Outstanding credit card balance of commercial banking sector grows Rs.817mn in Sept.

• People seen cutting their consumption spend as runaway prices hit households hardest 

Outstanding credit card balance of the licensed commercial banking sector continued its ascent for the second month in a row, though at a somewhat slower pace in September, reflecting that the soaring prices dented consumer sentiments of Sri Lankans who are undergoing the worst cost of living crisis in their lifetime. 

According to the latest data available through September, the outstanding credit card balance grew by Rs.817 million in the month, a sharp decline from Rs.3, 228 million recorded in August.  
The monthly changes in the outstanding credit card balance offers a distant proxy for the credit card and consumer spend, as credit card penetration remains extremely low compared to developed markets where the changes in card spend provides a clearer idea of consumer health. 
When the going gets tough there is a tendency for consumers to dig deeper into their credit card debt as their incomes become insufficient to meet their requirements, but card debt tend to fall when household balance sheets get tighter.   

Credit card interest rates have doubled from 18 percent to 36 percent in less than a half a year, putting those who carry card debt in an extremely tight spot. 
As a result, some banks also resorted to further tighten their credit standards on their card holders in particular by slashing even pre-approved card balances, limiting what they can spend from their cards.
Since May, the overall credit to the private sector by the licensed commercial banks have also turned negative, reflecting that banks have effectively turned their lending spigots off except for their prime clientele and those whose cash flows are strong enough to bear the extremely high borrowing cost.

The prime lending rate of licensed commercial banks have nearly quadrupled from a year ago levels, though there was a slight easing last week to 27.46 percent, reflecting how tight the financial conditions have become.    
The September increase brought the first nine- month increase in the outstanding card balance to Rs.3,481 million to a total portfolio of Rs.136,766 million.
Meanwhile, the number of active cards also rose by 8,134 in September bringing the total number of cards to 1,971,839.