Indian economy is growing at a very fast pace. This has contributed in the increase in giving credit by banks and financial institutions. The Asian Development Bank (ADB) feels that this can increase the risk of having more bad loans. Business Standard reported:
“The retail banking, particularly for housing and credit cards, is a new growth area for banks in India and Pakistan. In India, credit card debt growth should be monitored. Although still at its nascent stage, credit card debt rose by 36 per cent in 2004, the ADB noted.
Such a rapid rise points to the need for close supervision and consumer education. The bad loans (NPLs) for credit cards stand at about 8 per cent.
The credit card outstandings grew by 59.3 per cent to Rs 9,177 crore by end of March 2006 from Rs 5,760 crore a year ago, according to Reserve Bank of India’s annual report for 2005-06.”
I feel that part of the problem is that Indian government has a relax attitude to this problem. Indian government should ask the banks and other financial institutions not to lend money freely. In the western countries, having loan is becoming like a nightmare. For India, it will have serious social and financial consequences. It will hurt the Indian economy badly.
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