Because of the liquidity crunch in the lockdown, several banks, including Axis, ICICI, and Kotak Mahindra, have reduced the credit card limit of customers by 80%. Axis Bank has cut the credit limit of two lakh customers. In the situation caused by the COVID-19 crisis, some credit cardholders may come under financial pressure, which may risk their payments. However, Kotak Mahindra Bank Chairman (customer assets) Ambuj Chandana said, this has not been done for the first time. Credit card limits are reduced or increased on the ability of credit cardholders to get loans and analysis of card expenses.
Three reasons... Limit slashed by banks
On taking moratorium: Customers who are taking advantage of the three-month relief from RBI are reducing their credit card limits. Banks believe that customers who are taking the facility do not have money. In such a situation, customers will use credit cards to meet financial needs, and the payment will be delayed due to the liquidity crunch.
Low use of Credit Cards: The limit of low-use credit card customers are also being cut. There are many customers whose credit card limit is two lakh, and they have spent only 10,000 to 20,000 rupees in 12-24 months. The credit card limit of these customers can also be reduced.
Delay in payment or defaulters: 25-35 percent of customers holding credit cards delay outstanding payments or have sometimes defaulted. Banks say the limit is fixed in terms of credit card expenses and payments. The credit limit of customers who are prone to risk on payment of delay or default in repayment of money is reduced.
These customers may increase limits
Banks can increase the credit card limit of customers who have been paying on time with spending more than 50% of the amount for a few months. Suppose your credit card limit is Rs. 1 lakh. Out of that, you have spent 60,000 and have also paid it on time. Banks have relied on such customers. They feel that they will continue to spend, and there will be no risk on arrears. Banks can increase the credit card limit of such customers.
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Regular money mistakes to avoid the economic crisis in lockdown
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