cards, setting what appeared to be a prolonged trend in rising card balances. 

However, banks soon turned extra cautious in approving new cards and balance enhancements while tightening their credit standards in a precursor to confront potential fallout of the worst economic crisis Sri Lanka has ever seen. 

For instance, the Sri Lankan banks made record provisions against their loans and advances portfolios, which dented their profits in the March quarter as they anticipated large scale defaults from borrowers amid sharp rise in interest rates. 

In another sign of tightening credit conditions by the banks, which are operating as card issuers, they approved only 8,085 cards in April, less than half of 18,716 new cards issued in March. 
With the April dent, banks have issued total of 46, 286 cards in the first four months with the cumulative four-month card outstanding balance rising by Rs. 4.9 billion.