Project on Public Sector Banks

Description
This Project on Public Sector Banks

130
CHAPTER 1

RESEARCH METHODOLOGY
Objectives of the Project
The primary objective of the report is categorie! i"to fo##o$i"g s%b&topics'
() To st%!y the !emographic factors of cre!it car! ho#!ers)
*) To +"o$ the %si"g p%rpose of cre!it car! by the ho#!ers)
,) To assess the behavio%ra# cha"ges of cre!it car! ho#!ers)
-) To e.ami"e the co"s%mptio" patter" of cre!it car! ho#!ers)
/) To fi"! o%t the satisfactio" #eve# of e.isti"g cre!it car! ho#!ers)
0) To s%ggest meas%res to improve the cre!it car! system i" 1"!ia
Data sources
Primary sources
2rimary !ata has bee" co##ecte! thro%gh the str%ct%re! 3%estio""aire
co"sisti"g mai"#y of the c#ose! e"!e! 3%estio"s)
Secondary sources
Seco"!ary !ata has bee" co##ecte! from the i"ter"et4 jo%r"a#s4 refere"ce boo+s
etc)
Scope of the study
A## the 3%estio"s have bee" a"a#yse! by a!!i"g %p the respo"ses agai"st each
a#ter"ative a"! a"s$ers from the vario%s respo"!e"ts) The co##ecte! !ata has
bee" s%bject to statistica# a"a#ysis to !ra$ i"fere"ces a"! s%itab#e
co"c#%sio"s) Statistica# too#s #i+e chi&s3%are a"! perce"tage are %se!) 5or
ca#c%#ati"g the tab#e va#%e for a"a#ysis $ith chi&s3%are4 /6 sig"ifica"ce #eve#
is %se!)
RESEARCH METHODOLOG
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The st%!y is base! o" primary !ata4 $hich has bee" co##ecte! from the cre!it
car! %sers $ith the he#p of a $e## !rafte! a"! str%ct%re! 3%estio""aire 7see
a""e.%re8) 5or the co##ectio" of primary !ata4 $e have co"fi"e! o%rse#ves to
Ahme!aba!4 1"!ia) O%r samp#e co"sists of a tota# of (/9 respo"!e"ts) The
respo"!e"ts are basica##y cre!it car! %sers4 $ho have bee" se#ecte! by
fo##o$i"g the "o"&probabi#istic samp#i"g4 simp#e p%rposive samp#i"g a"!
co"ve"ie"ce samp#i"g tech"i3%es)
5%rther4 it is esse"tia# to me"tio" t$o thi"gs' first#y4 i" co"ve"ie"ce&samp#i"g4
respo"!e"ts 7$ho $ere see" %si"g:have possessio" of cre!it car!s8 $ere
se#ecte! beca%se they happe"e! to be i" the right p#ace at the right time a"!
seco"!#y4 co"ve"ie"ce samp#i"g tech"i3%e is "ot recomme"!e! for !escriptive
or cas%a# research4 b%t they ca" be %se! i" e.p#oratory research for the
ge"eratio" of i!eas 7Ma#hotra4 *99/8) The 3%estio"s i"3%ire! the choice of
cre!it car!4 a"! the %sers $ere give" *; stateme"ts) 1" a!!itio"4 the
respo"!e"ts ha! to rate the cre!it car!s accor!i"g to the importa"ce4 o" the
a"+ of 1"!ia4 re#egati"g it to commercia# ba"+i"g f%"ctio"s) After
1"!iaDs i"!epe"!e"ce i" (C-E4 the Reserve >a"+ $as "atio"a#ie! a"! give"
broa!er po$ers) 1" (C0C the gover"me"t "atio"a#ie! the (- #argest commercia#
ba"+sF the gover"me"t "atio"a#ie! the si. "e.t #argest i" (C;9)
The 1"!ia" >a"+i"g i"!%stry4 $hich is gover"e! by the >a"+i"g Reg%#atio" Act
of 1"!ia4 (C-C ca" be broa!#y c#assifie! i"to t$o major categories4 "o"&
sche!%#e! ba"+s a"! sche!%#e! ba"+s) Sche!%#e! ba"+s comprise commercia#
ba"+s a"! the co&operative ba"+s) 1" terms of o$"ership4 commercia# ba"+s ca"
be f%rther gro%pe! i"to "atio"a#ie! ba"+s4 the State >a"+ of 1"!ia a"! its gro%p
ba"+s4 regio"a# r%ra# ba"+s a"! private sector ba"+s 7the o#!: "e$ !omestic a"!
foreig"8) These ba"+s have over 0E4999 bra"ches sprea! across the co%"try)
The first phase of fi"a"cia# reforms res%#te! i" the "atio"a#iatio" of (- major
ba"+s i" (C0C a"! res%#te! i" a shift from C#ass ba"+i"g to Mass ba"+i"g) This
i" t%r" res%#te! i" a sig"ifica"t gro$th i" the geographica# coverage of ba"+s)
Every ba"+ ha! to earmar+ a mi"im%m perce"tage of their #oa" portfo#io to
sectors i!e"tifie! as Gpriority sectorsH) The ma"%fact%ri"g sector a#so gre$
!%ri"g the (CE9s i" protecte! e"viro"s a"! the ba"+i"g sector $as a critica#
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so%rce) The "e.t $ave of reforms sa$ the "atio"a#iatio" of 0 more commercia#
ba"+s i" (C;9) Si"ce the" the "%mber of sche!%#e! commercia# ba"+s i"crease!
fo%r&fo#! a"! the "%mber of ba"+ bra"ches i"crease! eight&fo#!)
After the seco"! phase of fi"a"cia# sector reforms a"! #ibera#iatio" of the sector
i" the ear#y "i"eties4 the 2%b#ic Sector >a"+s 72S>8 s fo%"! it e.treme#y !iffic%#t
to compete $ith the "e$ private sector ba"+s a"! the foreig" ba"+s) The "e$
private sector ba"+s first ma!e their appeara"ce after the g%i!e#i"es permitti"g
them $ere iss%e! i" Ba"%ary (CC,) Eight "e$ private sector ba"+s are prese"t#y
i" operatio") These ba"+s !%e to their #ate start have access to state&of&the&art
tech"o#ogy4 $hich i" t%r" he#ps them to save o" ma"po$er costs a"! provi!e
better services)
D%ri"g the year *9994 the State >a"+ of 1"!ia 7S>18 a"! its E associates
acco%"te! for a */ perce"t share i" !eposits a"! *( perce"t share i" cre!it) The
*9 "atio"a#ie! ba"+s acco%"te! for /,)* perce"t of the !eposits a"! -E)/
perce"t of cre!it !%ri"g the same perio!) The share of foreig" ba"+s 7"%mberi"g
-*84 regio"a# r%ra# ba"+s a"! other sche!%#e! commercia# ba"+s acco%"te! for
/)E perce"t4 ,)C perce"t a"! (*)* perce"t respective#y i" !eposits a"! -(
perce"t4 ,)(- perce"t a"! (*);/ perce"t respective#y i" cre!it !%ri"g the year
*999)
A$$re$ate Perfor!a#ce of the %a#&i#$ '#dustry
Aggregate !eposits of sche!%#e! commercia# ba"+s i"crease! at a compo%"!e!
a""%a# average gro$th rate 7CAGR8 of (E); perce"t !%ri"g (C0C&CC4 $hi#e ba"+
cre!it e.pa"!e! at a CAGR of (0), perce"t per a""%m) >a"+s= i"vestme"ts i"
gover"me"t a"! other approve! sec%rities recor!e! a CAGR of (; perce"t per
a""%m !%ri"g the same perio!)
1" 5Y9( the eco"omic s#o$!o$" res%#te! i" a Gross Domestic 2ro!%ct 7GD28
gro$th of o"#y 0)9 perce"t as agai"st the previo%s year=s 0)- perce"t) The I21
1"!e. 7a meas%re of i"f#atio"8 i"crease! by E)( perce"t as agai"st ,), perce"t i"
5Y99) Simi#ar#y4 mo"ey s%pp#y 7M,8 gre$ by aro%"! (0)* perce"t as agai"st
(-)0 perce"t a year ago)
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The gro$th i" aggregate !eposits of the sche!%#e! commercia# ba"+s at (/)-
perce"t i" 5Y9( perce"t $as #o$er tha" that of (C), perce"t i" the previo%s year4
$hi#e the gro$th i" cre!it by SC>s s#o$e! !o$" to (/)0 perce"t i" 5Y9( agai"st
*, perce"t a year ago)
The i"!%stria# s#o$!o$" a#so affecte! the ear"i"gs of #iste! ba"+s) The "et
profits of *9 #iste! ba"+s !roppe! by ,-)-, perce"t i" the 3%arter e"!e! March
*99() ?et profits gre$ by -9)E/ perce"t i" the first 3%arter of *999&*99(4 b%t
!roppe! to -)/0 perce"t i" the fo%rth 3%arter of *999&*99()
O" the Capita# A!e3%acy Ratio 7CAR8 fro"t $hi#e most ba"+s ma"age! to f%#fi##
the "orms4 it $as a feat achieve! $ith its o$" share of !iffic%#ties) The CAR4
$hich at prese"t is C)9 perce"t4 is #i+e#y to be hi+e! to (*)9 perce"t by the year
*99- base! o" the >as#e Committee recomme"!atio"s) A"y ba"+ that $ishes to
gro$ its assets "ee!s to a#so shore %p its capita# at the same time so that its
capita# as a perce"tage of the ris+&$eighte! assets is mai"tai"e! at the stip%#ate!
rate) Ihi#e the 12O ro%te $as a m%ch&fa"cie! o"e i" the ear#y JC9s4 the c%rre"t
sce"ario !oes"=t #oo+ too attractive for ba"+ majors)
Co"se3%e"t#y4 ba"+s have bee" force! to e.p#ore other ave"%es to shore %p their
capita# base) Ihi#e some are $ooi"g foreig" part"ers to a!! to the capita# others
are emp#oyi"g the MK A ro%te) Ma"y are a#so goi"g i" for right iss%es at prices
co"si!erab#y #o$er tha" the mar+et prices to $oo the i"vestors)
'#terest Rate Sce#e
The t$o years4 post the East Asia" crises i" (CCE&C; sa$ a c#imb i" the g#oba#
i"terest rates) 1t $as o"#y i" the #atter ha#f of 5Y9( that the @S 5e! c%t i"terest
rates) 1"!ia has ho$ever remai"e! more or #ess i"s%#ate!) The past * years i" o%r
co%"try $as characterie! by a mo%"ti"g i"te"tio" of the Reserve >a"+ of 1"!ia
7R>18 to stea!i#y re!%ce i"terest rates res%#ti"g i" a "arro$i"g !iffere"tia#
bet$ee" g#oba# a"! !omestic rates)
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The R>1 has bee" affecti"g ba"+ rate a"! CRR c%ts at reg%#ar i"terva#s to
improve #i3%i!ity a"! re!%ce rates) The o"#y e.ceptio" $as i" B%#y *999 $he"
the R>1 i"crease! the Cash Reserve Ratio 7CRR8 to stem the fa## i" the r%pee
agai"st the !o##ar) The stea!y fa## i" the i"terest rates res%#te! i" s3%eee!
margi"s for the ba"+s i" ge"era#)
Gover#!e#t i#itiatives
D%ri"g *99;&9C 7as per !ata %p to ?ovember (;4 *99;84 as per R>1 g%i!e#i"es4
sche!%#e! commercia# ba"+s 7SC>s8 i"crease! their !eposit rates for vario%s
mat%rities by /9&(E/ basis poi"ts) The i"terest rates ra"ge offere! by p%b#ic
sector ba"+s 72S>s8 o" !eposits of mat%rity of o"e year to three years i"crease!
to C)99&(9)/9 per ce"t i" ?ovember *99; from */&C)*/ per ce"t i" March
*99 O" the #e"!i"g si!e4 the be"chmar+ prime #e"!i"g rates 7>2LRs8 of 2S>s
i"crease! to (,)99&(-)E/ per ce"t by ?ovember *99; from (*)*/&(,)/9 per ce"t
i" March *99 2rivate sector ba"+s a"! foreig" ba"+s a#so i"crease! their >2LR
to (,)99&(E)E/ per ce"t a"! (9)99&(E)99 per ce"t from (,)99&(0)/9 per ce"t a"!
(9)99&(/)/9 per ce"t4 respective#y4 !%ri"g the same perio!)
Accor!i"g#y4 the $eighte! average >2LR of p%b#ic sector ba"+s4 private sector
ba"+s a"! foreig" ba"+s i"crease! to (,)CC per ce"t4 (0)-* per ce"t a"! (-)E,
per ce"t4 respective#y) The "%mber of a%tomate! te##er machi"es 7ATMs8 has
rise" a"! the %sage of ATMs has go"e %p s%bsta"tia##y !%ri"g the #ast fe$ years)
@se of other ba"+s= ATMs $o%#! a#so "ot attract a"y fee e.cept $he" %se! for
cash $ith!ra$a# for $hich the ma.im%m charge #evie! $as bro%ght !o$" to @SL
)-9C per $ith!ra$a# by March ,(4 *99 5%rther4 a## cash $ith!ra$a#s from a##
ATMs $o%#! be free $ith effect from Apri# (4 *99C)
%a#& i#itiatives
Si"ce December *99;4 the gover"me"t has a""o%"ce! series of meas%res to
a%gme"t f#o$ of cre!its to aro%"! @SL *4 004*E- to SMEs) To improve the f#o$
of cre!it to i"!%stria# c#%sters a"! faci#itate their overa## !eve#opme"t4 (/ ba"+s
operati"g i" Orissa i"c#%!i"g the p%b#ic sector State >a"+ of 1"!ia 7S>18 a"! the
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Sma## 1"!%stries Deve#opme"t >a"+ of 1"!ia 7S1D>18 have a!opte! -; c#%sters
specia##y i" sectors #i+e e"gi"eeri"g too#s4 fo%"!ry4 ha"!#oom4 foo! processi"g4
$eavi"g4 rice mi##4 cashe$ processi"g4 pharmace%tica#s4 be## meta#s a"!
carpe"try etc)
2S>s are "o$ cashi"g i" the a%to #oa" segme"t after the e.it of private p#ayers
o$i"g to the s#o$!o$") A%to #oa"s %s%a##y have three compo"e"ts & car #oa"s4
t$o&$hee#er #oa"s a"! commercia# vehic#e #oa"s) 2S>s are primari#y foc%si"g o"
car a"! t$o&$hee#er #oa"s) 2reva#e"t i"terest rates i" the car #oa" segme"t "o$
ra"ge bet$ee" (( per ce"t a"! (*)/ per ce"t per a""%m) 5or i"sta"ce4 accor!i"g
to the @"io" >a"+ of 1"!ia Chairma" a"! Ma"agi"g Director4 MM ?air4 his ba"+
ha! rece"t#y tie! %p $ith Mar%ti S%%+i 1"!ia for fi"a"ci"g the #atterDs pro!%ct
a"! it has a @SL (0,);- mi##io" a%to #oa" portfo#io)
The gover"me"t has to#! p%b#ic sector ba"+s 72S>s8 to e.te"! cre!it to f%"!&
starve! 1"!ia" i"!%stry4 especia##y e.porters a"! sma## a"! me!i%m sector
e"terprises to a!!ress their cre!it "ee!s) S1D>1 $o%#! be #e"!i"g @SL (),,
bi##io" o%t of @SL ()-E bi##io" cre!it from R>1 to p%b#ic sector ba"+s) This is
bei"g provi!e! to the 2S>s at 0)/ per ce"t 7S1D>1 is getti"g the cre!it at /)/ per
ce"t8 %"!er the co"!itio" that the ba"+s $i## have to #e"! this cre!it to the
me!i%m a"! sma##&sca#e i"!%stry %"its at a" i"terest rate of (9 per ce"t before
March ,(4 *9(9)
Accor!i"g to S>1 Chairma"4 O 2 >hatt4 co"trib%tio" of sma## a"! me!i%m
e"terprises 7SMEs8 is "ear#y -9&/9 per ce"t to GD2 gro$th of the "atio"4 a"!
this sector a#so acco%"ts for /9 per ce"t of the i"!%stria# o%tp%t) N>a"+s co%#!
accr%e reve"%e of over @SL /)E, bi##io" by e"co%ragi"g the SMEs4N >hatt sai!
a!!i"g4 NSMEDs sector is to gro$ fastest i" the "e.t five years4 $ith (- per ce"t
gro$th i" terms of reve"%e a"! (, per ce"t i" terms of profits)N The ba"+ i"
or!er to he#p %"its ti!e over the c%rre"t !o$"t%r"4 ha! i"tro!%ce! pro!%cts #i+e
GSME CareH specia##y i" Bhar+ha"!4 $hich provi!es %"its to access *9 per ce"t
a!!itio"a# f%"!s over a"! above their e.isti"g over!raft #imit) A#rea!y4 accor!i"g
to a" officia#4 the MSME mi"istry has propose! to R>1 that the sector be give" a
ma"!atory (/ per ce"t share of the tota# priority sector #e"!i"g) The ba"+i"g
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i"!%stry is thereby "o$ #e"!i"g both stre"gth a"! s%pport i" form of cash a"!
po#icies major#y i" p%tti"g bac+ the eco"omy i"to trac+)
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Recen! Bankin& De'elomen! in (ndia
The 1"!ia" ba"+i"g sector has $it"esse! $i!e ra"gi"g cha"ges %"!er the
i"f#%e"ce of the fi"a"cia# sector reforms i"itiate! !%ri"g the ear#y (CC9s) The
approach to s%ch reforms i" 1"!ia has bee" o"e of gra!%a# a"! "o"&!isr%ptive
progress thro%gh a co"s%#tative process) The emphasis has bee" o" !ereg%#atio"
a"! ope"i"g %p the ba"+i"g sector to mar+et forces) The Reserve >a"+ has bee"
co"siste"t#y $or+i"g to$ar!s the estab#ishme"t of a" e"ab#i"g reg%#atory
frame$or+ $ith prompt a"!
Effective s%pervisio" as $e## as the !eve#opme"t of tech"o#ogica# a"!
i"stit%tio"a# i"frastr%ct%re)
2ersiste"t efforts have bee" ma!e to$ar!s a!optio" of i"ter"atio"a# be"chmar+s
as appropriate to 1"!ia" co"!itio"s) Ihi#e certai" cha"ges i" the #ega#
i"frastr%ct%re are yet to be effecte!4 the !eve#opme"ts so far have bro%ght the
1"!ia" fi"a"cia# system c#oser to g#oba# sta"!ar!s)
S!a!u!ory Pre)em!ions
1" the pre&reforms phase4 the 1"!ia" ba"+i"g system operate! $ith a high #eve#
of stat%tory preemptio"s4 i" the form of both the Cash Reserve Ratio 7CRR8 a"!
the Stat%tory Li3%i!ity Ratio 7SLR84 ref#ecti"g the high #eve# of the co%"try=s
fisca# !eficit a"! its high !egree of mo"etisatio") Efforts i" the rece"t perio!
have bee" foc%se! o" #o$eri"g both the CRR a"! SLR) The stat%tory mi"im%m
of */ per ce"t for the SLR $as reache! as ear#y as (CCE4 a"! $hi#e the Reserve
>a"+ co"ti"%es to
p%rs%e its me!i%m&term objective of re!%ci"g the CRR to the stat%tory mi"im%m
#eve# of ,)9 per ce"t4 the CRR of the Sche!%#e! Commercia# >a"+s 7SC>s8 is
c%rre"t#y p#ace! at /)9 per ce"t of ?DTL 7"et !ema"! a"! time #iabi#ities8) The
#egis#ative cha"ges propose! by the Gover"me"t i" the @"io" >%!get4 *99/&90
to remove the #imits o" the SLR a"! CRR are e.pecte! to provi!e free!om to the
Reserve >a"+ i" the co"!%ct of mo"etary po#icy a"! a#so #e"! f%rther f#e.ibi#ity
to the ba"+i"g system i" the !ep#oyme"t of reso%rces)
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(n!eres! Ra!e S!ruc!ure
Dereg%#atio" of i"terest rates has bee" o"e of the +ey feat%res of fi"a"cia# sector
reforms) 1" rece"t years4 it has improve! the competitive"ess of the fi"a"cia#
e"viro"me"t a"! stre"gthe"e! the tra"smissio" mecha"ism of mo"etary po#icy)
Se3%e"ci"g of i"terest rate !ereg%#atio" has a#so e"ab#e! better price !iscovery
a"! imparte! greater efficie"cy to the reso%rce a##ocatio" process) The process
has bee" gra!%a# a"! pre!icate! %po" the i"stit%tio" of pr%!e"tia# reg%#atio" of
the ba"+i"g
system4 mar+et behavio%r4 fi"a"cia# ope"i"g a"!4 above a##4 the %"!er#yi"g
macroeco"omic co"!itio"s)
1"terest rates have "o$ bee" #arge#y !ereg%#ate! e.cept i" the case of' 7i8
savi"gs !eposit acco%"tsF 7ii8 "o"&resi!e"t 1"!ia" 7?R18 !epositsF 7iii8 sma##
#oa"s %p to Rs)* #a+hF a"! 7iv8 e.port cre!it)
After the i"terest rate !ereg%#atio"4 ba"+s became free to !etermi"e their o$"
#e"!i"g i"terest rates)
As a!vise! by the 1"!ia" >a"+s= Associatio" 7a se#f&reg%#atory orga"isatio" for
ba"+s84 commercia# ba"+s !etermi"e their respective >2LRs 7be"chmar+ prime
#e"!i"g rates8 ta+i"g i"to co"si!eratio"'
7i8 act%a# cost of f%"!sF 7ii8 operati"g e.pe"sesF a"! 7iii8 a mi"im%m margi" to
cover reg%#atory re3%ireme"ts of provisio"i"g a"! capita# charge a"! profit
margi") These factors !iffer from ba"+ to ba"+ a"! fee! i"to the !etermi"atio"
of >2LR a"! sprea!s of ba"+s) The >2LRs of p%b#ic sector ba"+s !ec#i"e! to
(9)*/&(()*/ per ce"t i" March *99/ from (9)*/&(()/9 per ce"t i" March *99-)
Iith a vie$ to gra"ti"g operatio"a# a%to"omy to p%b#ic sector ba"+s4 p%b#ic
o$"ership i" these ba"+s $as re!%ce! by a##o$i"g them to raise capita# from the
e3%ity mar+et of %p to -C per ce"t of pai!&%p capita#) Competitio" is bei"g
fostere! by permitti"g "e$ private sector ba"+s4 a"! more #ibera# e"try of
bra"ches of foreig" ba"+s4 joi"t&ve"t%re ba"+s a"! i"s%ra"ce compa"ies)
Rece"t#y4 a roa!map for the
prese"ce of foreig" ba"+s i" 1"!ia $as re#ease! $hich sets o%t the process of the
gra!%a# ope"i"g&%p of the ba"+i"g sector i" a tra"spare"t ma""er) 5oreig"
i"vestme"ts i" the fi"a"cia# sector i" the form *,; >1S 2apers ?o *; of 5oreig"
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Direct 1"vestme"t 75D18 as $e## as portfo#io i"vestme"t have bee" permitte!)
5%rthermore4 ba"+s have bee" a##o$e! to !iversify pro!%ct portfo#io a"!
b%si"ess activities) The share of p%b#ic sector ba"+s i" the ba"+i"g b%si"ess is
goi"g !o$"4 partic%#ar#y i" metropo#ita" areas) Some !iversificatio" of
o$"ership i" se#ect p%b#ic sector ba"+s has he#pe! f%rther the move to$ar!s
a%to"omy a"! th%s provi!e! some respo"se to competitive press%res)
Tra"spare"cy a"! !isc#os%re sta"!ar!s have bee" e"ha"ce! to meet i"ter"atio"a#
sta"!ar!s i" a" o"goi"g ma""er)
Pruden!ial Re&ula!ion
2r%!e"tia# "orms re#ate! to ris+&$eighte! capita# a!e3%acy re3%ireme"ts4
acco%"ti"g4 i"come recog"itio"4 provisio"i"g a"! e.pos%re $ere i"tro!%ce! i"
(CC* a"! gra!%a##y these "orms have bee" bro%ght %p to i"ter"atio"a# sta"!ar!s)
Other i"itiatives i" the area of stre"gthe"i"g pr%!e"tia# "orms i"c#%!e meas%res
to stre"gthe" ris+ ma"ageme"t thro%gh recog"itio" of !iffere"t compo"e"ts of
ris+4
assig"me"t of ris+&$eights to vario%s asset c#asses4 "orms o" co""ecte! #e"!i"g
a"! ris+ co"ce"tratio"4 app#icatio" of the mar+&to&mar+et pri"cip#e for
i"vestme"t portfo#ios a"! #imits o" !ep#oyme"t of f%"!s i" se"sitive activities)
Aeepi"g i" vie$ the Reserve >a"+=s goa# to achieve co"siste"cy a"! harmo"y
$ith i"ter"atio"a# sta"!ar!s a"! o%r approach to a!opt these sta"!ar!s at a pace
appropriate to o%r co"te.t4 it has bee" !eci!e! to migrate to >ase# 11) >a"+s are
re3%ire! to mai"tai" a mi"im%m CRAR 7capita# to ris+ $eighte! assets ratio8 of
C per ce"t o" a" o"goi"g basis) The capita# re3%ireme"ts are %"iform#y app#ie!
to a## ba"+s4 i"c#%!i"g foreig" ba"+s operati"g i" 1"!ia4 by $ay of pr%!e"tia#
g%i!e#i"es o" capita# a!e3%acy) Commercia# ba"+s i" 1"!ia $i## start
imp#eme"ti"g >ase# 11 $ith effect from March ,(4 *99E) They $i## i"itia##y a!opt
the Sta"!ar!ise! Approach for cre!it ris+ a"! the >asic 1"!icator Approach for
operatio"a# ris+) After a!e3%ate s+i##s have bee" !eve#ope!4 at both ba"+ a"!
s%pervisory #eve#4 some ba"+s may be a##o$e! to migrate to the 1"ter"a# Rati"gs&
>ase! 71R>8 Approach) >a"+s have a#so bee" a!vise! to form%#ate a"!
operatio"a#ise the Capita# A!e3%acy Assessme"t 2rocess 7CAA28 as re3%ire!
%"!er 2i##ar 11 of the ?e$ 5rame$or+)
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Some of the other reg%#atory i"itiatives re#eva"t to >ase# 11 that have bee"
imp#eme"te! by the Reserve >a"+ are'
O E"s%ri"g that ba"+s have a s%itab#e ris+ ma"ageme"t frame$or+ orie"te!
to$ar!s their re3%ireme"ts a"! !ictate! by the sie a"! comp#e.ity of their
b%si"ess4 ris+ phi#osophy4 mar+et perceptio"s a"! e.pecte! #eve# of capita#)
O 1"tro!%ci"g Ris+&>ase! S%pervisio" 7R>S8 i" se#ect ba"+s o" a pi#ot basis)
O E"co%ragi"g ba"+s to forma#ise their CAA2 i" a#ig"me"t $ith their b%si"ess
p#a" a"! performa"ce b%!geti"g system) This4 together $ith the a!optio" of
R>S4 sho%#! ai! i" f%#fi##i"g the 2i##ar 11 re3%ireme"ts %"!er >ase# 11)
O E.pa"!i"g the area of !isc#os%res 72i##ar 1118 so as to achieve greater
tra"spare"cy regar!i"g the fi"a"cia# positio" a"! ris+ profi#e of ba"+s)
O >%i#!i"g capacity to e"s%re the reg%#ator=s abi#ity to i!e"tify e#igib#e ba"+s a"!
permit them to a!opt 1R>:A!va"ce! Meas%reme"t approaches)
Iith a vie$ to e"s%ri"g migratio" to >ase# 11 i" a "o"&!isr%ptive ma""er4 a
co"s%#tative a"! participative approach has bee" a!opte! for both !esig"i"g a"!
imp#eme"ti"g the ?e$ 5rame$or+) A Steeri"g Committee comprisi"g se"ior
officia#s from (- ba"+s 7p%b#ic4 private a"! foreig"8 $ith represe"tatio" from the
1"!ia" >a"+s= Associatio" a"! the Reserve >a"+ has bee" co"stit%te!) O" the
basis of recomme"!atio"s of the Steeri"g Committee4 !raft g%i!e#i"es o"
imp#eme"tatio" of the ?e$ Capita# A!e3%acy 5rame$or+ have bee" iss%e! to
ba"+s)
1" or!er to assess the impact of >ase# 11 a!optio" i" vario%s j%ris!ictio"s a"! re&
ca#ibrate the proposa#s4 the >C>S is c%rre"t#y %"!erta+i"g the 5ifth P%a"titative
1mpact St%!y 7P1S /8) 1"!ia $i## be participati"g i" the st%!y4 a"! has se#ecte!
(( ba"+s $hich form a represe"tative samp#e for this p%rpose) These ba"+s
acco%"t for /()*9 per ce"t of mar+et share i" terms of assets) They have bee"
a!vise! to fami#iarise themse#ves $ith the P1S / re3%ireme"ts to e"ab#e them to
participate i" the e.ercise effective#y) The Reserve >a"+ is c%rre"t#y foc%si"g o"
the iss%e of recog"itio" of the e.ter"a# rati"g age"cies for %se i" the
Sta"!ar!ise! Approach for cre!it ris+)
As a $e##&estab#ishe! ris+ ma"ageme"t system is a pre&re3%isite for
imp#eme"tatio" of a!va"ce! approaches %"!er the ?e$ Capita# A!e3%acy
5rame$or+4 ba"+s $ere re3%ire! to e.ami"e the vario%s optio"s avai#ab#e %"!er
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the 5rame$or+ a"! !ra$ %p a roa!map for migratio" to >ase# 11) The fee!bac+
receive! from ba"+s s%ggests that a fe$ may be +ee" o" imp#eme"ti"g the
a!va"ce! approaches) Ho$ever4 "ot a## are f%##y e3%ippe! to !o so straighta$ay
a"! are4 therefore4 #oo+i"g to migrate to the a!va"ce! approaches at a #ater !ate)
>ase# 11 provi!es that ba"+s sho%#! be a##o$e! to a!opt:migrate to a!va"ce!
approaches o"#y $ith the specific approva# of the s%pervisor4 after e"s%ri"g that
they satisfy the mi"im%m re3%ireme"ts specifie! i" the 5rame$or+4 "ot o"#y at
the time of a!optio":migratio"4 b%t o" a co"ti"%i"g basis) He"ce4 ba"+s !esiro%s
of a!opti"g the a!va"ce! approaches m%st perform a stri"ge"t assessme"t of
their comp#ia"ce $ith the mi"im%m re3%ireme"ts before they shift gears to
migrate to these approaches) 1" this co"te.t4 c%rre"t "o"&avai#abi#ity of
acceptab#e a"! 3%a#itative historica# !ata re#eva"t to i"ter"a# cre!it ris+ rati"gs
a"! operatio"a# ris+ #osses4 a#o"g $ith the re#ate! costs i"vo#ve! i" b%i#!i"g %p
a"! mai"tai"i"g the re3%isite !atabase4 is e.pecte! to i"f#%e"ce the pace of
migratio" to the a!va"ce! approaches avai#ab#e %"!er >ase# 11)
E*osure +orms
The Reserve >a"+ has prescribe! reg%#atory #imits o" ba"+s= e.pos%re to
i"!ivi!%a# a"! gro%p borro$ers to avoi! co"ce"tratio" of cre!it4 a"! has a!vise!
ba"+s to fi. #imits o" their e.pos%re to specific i"!%stries or sectors 7rea# estate8
to e"s%re better ris+ ma"ageme"t) 1" a!!itio"4 ba"+s are a#so re3%ire! to observe
certai" stat%tory a"! reg%#atory #imits i" respect of their e.pos%res to capita#
mar+ets)
Asse!),iabili!y -ana&emen!
1" vie$ of the gro$i"g "ee! for ba"+s to be ab#e to i!e"tify4 meas%re4 mo"itor
a"! co"tro# ris+s4 appropriate ris+ ma"ageme"t g%i!e#i"es have bee" iss%e! from
time to time by the Reserve >a"+4 i"c#%!i"g g%i!e#i"es o" Asset&Liabi#ity
Ma"ageme"t 7ALM8) These g%i!e#i"es are i"te"!e! to serve as a be"chmar+ for
ba"+s to estab#ish a" i"tegrate! ris+ ma"ageme"t system) Ho$ever4 ba"+s ca"
a#so !eve#op their o$" systems compatib#e $ith type a"! sie of operatio"s as
$e## as ris+ perceptio" a"!
p%t i" p#ace a proper system for coveri"g the e.isti"g !eficie"cies a"! the
re3%isite %pgra!i"g) Detai#e! g%i!e#i"es o" the ma"ageme"t of cre!it ris+4
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mar+et ris+4 operatio"a# ris+4 etc) have a#so bee" iss%e! to ba"+s by the Reserve
>a"+)
The progress ma!e by the ba"+s is mo"itore! o" a 3%arter#y basis) Iith regar! to
ris+ ma"ageme"t tech"i3%es4 ba"+s are at !iffere"t stages of !ra$i"g %p a
comprehe"sive cre!it rati"g system4 %"!erta+i"g a cre!it ris+ assessme"t o" a
ha#f year#y basis4 prici"g #oa"s o" the basis of ris+ rati"g4 a!opti"g the Ris+&
A!j%ste! Ret%r" o" Capita# 7RAROC8 frame$or+ of prici"g4 etc) Some ba"+s
stip%#ate a 3%a"titative cei#i"g o" aggregate e.pos%res i" specifie! ris+
categories4 a"a#yse rati"g&$ise !istrib%tio" of borro$ers i" vario%s i"!%stries4
etc)
1" respect of mar+et ris+4 a#most a## ba"+s have a" Asset&Liabi#ity Ma"ageme"t
Committee) They have artic%#ate! mar+et ris+ ma"ageme"t po#icies a"!
proce!%res4 a"! have %"!erta+e" st%!ies of behavio%ra# mat%rity patter"s of
vario%s compo"e"ts of o"&ff&ba#a"ce sheet items)
+P, -ana&emen!
>a"+s have bee" provi!e! $ith a me"% of optio"s for !isposa#:recovery of ?2Ls
7"o"&performi"g #oa"s8) >a"+s reso#ve:recover their ?2Ls thro%gh
compromise"e time sett#eme"t4 fi#i"g of s%its4 Debt Recovery Trib%"a#s4 the
Lo+ A!a#at 7peop#e=s co%rt8 for%m4 Corporate Debt Restr%ct%ri"g 7CDR84 sa#e to
sec%ritisatio":reco"str%ctio" compa"ies a"! other ba"+s or to "o"&ba"+i"g
fi"a"ce compa"ies 7?>5Cs8) The prom%#gatio" of the Sec%ritisatio" a"!
Reco"str%ctio" of 5i"a"cia# Assets a"! E"forceme"t of Sec%rity 1"terest
7SAR5AES18 Act4 *99* a"! its s%bse3%e"t ame"!me"t have stre"gthe"e! the
positio" of cre!itors) A"other sig"ifica"t meas%re has bee" the setti"g&%p of the
*-9 >1S 2apers ?o *; Cre!it 1"formatio" >%rea% for i"formatio" shari"g o"
!efa%#ters a"! other borro$ers) The ro#e of Cre!it 1"formatio" >%rea% of 1"!ia
Lt!) 7C1>1L8 i" improvi"g the 3%a#ity of cre!it a"a#ysis by fi"a"cia# i"stit%tio"s
a"! ba"+s "ee! har!#y be overemphasise!) Iith the e"actme"t of the Cre!it
1"formatio" Compa"ies 7Reg%#atio"8 Act4 *99/4 the #ega# frame$or+ has bee"
p%t i" p#ace to faci#itate the f%## f#e!ge! operatio"a#isatio" of C1>1L a"! the
i"tro!%ctio" of other cre!it b%rea%s)
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Board $or .inancial Suer'ision /B.S0
A" i"!epe"!e"t >oar! for 5i"a"cia# S%pervisio" 7>5S8 %"!er the aegis of the
Reserve >a"+ has bee" estab#ishe! as the ape. s%pervisory a%thority for
commercia# ba"+s4 fi"a"cia# i"stit%tio"s4 %rba" ba"+s a"! ?>5Cs) Co"siste"t
$ith i"ter"atio"a# practice4 the >oar!=s foc%s is o" offsite a"! o"&site i"spectio"s
a"! o" ba"+s= i"ter"a# co"tro# systems) Offsite s%rvei##a"ce has bee"
stre"gthe"e! thro%gh co"tro# ret%r"s) The ro#e of stat%tory a%!itors has bee"
emphasise! $ith i"crease! i"ter"a# co"tro# thro%gh stre"gthe"i"g of the i"ter"a#
a%!it f%"ctio") Sig"ifica"t progress has bee" ma!e i" imp#eme"tatio" of the
Core 2ri"cip#es for Effective >a"+i"g S%pervisio") The s%pervisory rati"g
system %"!er CAMELS has bee" estab#ishe!4 co%p#e! $ith a move to$ar!s ris+&
base! s%pervisio")
Co"so#i!ate! s%pervisio" of fi"a"cia# co"g#omerates has si"ce bee" i"tro!%ce!
$ith bi&a""%a# !isc%ssio"s $ith the fi"a"cia# co"g#omerates) There have a#so
bee" i"itiatives aime! at stre"gthe"i"g corporate gover"a"ce thro%gh e"ha"ce!
!%e !i#ige"ce o" importa"t shareho#!ers4 a"! fit a"! proper tests for !irectors)
A scheme of 2rompt Corrective Actio" 72CA8 is i" p#ace for atte"!i"g to ba"+s
sho$i"g stea!y !eterioratio" i" fi"a"cia# hea#th) Three fi"a"cia# i"!icators4 vi)
capita# to ris+&$eighte! assets ratio 7CRAR84 "et "o"&performi"g assets 7"et
?2A8 a"! Ret%r" o" Assets 7RoA8 have bee" i!e"tifie! $ith specific thresho#!
#imits) Ihe" the i"!icators fa## be#o$ the thresho#! #eve# 7CRAR4 RoA8 or go
above it 7"et ?2As84 the 2CA scheme e"visages certai" str%ct%re!:!iscretio"ary
actio"s to be ta+e" by the reg%#ator)
The str%ct%re! actio"s i" the case of CRAR fa##i"g be#o$ the trigger poi"t may
i"c#%!e4 amo"g other thi"gs4 s%bmissio" a"! imp#eme"tatio" of a capita#
restoratio" p#a"4 restrictio" o" e.pa"sio" of ris+ $eighte! assets4 restrictio" o"
e"teri"g i"to "e$ #i"es of b%si"ess4 re!%ci"g:s+ippi"g !ivi!e"! payme"ts4 a"!
re3%ireme"t for recapita#isatio") The str%ct%re! actio"s i" the case of RoA
fa##i"g be#o$ the trigger #eve# may i"c#%!e4 amo"g other thi"gs4 restrictio" o"
accessi"g:re"e$i"g cost#y !eposits a"! CDs4 a re3%ireme"t to ta+e steps to
i"crease fee&base! i"come a"! to co"tai" a!mi"istrative e.pe"ses4 "ot to e"ter
"e$ #i"es of b%si"ess4 impositio" of restrictio"s o" borro$i"gs from the
i"terba"+ mar+et4 etc)
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1" the case of i"creasi"g "et ?2As4 str%ct%re! actio"s $i## i"c#%!e4 amo"g other
thi"gs4 %"!erta+i"g a specia# !rive to re!%ce the stoc+ of ?2As a"! co"tai"i"g
the ge"eratio" of fresh ?2As4 revie$i"g the #oa" po#icy of the ba"+4 ta+i"g steps
to %pgra!e cre!it appraisa# s+i##s a"! systems a"! to stre"gthe" fo##o$&%p of
a!va"ces4 i"c#%!i"g a #oa" revie$ mecha"ism for #arge #oa"s4 fo##o$i"g %p s%it
fi#e!: !ecree! !ebts effective#y4 p%tti"g i" p#ace proper cre!it ris+ ma"ageme"t
po#iciesrocessesroce!%resr%!e"tia# #imits4 re!%ci"g #oa" co"ce"tratio"4 etc)
Discretio"ary actio" may i"c#%!e restrictio"s o" capita# e.pe"!it%re4 e.pa"sio"
i" staff4 a"! i"crease of sta+e i" s%bsi!iaries) The Reserve >a"+:Gover"me"t
may ta+e steps to cha"ge promoters: o$"ership a"! may eve" ta+e steps to
merge:ama#gamate:#i3%i!ate the ba"+ or impose a moratori%m o" it if its positio"
!oes "ot improve $ithi" a" agree! perio!)
Technolo&ical (n$ras!ruc!ure
1" rece"t years4 the Reserve >a"+ has e"!eavo%re! to improve the efficie"cy of
the fi"a"cia# system by e"s%ri"g the prese"ce of a safe4 sec%re a"! effective
payme"t a"! sett#eme"t system) 1" the process4 apart from performi"g reg%#atory
a"! oversight f%"ctio"s the Reserve >a"+ has a#so p#aye! a" importa"t ro#e i"
promoti"g the system=s f%"ctio"a#ity a"! mo!er"isatio" o" a" o"goi"g basis)
The co"so#i!atio" of the e.isti"g payme"t systems revo#ves aro%"!
stre"gthe"i"g comp%terise! che3%e c#eari"g4 a"! e.pa"!i"g the reach of
E#ectro"ic C#eari"g Services 7ECS8 a"! E#ectro"ic 5%"!s)
Tra"sfer 7E5T8) The critica# e#eme"ts of the !eve#opme"ta# strategy are the
ope"i"g of "e$ c#eari"g ho%ses4 i"terco""ectio" of c#eari"g ho%ses thro%gh the
1"!ia" 5i"a"cia# ?et$or+ 71?51?ET8 a"! the !eve#opme"t of a Rea#&Time Gross
Sett#eme"t 7RTGS8 System4 a Ce"tra#ise! 5%"!s Ma"ageme"t System 7C5MS84 a
?egotiate! Dea#i"g System 7?DS8 a"! the Str%ct%re! 5i"a"cia# Messagi"g
System 7S5MS8) Simi#ar#y4 i"tegratio" of the vario%s payme"t pro!%cts $ith the
systems of i"!ivi!%a# ba"+s has bee" a"other thr%st area)
An Assessmen!
These reform meas%res have ha! a major impact o" the overa## efficie"cy a"!
stabi#ity of the ba"+i"g system i" 1"!ia) The !epe"!e"ce of the 1"!ia" ba"+i"g
system o" vo#ati#e #iabi#ities to fi"a"ce its assets is 3%ite #imite!4 $ith the
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f%"!i"g vo#ati#ity ratio at &9)(E per ce"t as compare! $ith a g#oba# ra"ge of
&9)(E to 9)(( per ce"t) The overa## capita# a!e3%acy ratio of ba"+s at e"!&March
*99/ $as (*); per ce"t as agai"st the reg%#atory re3%ireme"t of C per ce"t $hich
itse#f is higher tha" the >ase# "orm of ; per ce"t) The capita# a!e3%acy ratio $as
broa!#y comparab#e $ith the g#oba# ra"ge) There has bee" a mar+e!
improveme"t i" asset 3%a#ity $ith the perce"tage of gross ?2As to gross
a!va"ces for the ba"+i"g system !ec#i"i"g from (-)- per ce"t i" (CC; to /)* per
ce"t i" *99/) G#oba##y4 the ?2L ratio varies $i!e#y from a #o$ of 9), per ce"t to
,)9 per ce"t i" !eve#ope! eco"omies4 to over (9)9 per ce"t i" severa# Lati"
America" eco"omies) The reform meas%res have a#so res%#te! i" a" improveme"t
i" the profitabi#ity of ba"+s) RoA rose from 9)- per ce"t i" the year (CC(&C* to
9)C per ce"t i" *99-&9/) Co"si!eri"g that4 g#oba##y4 RoA $as i" the ra"ge &()* to
0)* per ce"t for *99-4 1"!ia" ba"+s are $e## p#ace!) The ba"+i"g sector reforms
have a#so emphasise! the "ee! to revie$ ma"po$er reso%rces a"! ratio"a#ise
re3%ireme"ts by !ra$i"g %p a rea#istic p#a" so as to re!%ce operati"g cost a"!
improve profitabi#ity) The cost to i"come ratio of 9)/ per ce"t for 1"!ia" ba"+s
compares favo%rab#y $ith the g#oba# ra"ge of 9)-0 per ce"t to 9)0; per ce"t a"!
vis&a&vis 9)-; per ce"t to ()(0 per ce"t for the $or#!=s #argest ba"+s) 1" rece"t
years4 the 1"!ia" eco"omy has bee" %"!ergoi"g a phase of high gro$th co%p#e!
$ith i"ter"a# a"! e.ter"a# stabi#ity characterise! by price stabi#ity4 fisca#
co"so#i!atio"4 overa## ba#a"ce of payme"ts a#ig"me"t4 improveme"t i" the
performa"ce of fi"a"cia# i"stit%tio"s a"! stab#e fi"a"cia# mar+et co"!itio"s a"!
the service sector ta+i"g a" i"creasi"g share4 e"ha"ce! competitive"ess4
i"crease! emphasis o" i"frastr%ct%re4 improve! mar+et microstr%ct%re4 a"
e"ab#i"g #egis#ative e"viro"me"t a"! sig"ifica"t capita# i"f#o$s) This has
provi!e! the bac+!rop for a more s%stai"e! !eve#opme"t of fi"a"cia# mar+ets
a"! reform)

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CHAPTER 3
1?TROD@CT1O? TO CRED1T CARD
1?D@STRY
History
O%r society $as o"ce %po" a time f%"ctio"i"g $itho%t mo"eyF it is agai" #i+e#y to
become mo"ey#ess) Ihi#e a"cie"t society $as co"fro"te! $ith the prob#ems of a!j%sti"g
m%t%a##y satisfactory rates a"! basis of e.cha"ge4 f%t%re society4 $ith the he#p of
comp%ters4 e#ectro"ics a"! te#ecomm%"icatio"s4 cre!it car!s4 te#epho"e a"! other mo!er"
mea"s of comm%"icatio"s4 $o%#! sett#e fi"a"cia# tra"sactio"s i"sta"t#y) Mo"ey as a
me!i%m of e.cha"ge $i## serve its f%"ctio") The !iffere"ce $i## be that i" f%t%re coi"s4
c%rre"cy "otes4 che3%es4 etc)4 $i## be !ispe"se! $ith i" favo%r of recor!s) 1"!ia has
e"tere! the stage of cre!it car! system a"! cre!it car!s are gai"i"g i"creasi"g re#eva"ce
to faci#itate i"!%stria#4 commercia# a"! agric%#t%ra# tra"sactio"s)
Cre!it $as first %se! i" Assyria4 >aby#o" a"! Egypt ,4999 years ago) The >i## of
E.cha"ge Q the forer%""er of ba"+ "otes & $as estab#ishe! i" the (-th ce"t%ry) Debts
sett#e! by o"e&thir! cash a"! t$o&thir!s bi## of e.cha"ge paper mo"ey fo##o$e! o"#y i"
the (Eth ce"t%ry) The first a!vertiseme"t for cre!it $as p#ace! i" (E,9 by Christopher
Thor"to" $ho offere! f%r"it%re that co%#! be pai! off $ee+#y)
5rom the (;th ce"t%ry %"ti# the ear#y part of the *9th4 ta##yme" so#! c#othes i" ret%r" for
sma## $ee+#y payme"tsF they $ere ca##e! Gta##yme"H beca%se they +ept a recor! of ta##y
of $hat peop#e ha! bro%ght o" a $oo!e" stic+) O"e si!e of the stic+ $as mar+e! $ith
"otches to represe"t the amo%"t of !ebt a"! the other si!e $as a recor! of payme"ts) 1"
the (C*9s shopper=s p#ate Q Gb%y "o$4 pay #aterH system Q $as i"tro!%ce! i" @SA) 1t
co%#! o"#y be %se! i" shops $hich iss%e! it)
The cre!it car! $as the s%ccessor of a variety of mercha"t cre!it schemes) 1t $as first
%se! i" the (C*9s4 i" the @"ite! States4 specifica##y to se## f%e# to a gro$i"g "%mber of
a%tomobi#e o$"ers) 1" (C,; severa# compa"ies starte! to accept each otherDs car!s) The
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co"cept of payi"g mercha"ts %si"g a car! $as i"ve"te! i" (C/9 by Ra#ph Sch"ei!er a"!
5ra"+ R) Mc?amara i" or!er to co"so#i!ate m%#tip#e car!s) The Di"ers C#%b4 $hich $as
create! partia##y thro%gh a merger $ith Di"e a"! Sig"4 pro!%ce! the first Nge"era#
p%rposeN charge car!4 $hich is simi#ar b%t re3%ire! the e"tire bi## to be pai! $ith each
stateme"tF it $as fo##o$e! short#y thereafter by America" E.press a"! Carte >#a"che)
Iester" @"io" ha! beg%" iss%i"g charge car!s to its fre3%e"t c%stomers i" (C(-)
>a"+ of America create! the BankAmericard i" (C/;4 a pro!%ct $hich eve"t%a##y
evo#ve! i"to the Misa system 7NCharge.N a#so became Misa8) MasterCar! came to bei"g
i" (C00 $he" a gro%p of cre!it&iss%i"g ba"+s estab#ishe! Master Charge) The fract%re!
"at%re of the @S ba"+i"g system mea"t that cre!it car!s became a" effective $ay for
those $ho $ere trave##i"g aro%"! the co%"try to move their cre!it to p#aces $here they
co%#! "ot !irect#y %se their ba"+i"g faci#ities) 1" (C00 >arc#aycar! i" the @A #a%"che!
the first cre!it car! o%tsi!e of the @S)
There are "o$ co%"t#ess variatio"s o" the basic co"cept of revo#vi"g cre!it for
i"!ivi!%a#s 7as iss%e! by ba"+s a"! ho"ore! by a "et$or+ of fi"a"cia# i"stit%tio"s84
i"c#%!i"g orga"iatio"&bra"!e! cre!it car!s4 corporate&%ser cre!it car!s4 store car!s a"!
so o")
1" co"trast4 a#tho%gh havi"g reache! very high a!optio" #eve#s i" the @S4 Ca"a!a a"! the
@A4 it is importa"t to "ote that ma"y c%#t%res $ere m%ch more cash&orie"te! i" the #atter
ha#f of the t$e"tieth ce"t%ry4 or ha! !eve#ope! a#ter"ative forms of cash&#ess payme"ts4
#i+e Carte b#e%e4 or the EC&car! 7Germa"y4 5ra"ce4 S$iter#a"!4 amo"g ma"y others8) 1"
these p#aces4 the ta+e&%p of cre!it car!s $as i"itia##y m%ch s#o$er) 1t too+ %"ti# the (CC9s
to reach a"ythi"g #i+e the perce"tage mar+et&pe"etratio" #eve#s achieve! i" the @S4
Ca"a!a or @A) 1" ma"y co%"tries accepta"ce sti## remai"s poor as the %se of a cre!it car!
system !epe"!s o" the ba"+i"g system bei"g perceive! as re#iab#e)
1" co"trast4 beca%se of the #egis#ative frame$or+ s%rro%"!i"g ba"+i"g system over!rafts4
some co%"tries4 5ra"ce i" partic%#ar4 $ere m%ch faster to !eve#op a"! a!opt chip&base!
cre!it car!s $hich are "o$ see" as major a"ti&fra%! cre!it !evices)
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The !esig" of the cre!it car! itse#f has become a major se##i"g poi"t i" rece"t years) The
va#%e of the car! to the iss%er bei"g re#ate! to the C%stomerDs %sage of the car!) This has
#e! to the rise of Co&>ra"! a"! Affi"ity car!s & $here the car!s !esig" is re#ate! to the
Naffi"ityN 7a %"iversity4 for e.amp#e8 #ea!i"g to higher car! %sage) 1" most cases a
perce"tage of the va#%e of the car! is ret%r"e! to the affi"ity gro%p)
Co#cept of credit card
2rogress i" civi#iatio" i" its t%r" has bro%ght o%t ra!ica# cha"ges i" the ma""er of
tra!i"g) The "ee! for somethi"g i"tri"sica##y %sef%# a"! easi#y app#icab#e i" every!ay
!ea#i"g is c#ear#y fe#t) Cash i" the form of c%rre"cy "otes a"! coi"s ma+es %p j%st o"e
form of the payme"t system) Deve#opme"t i" ba"+i"g $hi#e a#so givi"g i"p%ts to the
f%rther !eve#opme"t of cash bro%ght abo%t a seco"! phase i" payme"t "ame#y paper
i"str%ctio"s s%ch as che3%es a"! cre!it tra"sfers) The re3%ireme"t for greater f#e.ibi#ity
a"! co"ve"ie"ce has #e! to e#ectro"ic payme"ts4 a"! this is $here p#astic car!s have
prove! their $orth) 1t a##o$s the car! iss%ers to #imit the s%m of mo"ey the car!&ho#!ers
$ish to spe"!) The spe"!i"g of car!&ho#!ers $ho have !efa%#te! o" payme"ts or $ho are
over their cre!it #imit ca" be restricte! %"ti# the ba#a"ces are c#eare!)
Defi#itio# of credit card
A cre!it car! is a cre!it&to+e" $ithi" the mea"i"g of sectio" (-7(84 Co"s%mer Cre!it Act
(CE- of the @A $hich !efi"es a cre!it&to+e" as a car!4 che3%e4 vo%cher4 co%po"4 stamp4
form boo+#et or other !oc%me"t or thi"g give" to a" i"!ivi!%a# by a perso" carryi"g o" a
co"s%mer cre!it b%si"ess4 $ho %"!erta+es'& that o" the pro!%ctio" of it 7$hether or "ot
some other actio" is a#so re3%ire!84 he $i## s%pp#y4 cash4 goo!s a"! services 7or a"y of
them8 o" cre!it4 or that $ere4 o" the pro!%ctio" of it to thir! party 7$hether or "ot a"y
other actio" is a#so re3%ire!84 the thir! party s%pp#ies cash4 goo!s a"! services 7$hether
or "ot !e!%cti"g a"y !isco%"t or commissio"84 i" ret%r" for payme"t to him by the
i"!ivi!%a#)
1" very simp#e $or!s cre!it car! ca" be terme! as a" %"sec%re! perso"a# #oa" offere! to
c%stomers by the ba"+s $here the car!&ho#!er co%#! p%rchase goo!s a"! services from
a%thorie! mercha"t or mercha"t estab#ishme"ts 7MEs8 of the ba"+ %p to a fi.e! #imit o"
cre!it) S%ch cre!it is "orma##y ma!e avai#ab#e for a perio! of ,9 to -/ !ays) This is t%r"
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he#ps ear" i"come by $ay of commissio" from its mercha"t estab#ishme"tsF the scheme
provi!e! #arge scope for sa#e a"! i"crease! t%r"over $ith ass%re! a"! prompt payme"t)
1" (C/(4 the 5ra"+#i" ?atio"a# >a"+ i" ?e$ Yor+ iss%e! the first mo!er" cre!it car!)
@"so#icite! cre!it car!s $ere se"t to prospective car!&ho#!ers $ho $ere "ot s%bject to
cre!it scree"i"g prior to bei"g se"t a car!) Mercha"ts sig"e! agreeme"ts to accept the
car!s) Ihe" a p%rchase $as ma!e4 the car!&ho#!er prese"te! the car! to the mercha"t4
$ho $o%#! copy the i"formatio" o" the mercha"t=s acco%"t at 5ra"+#i" >a"+ i" the
amo%"t of the tra"sactio"s4 #ess the !isco%"t rate) 1f a p%rchase e.cee!e! the mercha"t=s
f#oor #imit4 the mercha"t $as re3%ire! to ca## the ba"+ for approva#) 5ra"+#i" ?atio"a#
>a"+=s Cre!it Car! programme $as copie! by h%"!re!s of other ba"+s i" the #ate (C/9s
a"! ear#y (C09s)
The >a"+ of America iss%e! >a"+ Americar! i" (C/; a"! eight years #ater4 i" (C004 the
ba"+s comprisi"g the Iester" State >a"+ Car! Associatio" iss%e! the Master Charge
Car!) >a"+ America a"! Master charge car! became the foca# poi"ts for the eve"t%a#
gro%pi"gs of a## ba"+ car!s thro%gho%t the $or#!) The M1SA a"! the MASTER the
#argest cre!it car!s to!ay appeare! i" mar+et i" (C00) These t$o i"ter"atio"a# car!s are
very pop%#ar a"! are accepte! a"! ho"ore! a## over the $or#! i" (E9 co%"tries) These
t$o i"!epe"!e"t car! compa"ies #e! to #atest i""ovatio"s i" the cre!it car! b%si"ess)
?o$ the cre!it car! system has become %"iversa##y pop%#ar thro%gho%t the $or#!
i"c#%!i"g the Comm%"ist co%"tries) At the e"! of (CC/ a"! (C;9 a mi##io" car!s $ere
%se! i" the $or#!) The tota# "%mber of cre!it car! %sers i" 1"!ia is c%rre"t#y i" e.cess of
;9 #a+h a"! "o$ more tha" ,9 ba"+s are chasi"g c%stomers $ith their car!s)
A cre!it car! a##o$s co"s%mers to p%rchase pro!%cts or services $itho%t cash a"! to pay
for them at a #ater !ate) To 3%a#ify for this type of cre!it4 the co"s%mer m%st ope" a"
acco%"t $ith a ba"+ or compa"y4 $hich spo"sors a car!) They the" receive a #i"e of
cre!it $ith a specifie! !o##ar amo%"t) They ca" %se the car! to ma+e p%rchases from
participati"g mercha"ts %"ti# they reach this cre!it #imit) Every mo"th the spo"sor
provi!es a bi##4 $hich ta##ies the car! activity !%ri"g the previo%s ,9 !ays) Depe"!i"g o"
the terms of the car!4 the c%stomer may pay i"terest charges o" the amo%"t that they !o
"ot pay for o" a mo"th#y basis) A#so4 cre!it car!s may be spo"sore! by #arge retai#ers
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7s%ch as major c#othi"g or !epartme"t stores8 or by ba"+s or corporatio"s 7#i+e M1SA or
America" E.press8)
Cre!its car!s are a re#ative#y rece"t !eve#opme"t) The M1SA Compa"y4 for e.amp#e4
traces its history bac+ to (C/; $he" the >a"+ of America bega" its >a"+America
program) 1" the mi!&(C09s4 the >a"+ of America bega" to #ice"se ba"+s i" the @"ite!
States the rights to iss%e its specia# >a"+Americar!s) 1" (CEE the "ame Misa $as a!opte!
i"ter"atio"a##y to cover a## these car!s) M1SA became the first cre!it car! to be
recog"ie! $or#!$i!e)
The ba"+s a"! compa"ies that spo"sor cre!it car!s profit i" three $ays) 2rimari#y they
ma+e mo"ey from the i"terest payme"ts charge! o" the %"pai! ba#a"ce4 b%t they a#so ca"
ma+e mo"ey by chargi"g a" a""%a# fee for the %se of the car!) The i"come from this fee4
$hich is typica##y o"#y L/9 or LE/ per c%stomer per year4 ca" be s%bsta"tia# co"si!eri"g
that the #arger compa"ies have te"s of mi##io"s of c%stomers) 1" a!!itio"4 the spo"sors
ma+e mo"ey by chargi"g mercha"ts a sma## perce"tage of i"come for the service of the
car!) This arra"geme"t is acceptab#e to the mercha"ts beca%se they ca" #et their
c%stomers pay by cre!it car! i"stea! of re3%iri"g cash) The mercha"t ma+es
arra"geme"ts to participate i" a cre!it car! program $ith a mercha"t ba"+4 $hich i" t%r"
$or+s $ith a car!&iss%i"g ba"+) The mercha"t ba"+ !etermi"es $hat perce"tage of the
tota# p%rchase va#%e has to be pai! by the mercha"t to the car!&iss%i"g ba"+) The amo%"t
varies !epe"!i"g o" the vo#%me a"! type of b%si"ess4 b%t i" ge"era# it is bet$ee" (&*6)
A perce"tage of that amo%"t is +ept by the mercha"t ba"+ as a tra"sactio"&processi"g
fee) 5or compa"ies #i+e America" E.press $hich spo"sor car!s4 the processi"g fee may
be sig"ifica"t#y higher) 5%rthermore4 spo"sors may ge"erate i"come by #easi"g cre!it
car! verificatio" e3%ipme"t to mercha"ts 7especia##y if the mercha"ts ca""ot affor! to
p%rchase the e3%ipme"t themse#ves)8 5i"a##y4 spo"sors may profit by chargi"g service
fees for #ate payme"ts
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CRED(T CARDS (+ (+D(A
Cre!it car! or the p#astic mo"ey4 as it is pop%#ar#y referre! to4 $as s#o$ to e"ter the
1"!ia" mar+et beca%se of the high se"time"ta# va#%e that 1"!ia" co"s%mers attach to har!
cash) 2reva#e"ce of sma## va#%e tra"sactio"4 cre!it shy c%#t%re a"! i"a!e3%ate ba"+i"g
habits of the pop%#atio" $ere other hi"!ra"ces)
Cre!it car!s arrive! i" 1"!ia abo%t t$o !eca!es ago) 1" the ear#y stages its gro$th $as
very s#o$ i" terms of "%mber a"! va#%e) Eve" the "%mber of p#ayers $as #imite! a"!
mai"#y foreig" ba"+s #i+e HS>C4 Citiba"+ a"! Sta"!ar! Chartere! >a"+ !omi"ate! the
mar+et) 1"!ia" ba"+s !i! "ot sho$ m%ch i"terest i" the pro!%ct i" the i"itia# stages) This
is evi!e"t from the fact that it too+ State >a"+ of 1"!ia 7S>184 1"!ia=s #argest ba"+4 a#most
a !eca!e to begi" !ea#i"g i" cre!it car!s) S>14 !espite its $i!esprea! reach4 has
aggressive#y starte! promoti"g cre!it car!s o"#y three years ago)
Ho$ever4 i" the rece"t past the sce"ario has cha"ge! !ramatica##y) The "%mber of
"atio"a#ie! a"! private ba"+s iss%i"g cre!it car!s has i"crease! sig"ifica"t#y) Cre!it
car!s are "o$ "ot o"#y i"tegra# parts of the co"s%mer=s #ife i" metros4 b%t eve" resi!e"ts
of sma##er cities a"! to$"s have ta+e" to them) This ca" be attrib%te! to the aggressive
strategy of "atio"a#ie! a"! private ba"+s to promote car! pro!%cts i" sma##er to$" a"!
cities) These ba"+s have far $i!er reach a"! !epth i" sma##er cities a"! to$" as
compare! to foreig" ba"+s) They have capita#ie! o" this a!va"tage to p#ay a major ro#e
i" e.pa"!i"g the cre!it car! base i" terms of "%mber a"! %sage i" sma##er cities a"!
to$")
Tra"sactio"s %si"g p#astic mo"ey i"vo#ve the payme"t of a sma## fee to the iss%i"g ba"+
i" the form of a" app#icatio":joi"i"g fee a"! a" a""%a# fee) Co"s%mers co##ect a
perce"tage&base! commissio" i" the form of re$ar! poi"ts for car! %sage at
shops:estab#ishme"ts) The %sage of cre!it car! is very simp#e a"! easy) The co"s%mers
!o "ot have to carry cash a"! ca" %se the car! to pay their shoppi"g:resta%ra"t bi##s) A##
yo% are re3%ire! to !o is give yo%r cre!it car! at the payme"t co%"ter4 the perso"
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ha"!#i"g the co%"ter s$ipes the car! i"to the system to chec+ the !etai#s of the car! a"!
yo% "ee! to sig" o" the bi##) The payme"t is !o"e e#ectro"ica##y) Iith o"#y a sig"at%re
yo%r payme"t is ta+e" care of) 1s"=t it very simp#eS
Yes it is4 b%t everyo"e is"=t e#igib#e for a cre!it car!) There are certai" re3%ireme"ts4
varyi"g across ba"+s4 to get a cre!it car!) Typica##y cre!it car! compa"ies 7or iss%i"g
ba"+s4 as they are +"o$"8 re3%ire the app#ica"t to have a mi"im%m i"come #eve# before
he ca" app#y for the car!) 2roof of i"come is give" by $ay of !oc%me"ts) These
!oc%me"ts co%#! be a copy of ta. ret%r" fi#e!F sa#ary s#ips if app#icab#e4 ba#a"ce sheet
a"! profit a"! #oss acco%"t !etai# if yo% are se#f&emp#oye!) These serve as the starti"g
poi"t $hi#e app#yi"g for a car!) The mi"im%m i"come #eve# varies from ba"+ to ba"+
a"! f#%ct%ates bet$ee" Rs 094999 & (/94999 per a""%m !epe"!i"g %po" yo%r ris+ profi#e
a"! the type of car!) This re3%ireme"t he#ps the iss%i"g ba"+ to assess $hether or "ot
yo% $i## be ab#e to repay the e.pe"ses i"c%rre! thro%gh yo%r cre!it car!) 1" a!!itio" to
i"come e#igibi#ity4 yo% "ee! to be at #east *( years of age 7ma.im%m 0/ years8)
There is "o !o%bt that cre!it car!s are very co"ve"ie"t4 especia##y i" case of !ai#y
e.pe"ses) 1" a!!itio" yo% ear" bo"%s poi"ts $hi#e yo% spe"! via the car!) 1t is beca%se of
these reaso"s that i" the rece"t past car! %sage has i"crease! !ramatica##y) 1" fact4 p#astic
c%rre"cy has a#most $ipe! off har! c%rre"cy from the @S4 res%#ti"g i" far #ess
e.pe"!it%re associate! $ith cash tra"sactio"s)
C%rre"t#y4 fo%r major bishops are r%#i"g the car! empire & Citiba"+4 Sta"!ar! Chartere!
>a"+4 HS>C a"! State >a"+ of 1"!ia 7S>18) The i"!%stry4 $hich is cateri"g to over ,);
mi##io"( car! %sers4 is e.pecte! to !o%b#e by the fisca# *99,) Accor!i"g to a st%!y
co"!%cte! by State >a"+ of 1"!ia4 Citiba"+ is the !omi"a"t p#ayer4 havi"g iss%e! ()/
mi##io" car!s so far) Sta"!ar! Chartere! >a"+ fo##o$s $ay behi"! $ith 9)0E mi##io"4
$hi#e Ho"g+o"g >a"+ has 9), mi##io" cre!it car! c%stomers) Amo"g the "atio"a#ie!
ba"+s4 S>1 tops the #ist $ith 9)*; mi##io" car!s4 fo##o$e! by >a"+ of >aro!a at 9)**
mi##io")
The cre!it car! mar+et i" 1"!ia4 $hich starte! o%t i" (C;(4 is o" the verge of a"
%"prece!e"te! boom) >et$ee" (C;E a"! *9994 the mar+et has virt%a##y gro$" to over
,); mi##io" car!s $ith a#most */&,9 per ce"t gro$th i" "e$ car!&ho#!ers)
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1"!ia is ge"erati"g more cre!it car! spe"!ers tha" spe"!i"g p#aces) Ihi#e car!&base a"!
appe"!s are gro$i"g at a spiffy */&,9 per ce"t* a""%a##y4 the "%mber of mercha"t
estab#ishme"ts $hich accept car!s is gro$i"g se#ective#y s#%ggish) The fig%re $as p%t at
E/4999Q;94999 a co%p#e of years ago4 a"! "o$ sta"!s at (994999 o" both the Misa a"!
MasterCar! #oops) As oppose! to that4 there are *)/ mi##io" car!&ho#!ers a"! ,), mi##io"
car!s 7some4 obvio%s#y4 have more tha" o"e8 a"! the "%mbers are gro$i"g very stro"g#y)
The seve" mi##io" 1"!ia" cre!it car! i"!%stry has bee" gro$i"g over */ per ce"t,
a""%a##y a"! has "o$ more tha" ,9 ba"+s chasi"g c%stomers $ith their car!s) Sti##4 cre!it
car!s i" 1"!ia have ma!e b%si"ess se"se o"#y to a fe$)
GThe a""%a# gro$th rate is goo!4 b%t it is o"#y *9 per ce"t of the car! base4 that is
ge"erati"g reve"%e4H says Roopa" Astha"a4 ma"ager4 Car! 2ro!%cts Divisio" of HS>C)
?ear#y -/&/9 per ce"t of the car!&ho#!ers are estimate! to be i"active4 $hi#e a"other ,9
per ce"t %se the car! as a charge car! $itho%t %si"g the revo#vi"g faci#ity car!s are
e.pecte! to acco%"t for ,, per ce"t of a## p%rchases by *999 a"! -, per ce"t by *99/)
The cre!it car! embo!ies t$o esse"tia# aspects of the basic ba"+i"g f%"ctio" & the
tra"smissio" of payme"ts a"! the gra"ti"g of cre!it) Therefore4 i" its tr%e se"se4 a Jcre!it=
car! m%st offer the opi"io" of revo#vi"g cre!it) This is very a+i" to the over!raft faci#ity
offere! by ba"+s to their acco%"t ho#!ers) A cre!it car! ho#!er !oes "ot "ecessari#y have
to sett#e his e"tire acco%"t at the e"! of the mo"th for he has the optio" to ma+e partia#
payme"t i" s%bse3%e"t mo"ths) 1" fact4 $he" the car!&ho#!er ma+es the f%## payme"t at
the e"! of the mo"th he is sai! to be %si"g his cre!it car! as a Jcharge car!=) 1"ci!e"ta##y4
the i"terest pai! by the car!&ho#!er o" the Jcre!it= %ti#ie! by him is $hat ma+es the
b%si"ess of cre!it car!s profitab#e from the poi"t of vie$ of the ba"+ iss%i"g the car!)
1"!ia"s are sti## "ot s%re of the p#astic mo"ey) Cre!it car!s spe"! as a proportio" of the
tota# e.pe"!it%re by 1"!ia"s is o"e of the #o$est i" the $or#!) Ihi#e 1"!ia"s s$ipe!
p#astic mo"ey $orth L0 bi##io" i" *9904 cre!it car! %sers i" Aorea c%m%#ative#y spe"t
L(,0 bi##io")
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1"!ia"s spe"! j%st (6 of their tota# p%rchases thro%gh cre!it car!s $hi#e the Aorea"s
ma+e o"e&fifth of their tota# p%rchases thro%gh cre!it car!s) The $or#! average hovers
aro%"! C6)
GThe very #o$ #eve#s of pe"etratio" i" 1"!ia offer imme"se pote"tia# for cre!it car!
compa"ies) A#so4 there are fe$er cre!it car! compa"ies tha" those i" other parts of the
$or#!) The high gro$th i" spe"!i"g is attracti"g a #ot of e"tra"ts i"to the segme"t) Ihat
is !ra$i"g a #arge "%mber of compa"ies a"! fi"a"cia# i"stit%tio"s i"c#%!i"g Life
1"s%ra"ce Corporatio" of 1"!ia 7L1C8 to 1"!ia is the 0(6 year&o"&year gro$th bei"g
$it"esse! i" retai# spe"!i"g4 the highest i" the $or#!)
1"teresti"g#y4 eve" amo"g the rich4 cre!it car! o$"ership i" 1"!ia is the #o$est i" the
$or#!) Ihi#e C96 of the aff#%e"t i" Ho"g Ao"g have cre!it car!s a"! the correspo"!i"g
fig%re for Sy!"ey sta"!s at ;E64 i" 1"!ia4 o"#y *;6 of the aff#%e"t have cre!it car!)
Ma"i#a4 Ba+arta4 Taipei 4 Ho"g Ao"g have -;&E06 of the aff#%e"t pop%#atio" o$"i"g
cre!it car!s4 accor!i"g to Misa research i" Asia) Seo%# has ;-6 of its aff#%e"t pop%#atio"
o$"i"g a cre!it car!) Aorea4 ho$ever4 has a history of !efa%#ts o" cre!it car!s $here the
gover"me"t ha! to bai# o%t the cre!it car! compa"ies)
So%rces i" the i"!%stry say $ith s%ch #o$ pe"etratio" #eve#s there are at #east ha#f a
!oe" compa"ies that are #oo+i"g to ro## o%t cre!it car! operatio"s i" 1"!ia) A1G4
>arc#ays4 a"! L1C are some of the compa"ies eager to e"ter the 1"!ia" mar+et) 2%"jab
?atio"a# >a"+ 72?>8 is a#so #ear"t to be i" "egotiatio"s to #a%"ch a"other cre!it car!)
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Credi! Card 1era!ions o$ banks) 2uidelines Da!ed
21s! +o' 2334
2%rs%a"t to the a""o%"ceme"t ma!e i" the A""%a# 2o#icy Stateme"t *99-&9/4 the
Reserve >a"+ of 1"!ia ha! co"stit%te! a Ior+i"g Gro%p o" Reg%#atory Mecha"ism for
Car!s) The Gro%p has s%ggeste! vario%s reg%#atory meas%res aime! at e"co%ragi"g
gro$th of cre!it car!s i" a safe4 sec%re a"! efficie"t ma""er as $e## as to e"s%re that the
r%#es4 reg%#atio"s4 sta"!ar!s a"! practices of the car! iss%i"g ba"+s are i" a#ig"me"t $ith
the best c%stomer practices) The fo##o$i"g g%i!e#i"es o" cre!it car! operatio"s of ba"+s
have bee" frame! base! o" the recomme"!atio"s of the Gro%p as a#so the fee!bac+
receive! from the members of the p%b#ic4 car! iss%i"g ba"+s a"! others) A## the cre!it
car! iss%i"g ba"+s : ?>5Cs sho%#! imp#eme"t these g%i!e#i"es imme!iate#y)
Each ba"+ : ?>5C m%st have a $e## !oc%me"te! po#icy a"! a 5air 2ractices Co!e for
cre!it car! operatio"s) 1" March *99/4 the 1>A re#ease! a 5air 2ractices Co!e for cre!it
car! operatio"s $hich co%#! be a!opte! by ba"+s : ?>5Cs) The ba"+ : ?>5CDs 5air
2ractice Co!e sho%#!4 at a mi"im%m4 i"corporate the re#eva"t g%i!e#i"es co"tai"e! i" this
circ%#ar) >a"+s : ?>5Cs sho%#! $i!e#y !issemi"ate the co"te"ts thereof i"c#%!i"g
thro%gh their $ebsites4 at the #atest by ?ovember ,94 *99/)
2uidelines $or (mlemen!a!ion
'ssue of cards
a) >a"+s : ?>5Cs sho%#! i"!epe"!e"t#y assess the cre!it ris+ $hi#e iss%i"g car!s to
perso"s4 especia##y to st%!e"ts a"! others $ith "o i"!epe"!e"t fi"a"cia# mea"s) A!!&o"
car!s i)e) those that are s%bsi!iary to the pri"cipa# car!4 may be iss%e! $ith the c#ear
%"!ersta"!i"g that the #iabi#ity $i## be that of the pri"cipa# car!ho#!er)
b) As ho#!i"g severa# cre!it car!s e"ha"ces the tota# cre!it avai#ab#e to a"y co"s%mer4
ba"+s : ?>5Cs sho%#! assess the cre!it #imit for a cre!it car! c%stomer havi"g regar! to
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the #imits e"joye! by the car!ho#!er from other ba"+s o" the basis of se#f !ec#aratio":
cre!it i"formatio")
c) The car! iss%i"g ba"+s : ?>5Cs $o%#! be so#e#y respo"sib#e for f%#fi#me"t of a## AYC
re3%ireme"ts4 eve" $here DSAs : DMAs or other age"ts so#icit b%si"ess o" their
beha#f)
!) Ihi#e iss%i"g car!s4 the terms a"! co"!itio"s for iss%e a"! %sage of a cre!it car!
sho%#! be me"tio"e! i" c#ear a"! simp#e #a"g%age 7preferab#y i" E"g#ish4 Hi"!i a"! the
#oca# #a"g%age8 comprehe"sib#e to a car! %ser) The Most 1mporta"t Terms a"!
Co"!itio"s 7M1TCs8 terme! as sta"!ar! set of co"!itio"s4 as give" i" the Appe"!i.4
sho%#! be high#ighte! a"! a!vertise!: se"t separate#y to the prospective c%stomer:
c%stomers at a## the stages i)e) !%ri"g mar+eti"g4 at the time of app#icatio"4 at the
accepta"ce stage 7$e#come +it8 a"! i" importa"t s%bse3%e"t comm%"icatio"s)
'#terest rates a#d other char$es
a) Car! iss%ers sho%#! e"s%re that there is "o !e#ay i" !ispatchi"g bi##s a"! the c%stomer has
s%fficie"t "%mber of !ays 7at #east o"e fort"ight8 for ma+i"g payme"t before the i"terest
starts getti"g charge!)
b) Car! iss%ers sho%#! 3%ote a""%a#ie! perce"tage rates 7A2R8 o" car! pro!%cts
7separate#y for retai# p%rchase a"! for cash a!va"ce4 if !iffere"t8) The metho! of
ca#c%#atio" of A2R sho%#! be give" $ith a co%p#e of e.amp#es for better comprehe"sio")
The A2R charge! a"! the a""%a# fee sho%#! be sho$" $ith e3%a# promi"e"ce) The #ate
payme"t charges4 i"c#%!i"g the metho! of ca#c%#atio" of s%ch charges a"! the "%mber of
!ays4 sho%#! be promi"e"t#y i"!icate!) The ma""er i" $hich the o%tsta"!i"g %"pai!
amo%"t $i## be i"c#%!e! for ca#c%#atio" of i"terest sho%#! a#so be specifica##y sho$" $ith
promi"e"ce i" a## mo"th#y stateme"ts) Eve" $here the mi"im%m amo%"t i"!icate! to
+eep the car! va#i! has bee" pai!4 it sho%#! be i"!icate! i" bo#! #etters that the i"terest
$i## be charge! o" the amo%"t !%e after the !%e !ate of payme"t) These aspects may be
sho$" i" the Ie#come Ait i" a!!itio" to bei"g sho$" i" the mo"th#y stateme"t)
c) The ba"+ : ?>5C sho%#! "ot #evy a"y charge that $as "ot e.p#icit#y i"!icate! to the
cre!it car! ho#!er at the time of iss%e of the car! a"! getti"g his : her co"se"t) Ho$ever4
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this $o%#! "ot be app#icab#e to charges #i+e service ta.es4 etc) $hich may s%bse3%e"t#y
be #evie! by the Gover"me"t or a"y other stat%tory a%thority)
!) The terms a"! co"!itio"s for payme"t of cre!it car! !%es4 i"c#%!i"g the mi"im%m
payme"t !%e4 sho%#! be stip%#ate! so as to e"s%re that there is "o "egative amortiatio")
e) Cha"ges i" charges 7other tha" i"terest8 may be ma!e o"#y $ith prospective effect givi"g
"otice of at #east o"e mo"th) 1f a cre!it car! ho#!er !esires to s%rre"!er his cre!it car! o"
acco%"t of a"y cha"ge i" cre!it car! charges to his !isa!va"tage4 he may be permitte! to
!o so $itho%t the ba"+ #evyi"g a"y e.tra charge for s%ch c#os%re)
(ro#$fu" bi""i#$
a) The car! iss%i"g ba"+ : ?>5C sho%#! e"s%re that $ro"g bi##s are "ot raise! a"! iss%e! to
c%stomers) 1" case4 a c%stomer protests a"y bi##4 the ba"+ : ?>5C sho%#! provi!e
e.p#a"atio" a"!4 if "ecessary4 !oc%me"tary evi!e"ce to the c%stomer $ithi" a ma.im%m
perio! of si.ty !ays $ith a spirit to amicab#y re!ress the grieva"ces)
b) To obviate fre3%e"t comp#ai"ts of !e#aye! bi##i"g4 the cre!it car! iss%i"g ba"+ : ?>5C
may co"si!er provi!i"g bi##s a"! stateme"ts of acco%"ts o"#i"e4 $ith s%itab#e sec%rity
b%i#t therefore)
)se of DSAs * DMAs a#d other a$e#ts
a) Ihe" ba"+s : ?>5Cs o%tso%rce the vario%s cre!it car! operatio"s4 they have to be
e.treme#y caref%# that the appoi"tme"ts of s%ch service provi!ers !o "ot compromise
$ith the 3%a#ity of the c%stomer service a"! the ba"+ : ?>5C=s abi#ity to ma"age cre!it4
#i3%i!ity a"! operatio"a# ris+s) 1" the choice of the service provi!er4 the ba"+ : ?>5Cs
have to be g%i!e! by the "ee! to e"s%re co"fi!e"tia#ity of the c%stomer=s recor!s4 respect
c%stomer privacy4 a"! a!here to fair practices i" !ebt co##ectio")
b) The Co!e of Co"!%ct for Direct Sa#es Age"ts 7DSAs8 form%#ate! by the 1"!ia" >a"+s=
Associatio" 71>A8 co%#! be %se! by ba"+s : ?>5Cs i" form%#ati"g their o$" co!es for
the p%rpose) The ba"+ : ?>5C sho%#! e"s%re that the DSAs e"gage! by them for
mar+eti"g their cre!it car! pro!%cts scr%p%#o%s#y a!here to the ba"+ : ?>5C=s o$" Co!e
of Co"!%ct for cre!it car! operatio"s $hich sho%#! be !isp#aye! o" the ba"+ : ?>5C=s
$ebsite a"! be avai#ab#e easi#y to a"y cre!it car! ho#!er)
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c) The ba"+ : ?>5C sho%#! have a system of ra"!om chec+s a"! mystery shoppi"g to
e"s%re that their age"ts have bee" proper#y briefe! a"! trai"e! i" or!er to ha"!#e $ith
care a"! ca%tio" their respo"sibi#ities4 partic%#ar#y i" the aspects i"c#%!e! i" these
g%i!e#i"es #i+e so#iciti"g c%stomers4 ho%rs for ca##i"g4 privacy of c%stomer i"formatio"4
co"veyi"g the correct terms a"! co"!itio"s of the pro!%ct o" offer4 etc)
Redressa" of Grieva#ces
a) Ge"era##y4 a time #imit of si.ty 7098 !ays may be give" to the c%stomers for preferri"g
their comp#ai"ts grieva"ces)
b) The car! iss%i"g ba"+ : ?>5C sho%#! co"stit%te Grieva"ce Re!ressa# machi"ery $ithi"
the ba"+ : ?>5C a"! give $i!e p%b#icity abo%t it thro%gh e#ectro"ic a"! pri"t me!ia)
The "ame a"! co"tact "%mber of !esig"ate! grieva"ce re!ressa# officer of the ba"+ :
?>5C sho%#! be me"tio"e! o" the cre!it car! bi##s) The !esig"ate! officer sho%#! e"s%re
that ge"%i"e grieva"ces of cre!it car! s%bscribers are re!resse! prompt#y $itho%t
i"vo#vi"g !e#ay)
c) The grieva"ce re!ressa# proce!%re of the ba"+ : ?>5C a"! the time frame fi.e! for
respo"!i"g to the comp#ai"ts sho%#! be p#ace! o" the ba"+ : ?>5CDs $ebsite) The "ame4
!esig"atio"4 a!!ress a"! co"tact "%mber of importa"t e.ec%tives as $e## as the
Grieva"ce Re!ressa# Officer of the ba"+ : ?>5C may be !isp#aye! o" the $ebsite) There
sho%#! be a system of ac+"o$#e!gi"g c%stomersD comp#ai"ts for fo##o$ %p4 s%ch as
comp#ai"t "%mber : !oc+et "%mber4 eve" if the comp#ai"ts are receive! o" pho"e)
!) 1f a comp#ai"a"t !oes "ot get satisfactory respo"se from the ba"+ : ?>5C $ithi" a
ma.im%m perio! of thirty 7,98 !ays from the !ate of his #o!gi"g the comp#ai"t4 he $i##
have the optio" to approach the Office of the co"cer"e! >a"+i"g Omb%!sma" for
re!ressa# of his grieva"ce:s) The ba"+ : ?>5C sha## be #iab#e to compe"sate the
comp#ai"a"t for the #oss of his time4 e.pe"ses4 fi"a"cia# #oss as $e## as for the
harassme"t a"! me"ta# a"g%ish s%ffere! by him for the fa%#t of the ba"+ a"! $here the
grieva"ce has "ot bee" re!resse! i" time)
'#ter#a" co#tro" a#d !o#itori#$ syste!s
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Iith a vie$ to e"s%ri"g that the 3%a#ity of c%stomer service is e"s%re! o" a" o"&goi"g
basis i" ba"+s : ?>5Cs4 the Sta"!i"g Committee o" C%stomer Service i" each ba"+ :
?>5C may revie$ o" a mo"th#y basis the cre!it car! operatio"s i"c#%!i"g reports of
!efa%#ters to the C1>1L4 cre!it car! re#ate! comp#ai"ts a"! ta+e meas%res to improve the
services a"! e"s%re the or!er#y gro$th i" the cre!it car! operatio"s) >a"+s : ?>5Cs
sho%#! p%t %p !etai#e! 3%arter#y a"a#ysis of cre!it car! re#ate! comp#ai"ts to their Top
Ma"ageme"t) Car! iss%i"g ba"+s sho%#! have i" p#ace a s%itab#e mo"itori"g mecha"ism
to ra"!om#y chec+ the ge"%i"e"ess of mercha"t tra"sactio"s)
Ri$ht to i!pose pe#a"ty
The Reserve >a"+ of 1"!ia reserves the right to impose a"y pe"a#ty o" a ba"+ : ?>5C
%"!er the provisio"s of the >a"+i"g Reg%#atio" Act4 (C-C for vio#atio" of a"y of these
g%i!e#i"es)
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Ho+ credit cards +or&
A" e.amp#e of the fro"t of a typica# cre!it car!'
() 1ss%i"g ba"+ #ogo
*) EMM chip
,) Ho#ogram
-) Car! "%mber
/) Car! bra"! #ogo
0) E.piry Date
E) Car!ho#!erDs "ame
A" e.amp#e of the reverse si!e of a typica# cre!it car!'
() Mag"etic Stripe
*) Sig"at%re Strip
,) Car! Sec%rity Co!e
A %ser is iss%e! cre!it after a" acco%"t has bee" approve! by the cre!it provi!er4 a"! is
give" a cre!it car!4 $ith $hich the %ser $i## be ab#e to ma+e p%rchases from mercha"ts
accepti"g that cre!it car! %p to a pre&estab#ishe! cre!it #imit) Ofte" a ge"era# ba"+ iss%es
the cre!it4 b%t sometimes a captive ba"+ create! to iss%e a partic%#ar bra"! of cre!it car!4
s%ch as Chase4 Ie##s 5argo or >a"+ of America iss%es the cre!it)
Ihe" a p%rchase is ma!e4 the cre!it car! %ser agrees to pay the car! iss%er) The
car!ho#!er i"!icates their co"se"t to pay4 by sig"i"g a receipt $ith a recor! of the car!
!etai#s a"! i"!icati"g the amo%"t to be pai! or by e"teri"g a 2erso"a# i!e"tificatio"
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"%mber 721?8) A#so4 ma"y mercha"ts "o$ accept verba# a%thoriatio"s via te#epho"e a"!
e#ectro"ic a%thoriatio" %si"g the 1"ter"et4 +"o$" as a Car! "ot prese"t 7C?28
tra"sactio")
E#ectro"ic verificatio" systems a##o$ mercha"ts to verify that the car! is va#i! a"! the
cre!it car! c%stomer has s%fficie"t cre!it to cover the p%rchase i" a fe$ seco"!s4
a##o$i"g the verificatio" to happe" at time of p%rchase) The verificatio" is performe!
%si"g a cre!it car! payme"t termi"a# or 2oi"t of Sa#e 72OS8 system $ith a
comm%"icatio"s #i"+ to the mercha"tDs ac3%iri"g ba"+) Data from the car! is obtai"e!
from a mag"etic stripe or chip o" the car!F the #atter system is i" the @"ite! Ai"g!om
commo"#y +"o$" as Chip a"! 21?4 b%t is more tech"ica##y a" EMM car!)
Other variatio"s of verificatio" systems are %se! by ecommerce mercha"ts to !etermi"e
if the %serDs acco%"t is va#i! a"! ab#e to accept the charge) These $i## typica##y i"vo#ve
the car!ho#!er provi!i"g a!!itio"a# i"formatio"4 s%ch as the sec%rity co!e pri"te! o" the
bac+ of the car!4 or the a!!ress of the car!ho#!er)
Each mo"th4 the cre!it car! %ser is se"t a stateme"t i"!icati"g the p%rchases %"!erta+e"
$ith the car!4 a"y o%tsta"!i"g fees4 a"! the tota# amo%"t o$e!) After receivi"g the
stateme"t4 the car!ho#!er may !isp%te a"y charges that he or she thi"+s are i"correct 7see
5air Cre!it >i##i"g Act for !etai#s of the @S reg%#atio"s8) Other$ise4 the car!ho#!er m%st
pay a !efi"e! mi"im%m proportio" of the bi## by a !%e !ate4 or may choose to pay a
higher amo%"t %p to the e"tire amo%"t o$e!) The cre!it provi!er charges i"terest o" the
amo%"t o$e! 7typica##y at a m%ch higher rate tha" most other forms of !ebt8) Some
fi"a"cia# i"stit%tio"s ca" arra"ge for a%tomatic payme"ts to be !e!%cte! from the %serDs
ba"+ acco%"ts)
Cre!it car! iss%ers %s%a##y $aive i"terest charges if the ba#a"ce is pai! i" f%## each
mo"th4 b%t typica##y $i## charge f%## i"terest o" the e"tire o%tsta"!i"g ba#a"ce from the
!ate of each p%rchase if the tota# ba#a"ce is "ot pai!)
5or e.amp#e4 if a %ser ha! a L(4999 o%tsta"!i"g ba#a"ce a"! pays it i" f%##4 there $o%#!
be "o i"terest charge!) 1f4 ho$ever4 eve" L()99 of the tota# ba#a"ce remai"e! %"pai!4
i"terest $o%#! be charge! o" the L(4999 from the !ate of p%rchase %"ti# the payme"t is
receive!) The precise ma""er i" $hich i"terest is charge! is %s%a##y !etai#e! i" a
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car!ho#!er agreeme"t $hich may be s%mmarie! o" the bac+ of the mo"th#y stateme"t)
The ge"era# ca#c%#atio" form%#a most fi"a"cia# i"stit%tio"s %se to !etermi"e the amo%"t
of i"terest to be charge! is A2R99 . AD>:,0/ . "%mber of !ays revo#ve!) Ta+e the
A""%a# perce"tage rate 7A2R8 a"! !ivi!e by (99 the" m%#tip#y to the amo%"t of the
average !ai#y ba#a"ce !ivi!e! by ,0/ a"! the" ta+e this tota# a"! m%#tip#y by the tota#
"%mber of !ays the amo%"t revo#ve! before payme"t $as ma!e o" the acco%"t)
5i"a"cia# i"stit%tio"s refer to i"terest charge! bac+ to the origi"a# time of the tra"sactio"
a"! %p to the time a payme"t $as ma!e4 if "ot i" f%##4 as RR5C or resi!%a# retai# fi"a"ce
charge) Th%s after a" amo%"t has revo#ve! a"! a payme"t has bee" ma!e that the %ser of
the car! $i## sti## receive i"terest charges o" their stateme"t after payi"g the "e.t
stateme"t i" f%## 7i" fact the stateme"t may o"#y have a charge for i"terest that co##ecte!
%p %"ti# the !ate the f%## ba#a"ce $as pai!)))i)e) $he" the ba#a"ce stoppe! revo#vi"g8)
The cre!it car! may simp#y serve as a form of revo#vi"g cre!it4 or it may become a
comp#icate! fi"a"cia# i"str%me"t $ith m%#tip#e ba#a"ce segme"ts each at a !iffere"t
i"terest rate4 possib#y $ith a si"g#e %mbre##a cre!it #imit4 or $ith separate cre!it #imits
app#icab#e to the vario%s ba#a"ce segme"ts) @s%a##y this compartme"ta#iatio" is the
res%#t of specia# i"ce"tive offers from the iss%i"g ba"+4 either to e"co%rage ba#a"ce
tra"sfers from car!s of other iss%ers4 or to e"co%rage more spe"!i"g o" the part of the
c%stomer) 1" the eve"t that severa# i"terest rates app#y to vario%s ba#a"ce segme"ts4
payme"t a##ocatio" is ge"era##y at the !iscretio" of the iss%i"g ba"+4 a"! payme"ts $i##
therefore %s%a##y be a##ocate! to$ar!s the #o$est rate ba#a"ces %"ti# pai! i" f%## before
a"y mo"ey is pai! to$ar!s higher rate ba#a"ces)
1"terest rates ca" vary co"si!erab#y from car! to car!4 a"! the i"terest rate o" a partic%#ar
car! may j%mp !ramatica##y if the car! %ser is #ate $ith a payme"t o" that car! or a"y
other cre!it i"str%me"t4 or eve" if the iss%i"g ba"+ !eci!es to raise its reve"%e) As the
rates a"! terms vary4 services have bee" set %p a##o$i"g %sers to ca#c%#ate savi"gs
avai#ab#e by s$itchi"g car!s4 $hich ca" be co"si!erab#e if there is a #arge o%tsta"!i"g
ba#a"ce 7see e.ter"a# #i"+s for some o"&#i"e services)
>eca%se of i"te"se competitio" i" the cre!it car! i"!%stry4 cre!it provi!ers ofte" offer
i"ce"tives s%ch as fre3%e"t f#ier poi"ts4 gift certificates4 or cash bac+ 7typica##y %p to (
perce"t base! o" tota# p%rchases8 to try to attract c%stomers to their program)
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Lo$ i"terest cre!it car!s or eve" 96 i"terest cre!it car!s are avai#ab#e) The o"#y
!o$"si!e to co"s%mers is that the perio! of #o$ i"terest cre!it car!s is #imite! to a fi.e!
term4 %s%a##y bet$ee" 0 a"! (* mo"ths after $hich a higher rate is charge!) Ho$ever4
services are avai#ab#e $hich a#ert cre!it car! ho#!ers $he" their #o$ i"terest perio! is !%e
to e.pire) Most s%ch services charge a mo"th#y or a""%a# fee)
Grace perio!
A cre!it car!Ds grace perio! is the time the c%stomer has to pay the ba#a"ce before i"terest
is charge! to the ba#a"ce) Grace perio!s vary4 b%t %s%a##y ra"ge from *9 to ,9 !ays
!epe"!i"g o" the type of cre!it car! a"! the iss%i"g ba"+) Some po#icies a##o$ for
rei"stateme"t after certai" co"!itio"s are met) @s%a##y4 if a c%stomer is #ate payi"g the
ba#a"ce4 fi"a"ce charges $i## be ca#c%#ate! a"! the grace perio! !oes "ot app#y) 5i"a"ce
charge7s8 i"c%rre! !epe"!s o" the grace perio! a"! ba#a"ce4 $ith most cre!it car!s there
is "o grace perio! if thereDs a"y o%tsta"!i"g ba#a"ce from the previo%s bi##i"g cyc#e or
stateme"t 7i)e) i"terest is app#ie! o" both the previo%s ba#a"ce a"! "e$ tra"sactio"s8)
Ho$ever4 there are some cre!it car!s that $i## o"#y app#y fi"a"ce charge o" the previo%s
or o#! ba#a"ce4 e.c#%!i"g "e$ tra"sactio"s)
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The !ercha#t,s side
A" e.amp#e of street mar+ets accepti"g cre!it car!s
5or mercha"ts4 a cre!it car! tra"sactio" is ofte" more sec%re tha" other forms of
payme"t4 s%ch as chec+s4 beca%se the iss%i"g ba"+ commits to pay the mercha"t the
mome"t the tra"sactio" is a%thorie!4 regar!#ess of $hether the co"s%mer !efa%#ts o"
their cre!it car! payme"t 7e.cept for #egitimate !isp%tes4 $hich are !isc%sse! be#o$4 a"!
ca" res%#t i" charge bac+s to the mercha"t8) 1" most cases4 car!s are eve" more sec%re
tha" cash4 beca%se they !isco%rage theft by the mercha"tDs emp#oyees)
5or each p%rchase4 the ba"+ charges a commissio" 7!isco%"t fee84 to the mercha"t for
this service a"! there may be a certai" !e#ay before the agree! payme"t is receive! by
the mercha"t) The commissio" is ofte" a perce"tage of the tra"sactio" amo%"t4 p#%s a
fi.e! fee) 1" a!!itio"4 a mercha"t may be pe"a#ie! or have their abi#ity to receive
payme"t %si"g that cre!it car! restricte! if there are too ma"y ca"ce##atio"s or reversa#s
of charges as a res%#t of !isp%tes) Some sma## mercha"ts re3%ire cre!it p%rchases to have
a mi"im%m amo%"t 7%s%a##y bet$ee" L/ a"! L(98 to compe"sate for the tra"sactio"
costs4 tho%gh this is "ot a#$ays a##o$e! by the cre!it car! co"sorti%m)
1" some co%"tries4 #i+e the ?or!ic co%"tries4 ba"+s g%ara"tee payme"t o" sto#e" car!s
o"#y if a" 1D car! is chec+e! a"! the 1D car! "%mber:civic registratio" "%mber is $ritte"
!o$" o" the receipt together $ith the sig"at%re) 1" these co%"tries mercha"ts therefore
%s%a##y as+ for 1D) ?o"&?or!ic citie"s4 $ho are %"#i+e#y to possess a ?or!ic 1D car! or
!rivi"g #ice"se4 $i## i"stea! have to sho$ their passport4 a"! the passport "%mber $i## be
$ritte" !o$" o" the receipt4 sometimes together $ith other i"formatio") Some shops %se
the car!Ds 21? co!e for i!e"tificatio"4 a"! i" that case sho$i"g a" 1D car! is "ot
"ecessary)
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Parties i#vo"ved
• Car!ho#!er' The o$"er of the car! %se! to ma+e a p%rchaseF the co"s%mer)
• Car!&iss%i"g ba"+' The fi"a"cia# i"stit%tio" or other orga"iatio" that iss%e! the cre!it
car! to the car!ho#!er) This ba"+ bi##s the co"s%mer for repayme"t a"! bears the ris+ that
the car! is %se! fra%!%#e"t#y) America" E.press a"! Discover $ere previo%s#y the o"#y
car!&iss%i"g ba"+s for their respective bra"!s4 b%t as of *99E4 this is "o #o"ger the case)
• Mercha"t' The i"!ivi!%a# or b%si"ess accepti"g cre!it car! payme"ts for pro!%cts or
services so#! to the car!ho#!er
• Ac3%iri"g ba"+' The fi"a"cia# i"stit%tio" accepti"g payme"t for the pro!%cts or
services o" beha#f of the mercha"t)
• 1"!epe"!e"t sa#es orga"iatio"' Rese##ers 7to mercha"ts8 of the services of the
ac3%iri"g ba"+)
• Mercha"t acco%"t provi!er' This co%#! refer to the ac3%iri"g ba"+ or the i"!epe"!e"t
sa#es orga"iatio"4 b%t i" ge"era# is the orga"iatio" that the mercha"t !ea#s $ith)
• Cre!it Car! associatio"' A" associatio" of car!&iss%i"g ba"+s s%ch as Misa4 MasterCar!4
Discover4 America" E.press4 etc) that set tra"sactio" terms for mercha"ts4 car!&iss%i"g
ba"+s4 a"! ac3%iri"g ba"+s)
• Tra"sactio" "et$or+' The system that imp#eme"ts the mecha"ics of the e#ectro"ic
tra"sactio"s) May be operate! by a" i"!epe"!e"t compa"y4 a"! o"e compa"y may
operate m%#tip#e "et$or+s) Tra"sactio" processi"g "et$or+s i"c#%!e' Car!"et4 ?aba"co4
Omaha4 2ayme"tech4 ?DC At#a"ta4 ?ova4 Mita#4 Co"cor! E5S"et4 a"! Misa?et)

• Affi"ity part"er' Some i"stit%tio"s #e"! their "ame to a" iss%er to attract c%stomers that
have a stro"g re#atio"ship $ith that i"stit%tio"4 a"! get pai! a fee or a perce"tage of the
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ba#a"ce for each car! iss%e! %si"g their "ame) E.amp#es of typica# affi"ity part"ers are
sports teams4 %"iversities a"! charities)
The f#o$ of i"formatio" a"! mo"ey bet$ee" these parties T a#$ays thro%gh the car!
associatio"s T is +"o$" as the i"tercha"ge4 a"! it co"sists of a fe$ steps)
Tra#sactio# steps
Au!hori5a!ion' 1" the eve"t of a chargebac+ 7$he" thereDs a" error i" processi"g the
tra"sactio" or the car!ho#!er !isp%tes the tra"sactio"84 the iss%er ret%r"s the tra"sactio"
to the ac3%irer for reso#%tio") The ac3%irer the" for$ar!s the chargebac+ to the mercha"t4
$ho m%st either accept the chargebac+ or co"test it)
Secured credit cards
A sec%re! cre!it car! is a type of cre!it car! sec%re! by a !eposit acco%"t o$"e! by the
car!ho#!er) Typica##y4 the car!ho#!er m%st !eposit bet$ee" (996 a"! *996 of the tota#
amo%"t of cre!it !esire!) Th%s if the car!ho#!er p%ts !o$" L(9994 he or she $i## be give"
cre!it i" the ra"ge of L/99QL(999) 1" some cases4 cre!it car! iss%ers $i## offer i"ce"tives
eve" o" their sec%re! car! portfo#ios) 1" these cases4 the !eposit re3%ire! may be
sig"ifica"t#y #ess tha" the re3%ire! cre!it #imit4 a"! ca" be as #o$ as (96 of the !esire!
cre!it #imit) This !eposit is he#! i" a specia# savi"gs acco%"t) Cre!it car! iss%ers offer
this as they have "otice! that !e#i"3%e"cies $ere "otab#y re!%ce! $he" the c%stomer
perceives he has somethi"g to #ose if he !oes"Dt repay his ba#a"ce)
The car!ho#!er of a sec%re! cre!it car! is sti## e.pecte! to ma+e reg%#ar payme"ts4 as he
or she $o%#! $ith a reg%#ar cre!it car!4 b%t sho%#! he or she !efa%#t o" a payme"t4 the
car! iss%er has the optio" of recoveri"g the cost of the p%rchases pai! to the mercha"ts
o%t of the !eposit) The a!va"tage of the sec%re! car! for a" i"!ivi!%a# $ith "egative or
"o cre!it history is that most compa"ies report reg%#ar#y to the major cre!it b%rea%s) This
a##o$s for reb%i#!i"g of positive cre!it history)
A#tho%gh the !eposit is i" the ha"!s of the cre!it car! iss%er as sec%rity i" the eve"t of
!efa%#t by the co"s%mer4 the !eposit $i## "ot be !ebite! simp#y for missi"g o"e or t$o
payme"ts) @s%a##y the !eposit is o"#y %se! as a" offset $he" the acco%"t is c#ose!4 either
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at the re3%est of the c%stomer or !%e to severe !e#i"3%e"cy 7(/9 to (;9 !ays8) This
mea"s that a" acco%"t $hich is #ess tha" (/9 !ays !e#i"3%e"t $i## co"ti"%e to accr%e
i"terest a"! fees4 a"! co%#! res%#t i" a ba#a"ce $hich is m%ch higher tha" the act%a#
cre!it #imit o" the car!) 1" these cases the tota# !ebt may far e.cee! the origi"a# !eposit
a"! the car!ho#!er "ot o"#y forfeits their !eposit b%t is #eft $ith a" a!!itio"a# !ebt)
Most of these co"!itio"s are %s%a##y !escribe! i" a car!ho#!er agreeme"t $hich the
car!ho#!er sig"s $he" their acco%"t is ope"e!)
Sec%re! cre!it car!s are a" optio" to a##o$ a perso" $ith a poor cre!it history or "o
cre!it history to have a cre!it car! $hich might "ot other$ise be avai#ab#e) They are
ofte" offere! as a mea"s of reb%i#!i"g o"eDs cre!it) Sec%re! cre!it car!s are avai#ab#e
$ith both Misa a"! MasterCar! #ogos o" them) 5ees a"! service charges for sec%re!
cre!it car!s ofte" e.cee! those charge! for or!i"ary "o"&sec%re! cre!it car!s4 ho$ever4
for peop#e i" certai" sit%atio"s4 7for e.amp#e4 after chargi"g off o" other cre!it car!s4 or
peop#e $ith a #o"g history of !e#i"3%e"cy o" vario%s forms of !ebt84 sec%re! car!s ca"
ofte" be #ess e.pe"sive i" tota# cost tha" %"sec%re! cre!it car!s4 eve" i"c#%!i"g the
sec%rity !eposit)
Sometimes a cre!it car! $i## be sec%re! by the e3%ity i" the borro$erDs home) This is
ca##e! a home e3%ity #i"e of cre!it 7HELOC8)
Prepaid credit cards
A prepai! cre!it car! is "ot rea##y a cre!it car!4 as "o cre!it is offere! by the car! iss%er'
the car!&ho#!er spe"!s mo"ey $hich has bee" Nstore!N via a prior !eposit by the car!&
ho#!er or someo"e e#se4 s%ch as a pare"t or emp#oyer) Ho$ever4 it carries a cre!it&car!
bra"! 7Misa or MasterCar!8 a"! ca" be %se! i" simi#ar $ays) As more co"s%mers re3%ire
a s%itab#e so#%tio" to reb%i#!i"g cre!it4 rece"t cha"ges have a##o$e! some cre!it car!
compa"ies to offer pre&pai! cre!it car!s to he#p reb%i#! cre!it) They are har! to fi"! a"!
have higher A2R fees a"! higher i"terest costs)
After p%rchasi"g the car!4 the car!ho#!er #oa!s it $ith a"y amo%"t of mo"ey a"! the"
%ses the car! to spe"! the mo"ey) 2repai! car!s ca" be iss%e! to mi"ors si"ce there is "o
cre!it #i"e i"vo#ve!)
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The mai" a!va"tage over sec%re! cre!it car!s is that yo% are "ot re3%ire! to come %p
$ith L/99 or more to ope" a" acco%"t) A#so most sec%re! cre!it car!s sti## charge yo%
i"terest eve" tho%gh yo% are "ot act%a##y Nborro$i"gN a"y mo"ey) Iith prepai! cre!it
car!s yo% are "ot charge! a"y i"terest b%t yo% are ofte" charge! mo"th#y fees after a"
arbitrary time perio!) Ma"y other fees a#so %s%a##y app#y to a prepai! car!)
2repai! cre!it car!s are ofte" mar+ete! to tee"agers for shoppi"g o"#i"e $itho%t havi"g
their pare"ts comp#ete the tra"sactio")
>eca%se of the ma"y fees that app#y to obtai"i"g a"! %si"g cre!it&car!&bra"!e! prepai!
car!s4 the 5i"a"cia# Co"s%mer Age"cy of Ca"a!a !escribes them as Na" e.pe"sive $ay
to spe"! yo%r o$" mo"eyN) The age"cy p%b#ishes a boo+#et4 N2re&pai! car!sN4 $hich
e.p#ai"s the a!va"tages a"! !isa!va"tages of this type of prepai! car!)
-eatures
As $e## as co"ve"ie"t4 accessib#e cre!it4 cre!it car!s offer co"s%mers a" easy $ay to
trac+ e.pe"ses4 $hich is "ecessary for both mo"itori"g perso"a# e.pe"!it%res a"! the
trac+i"g of $or+&re#ate! e.pe"ses for ta.atio" a"! reimb%rseme"t p%rposes) Cre!it car!s
are accepte! $or#!$i!e4 a"! are avai#ab#e $ith a #arge variety of cre!it #imits4 repayme"t
arra"geme"t4 a"! other per+s 7s%ch as re$ar!s schemes i" $hich poi"ts ear"e! by
p%rchasi"g goo!s $ith the car! ca" be re!eeme! for f%rther goo!s a"! services or cre!it
car! cashbac+8)
Some co%"tries4 s%ch as the @"ite! States4 the @"ite! Ai"g!om4 a"! 5ra"ce4 #imit the
amo%"t for $hich a co"s%mer ca" be he#! #iab#e !%e to fra%!%#e"t tra"sactio"s as a res%#t
of a co"s%merDs cre!it car! bei"g #ost or sto#e")
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Security
A smart car!4 combi"i"g cre!it car! a"! !ebit car! properties) The , by / mm sec%rity chip
embe!!e! i" the car! is sho$" e"#arge! i" the i"set) The go#! co"tact pa!s o" the car! e"ab#e
e#ectro"ic access to the chip)
The #o$ sec%rity of the cre!it car! system prese"ts co%"t#ess opport%"ities for fra%!)
This opport%"ity has create! a h%ge b#ac+ mar+et i" sto#e" cre!it car! "%mbers4 $hich
are ge"era##y %se! 3%ic+#y before the car!s are reporte! sto#e")
The goa# of the cre!it car! compa"ies is "ot to e#imi"ate fra%!4 b%t to Nre!%ce it to
ma"ageab#e #eve#sN4 s%ch that the tota# cost of both fra%! a"! fra%! preve"tio" is
mi"imie!
)
This imp#ies that high&cost #o$&ret%r" fra%! preve"tio" meas%res $i## "ot be
%se! if their cost e.cee!s the pote"tia# gai"s from fra%! re!%ctio")
Most i"ter"et fra%! is !o"e thro%gh the %se of sto#e" cre!it car! i"formatio" $hich is
obtai"e! i" ma"y $ays4 the simp#est bei"g copyi"g i"formatio" from retai#ers4 either
o"#i"e or off#i"e) Despite efforts to improve sec%rity for remote p%rchases %si"g cre!it
car!s4 systems $ith sec%rity ho#es are %s%a##y the res%#t of poor imp#eme"tatio"s of car!
ac3%isitio" by mercha"ts) 5or e.amp#e4 a $ebsite that %ses SSL to e"crypt car! "%mbers
from a c#ie"t may simp#y emai# the "%mber from the $eb server to someo"e $ho
ma"%a##y processes the car! !etai#s at a car! termi"a#)
?at%ra##y4 a"y$here car! !etai#s become h%ma"&rea!ab#e before bei"g processe! at the
ac3%iri"g ba"+4 a sec%rity ris+ is create!) Ho$ever4 ma"y ba"+s offer systems s%ch as
C#ear Commerce4 $here e"crypte! car! !etai#s capt%re! o" a mercha"tDs $eb server ca"
be se"t !irect#y to the payme"t processor)
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Co"tro##e! 2ayme"t ?%mbers are a"other optio" for protecti"g o"eDs cre!it car! "%mber'
they are Na#iasN "%mbers #i"+e! to o"eDs act%a# car! "%mber4 ge"erate! as "ee!e!4 va#i!
for a re#ative#y short time4 $ith a very #o$ #imit4 a"! typica##y o"#y va#i! $ith a si"g#e
mercha"t)
The 5e!era# >%rea% of 1"vestigatio" a"! @)S) 2osta# 1"spectio" Service are respo"sib#e
for prosec%ti"g crimi"a#s $ho e"gage i" cre!it car! fra%! i" the @"ite! States4 b%t they
!o "ot have the reso%rces to p%rs%e a## crimi"a#s) 1" ge"era#4 fe!era# officia#s o"#y
prosec%te cases e.cee!i"g @S L/999 i" va#%e) Three improveme"ts to car! sec%rity have
bee" i"tro!%ce! to the more commo" cre!it car! "et$or+s b%t "o"e has prove" to he#p
re!%ce cre!it car! fra%! so far) 5irst4 the o"&#i"e verificatio" system %se! by mercha"ts is
bei"g e"ha"ce! to re3%ire a - !igit 2erso"a# 1!e"tificatio" ?%mber 721?8 +"o$" o"#y to
the car! ho#!er) Seco"!4 the car!s themse#ves are bei"g rep#ace! $ith simi#ar&#oo+i"g
tamper&resista"t smart car!s $hich are i"te"!e! to ma+e forgery more !iffic%#t) The
majority of smartcar! 71C car!8 base! cre!it car!s comp#y $ith the EMM 7E%ropay
MasterCar! Misa8 sta"!ar!) Thir!4 a" a!!itio"a# , or - !igit co!e is "o$ prese"t o" the
bac+ of most car!s4 for %se i" Ncar! "ot prese"tN tra"sactio"s) See CMM* for more
i"formatio")
The $ay cre!it car! o$"ers pay off their ba#a"ces has a treme"!o%s effect o" their cre!it
history) A## the i"formatio" is co##ecte! by cre!it b%rea%s) The cre!it i"formatio" stays o"
the cre!it report4 !epe"!i"g o" the j%ris!ictio" a"! the sit%atio"4 for (4 *4 /4 E or eve" (9
years after the !ebt is repai!)
Profits a#d "osses
1" rece"t times4 cre!it car! portfo#ios have bee" very profitab#e for ba"+s4 #arge#y !%e to
the boomi"g eco"omy of the #ate "i"eties) Ho$ever4 i" the case of cre!it car!s4 s%ch high
ret%r"s go ha"! i" ha"! $ith ris+4 si"ce the b%si"ess is esse"tia##y o"e of ma+i"g
%"sec%re! 7%"co##atera#ie!8 #oa"s4 a"! th%s !epe"!e"t o" borro$ers "ot to !efa%#t i"
#arge "%mbers)
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Costs
Cre!it car! iss%ers 7ba"+s8 have severa# types of costs'
(n!eres! e*enses
>a"+s ge"era##y borro$ the mo"ey they the" #e"! to their c%stomers) As they receive
very #o$&i"terest #oa"s from other firms4 they may borro$ as m%ch as their c%stomers
re3%ire4 $hi#e #e"!i"g their capita# to other borro$ers at higher rates) 1f the car! iss%er
charges (/6 o" mo"ey #e"t to %sers4 a"! it costs /6 to borro$ the mo"ey to #e"!4 a"!
the ba#a"ce sits $ith the car!ho#!er for a year4 the iss%er ear"s (96 o" the #oa") This /6
!iffere"ce is the Ni"terest e.pe"seN a"! the (96 is the N"et i"terest margi"N)
1era!in& cos!s
This is the cost of r%""i"g the cre!it car! portfo#io4 i"c#%!i"g everythi"g from payi"g the
e.ec%tives $ho r%" the compa"y to pri"ti"g the p#astics4 to mai#i"g the stateme"ts4 to
r%""i"g the comp%ters that +eep trac+ of every car!ho#!erDs ba#a"ce4 to ta+i"g the ma"y
pho"e ca##s $hich car!ho#!ers p#ace to their iss%er4 to protecti"g the c%stomers from
fra%! ri"gs) Depe"!i"g o" the iss%er4 mar+eti"g programs are a#so a sig"ifica"t portio" of
e.pe"ses)
Char&e o$$s
Ihe" a co"s%mer becomes severe#y !e#i"3%e"t o" a !ebt 7ofte" at the poi"t of si.
mo"ths $itho%t payme"t84 the cre!itor may !ec#are the !ebt to be a charge&off) 1t $i##
the" be #iste! as s%ch o" the !ebtorDs cre!it b%rea% reports 7E3%ifa.4 for i"sta"ce4 #ists
NRCN i" the Nstat%sN co#%m" to !e"ote a charge&off)8 1t is o"e of the $orst possib#e items
to have o" yo%r fi#e) The item $i## i"c#%!e re#eva"t !ates4 a"! the amo%"t of the ba! !ebt)
A charge&off is co"si!ere! to be N$ritte" off as %"co##ectab#e)N To ba"+s4 ba! !ebts a"!
eve" fra%! are simp#y part of the cost of !oi"g b%si"ess)
Ho$ever4 the !ebt is sti## #ega##y va#i!4 a"! the cre!itor ca" attempt to co##ect the f%##
amo%"t) This i"c#%!es co"tacts from i"ter"a# co##ectio"s staff4 or more #i+e#y4 a" o%tsi!e
co##ectio" age"cy) 1f the amo%"t is #arge 7ge"era##y over L(/99 & L*99984 there is the
possibi#ity of a #a$s%it or arbitratio")
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1" the @S4 as the charge off "%mber c#imbs or becomes erratic4 officia#s from the 5e!era#
Reserve ta+e a c#ose #oo+ at the fi"a"ces of the ba"+ a"! may impose vario%s operati"g
strict%res o" the ba"+4 a"! i" the most e.treme cases4 may c#ose the ba"+ e"tire#y)
Re#ards
Pa"tas 5re3%e"t 5#yer co&bra"!e! cre!it car!s
Ma"y cre!it car! c%stomers receive re$ar!s4 s%ch as fre3%e"t f#ier poi"ts4 gift
certificates4 or cash bac+ as a" i"ce"tive to %se the car!) Re$ar!s are ge"era##y tie! to
p%rchasi"g a" item or service o" the car!4 $hich may or may "ot i"c#%!e ba#a"ce
tra"sfers4 cash a!va"ces4 or other specia# %ses) Depe"!i"g o" the type of car!4 re$ar!s
$i## ge"era##y cost the iss%er bet$ee" 9)*/6 a"! *)96 of the spe"!) ?et$or+s #i+e Misa
or MasterCar! have i"crease! their fees to a##o$ iss%ers to f%"! their re$ar!s system)
Ho$ever4 most re$ar!s poi"ts are accr%e! as a #iabi#ity o" a compa"yDs ba#a"ce sheet
a"! e.pe"se! at the time of re$ar! re!emptio") As a res%#t4 some iss%ers !isco%rage
re!emptio" by forci"g the car!ho#!er to ca## c%stomer service for re$ar!s)
O" their servici"g $ebsite4 re!eemi"g a$ar!s is %s%a##y a feat%re that is very $e## hi!!e"
by the iss%ers) Others e"co%rage re!emptio" for #o$er cost mercha"!iseF i"stea! of a"
air#i"e tic+et4 $hich is very e.pe"sive to a" iss%er4 the car!ho#!er may be e"co%rage! to
re!eem for a gift certificate i"stea!) Iith a fract%re! a"! competitive e"viro"me"t4
re$ar!s poi"ts c%t !ramatica##y i"to a" iss%erDs bottom #i"e4 a"! re$ar!s poi"ts a"!
re#ate! i"ce"tives m%st be caref%##y ma"age! to e"s%re a profitab#e portfo#io) There is a
case to be ma!e that re$ar!s "ot re!eeme! sho%#! fo##o$ the same path as gift car!s that
are "ot %se!' i" certai" states the gift car! brea+age goes to the stateDs treas%ry) The same
co%#! happe" to the va#%e of poi"ts or cash "ot re!eeme!)
.raud
Ihere a car! is sto#e"4 or a" %"a%thorie! !%p#icate ma!e4 most car! iss%ers $i## ref%"!
some or a## of the charges that the c%stomer has receive! for thi"gs they !i! "ot b%y)
These ref%"!s $i##4 i" some cases4 be at the e.pe"se of the mercha"t4 especia##y i" mai#
or!er cases $here the mercha"t ca""ot c#aim sight of the car!) 1" severa# co%"tries4
mercha"ts $i## #ose the mo"ey if "o 1D car! $as as+e! for4 therefore mercha"ts %s%a##y
re3%ire 1D car! i" these co%"tries)
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The cost of fra%! is highF i" the @A i" *99- it $as over U/99 mi##io") Cre!it car!
compa"ies ge"era##y g%ara"tee the mercha"t $i## be pai! o" #egitimate tra"sactio"s
regar!#ess of $hether the co"s%mer pays their cre!it car! bi##)
NSoft fra%!N is fra%! committe! by the c%stomer himse#f' getti"g a car! a"! %si"g it $ith
"o i"te"tio" ever to repay the ba#a"ce) S%ch c%stomers are ca##e! N!iabo#ica#sN by the
cre!it car! compa"ies that try to avoi! them at a## cost)
Securi!y
A" a!!itio"a# feat%re to sec%re the cre!it car! tra"sactio" a"! prohibit the %se of a #ost
cre!it car! is the MobiC#ear so#%tio") Each tra"sactio" is a%the"ticate! thro%gh a ca## to
the %ser mobi#e pho"e) The tra"sactio" is re#ease! o"ce the tra"sactio" has bee"
co"firme! by the car!ho#!er p%shi"g his:her pi" co!e !%ri"g the ca##)
Re'enues
Offsetti"g costs are the fo##o$i"g reve"%es'
(n!erchan&e $ees
1"tercha"ge fees are charge! by the mercha"tDs ac3%irer to a car!&accepti"g mercha"t as
compo"e"t of the so&ca##e! mercha"t !isco%"t rate 7a#so referre! to as Nmercha"t service
feeN8) The mercha"t pays a mercha"t !isco%"t fee that is typica##y * to , perce"t 7this is
"egotiate!4 b%t $i## vary "ot o"#y from mercha"t to mercha"t4 b%t a#so from car! to car!4
$ith b%si"ess car!s a"! re$ar!s car!s ge"era##y costi"g the mercha"ts more to process84
$hich is $hy some mercha"ts prefer cash4 !ebit car!s4 or eve" che3%es) The majority of
this fee4 ca##e! the i"tercha"ge fee4 goes to the iss%i"g ba"+4 b%t parts of it go to the
processi"g "et$or+4 the car! associatio" 7America" E.press4 Misa4 MasterCar!4 etc)84 a"!
the mercha"tDs ac3%irer) Iith a corporate car!4 the i"tercha"ge is a#so ofte" share! by the
Compa"y i" $hose "ame the car! is iss%e! as a" i"ce"tive to %se that iss%erDs car!
i"stea! of someo"e e#seDs)
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The i"tercha"ge fee that app#ies to a partic%#ar mercha"t is a f%"ctio" of ma"y variab#es
i"c#%!i"g the type of mercha"t4 the mercha"tDs average tra"sactio" amo%"t4 $hether the
car!s are physica##y prese"t4 if the car!Ds mag"etic stripe is rea! or if the tra"sactio" is
ha"!&+eye! or e"tere! o" a $ebsite4 the specific type of car!4 $he" the tra"sactio" is
sett#e!4 the a%thorie! a"! sett#e! tra"sactio" amo%"ts4 etc) 5or a typica# cre!it car!
iss%er4 i"tercha"ge fee reve"%es may represe"t abo%t fiftee" perce"t of tota# reve"%es4 b%t
this $i## vary great#y $ith the type of c%stomers represe"te! i" their portfo#io) C%stomers
$ho carry high ba#a"ces may ge"erate #o$ i"tercha"ge reve"%e !%e to cre!it #i"e
#imitatio"s4 $hi#e c%stomers $ho %se their car!s for b%si"ess a"! spe"! h%"!re!s of
tho%sa"!s of !o##ars a year o" their car!s $hi#e payi"g off ba#a"ces every mo"th $i##
have very hea#thy i"tercha"ge reve"%es)
(ndus!ry 6ar&on $or cus!omer ca!e&ories
C%stomers $ho !o "ot pay i" f%## the amo%"t o$e! o" their mo"th#y stateme"t 7the
Nba#a"ceN8 by the !%e !ate 7that is4 at the e"! of the Ngrace perio!N8 a"! are "ot i" a
promotio"a# perio! o$e i"terest 7Nfi"a"ce chargesN8 are +"o$" i" the i"!%stry as
Nrevo#vers)N Those $ho pay i" f%## 7pay the e"tire ba#a"ce8 are +"o$" i" the i"!%stry as
Ntra"sactors4N or Nco"ve"ie"ce %sersN) Those that shift %sage of their cre!it car!s or
tra"sfer ba#a"ces fre3%e"t#y are +"o$" i" the i"!%stry as Nrate s%rfersN4 Nrate tartsN or
Ngamers)N
(n!eres! on ou!s!andin& balances
1"terest charges vary $i!e#y from car! iss%er to car! iss%er) Ofte"4 there are NteaserN
rates i" effect for i"itia# perio!s of time 7as #o$ as ero perce"t for4 say4 si. mo"ths84
$hereas reg%#ar rates ca" be as high as -9 perce"t) 1" the @)S) thereDs "o fe!era# #imit o"
the i"terest or #ate fees cre!it car! iss%ers ca" chargeF the i"terest rates are set by the
states4 $ith some states4 #i+e So%th Da+ota4 havi"g "o cei#i"g o" i"terest rates a"! fees4
i"viti"g some ba"+s to estab#ish their cre!it car! operatio"s there) Other states4 #i+e
De#a$are4 have very $ea+ %s%ry #a$s) The teaser rate "o #o"ger app#ies if the c%stomer
!oes"Dt pay his bi##s o" time4 a"! is rep#ace! by a pe"a#ty i"terest rate 7for e.amp#e4
*-)CC68 that app#ies retroactive#y) So c%stomers sho%#! be $ary of these offers that
%s%a##y co"tai" some traps) Cash $ith!ra$a#s $i## "ever carry the teaser rate4 for
e.amp#e)
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?ote that for some ba"+s4 eve" if yo% ha! pai! it off a" o%tsta"!i"g ba#a"ce a#o"g $ith
i"terest fees4 for the "e.t t$o mo"ths4 they $i## a#so charge yo% i"terest rates for
a"ythi"g yo% ha! p%rchase!)
.ees char&ed !o cus!omers
The major fees are for'
• Late payme"ts
• Charges that res%#t i" e.cee!i"g the cre!it #imit o" the car! 7$hether !o"e !e#iberate#y
or by mista+e84 ca##e! over #imit fees
• Ret%r"e! che3%e fees or payme"t processi"g fees 7e)g) pho"e payme"t fee8
• Cash a!va"ces a"! co"ve"ie"ce che3%es 7ofte" ,6 of the amo%"t8) Tra"sactio"s i" a
foreig" c%rre"cy 7as m%ch as ,6 of the amo%"t8) A fe$ fi"a"cia# i"stit%tio"s !o "ot
charge a fee for this)
• Membership fees 7a""%a# or mo"th#y84 sometimes a perce"tage of the cre!it #imit)
1ss%ers #ove mo"th#y fees as it a##o$s them to charge s%bsta"tia# amo%"ts $itho%t the
c%stomer rea#ii"g ho$ e.pe"sive the charge rea##y is 7a mo"th#y amo%"t is perceive! as
ha#f the price of the e3%iva#e"t a""%a# fee8
• 5oreig" E.cha"ge 2remi%m
A!va"tages vs) Disa!va"tages
A cre!it car! from M1SA4 MasterCar!4 or a"y other "et$or+ a##o$s yo% to pay for
p%rchases or services by borro$i"g from the cre!it car! compa"y) Yo% the" repay by
ma+i"g mo"th#y payme"ts to$ar!s the amo%"t borro$e!) That is4 yo% !o "ot have to
repay the $ho#e borro$e! amo%"t i" f%## at o"e go)
The" there are charge car!s4 s%ch as the America" E.press car!4 that re3%ire f%##
payme"t of the borro$e! amo%"t each mo"th)
Either $ay4 the cre!it car! is a very co"ve"ie"t a#ter"ative to payi"g by cash)
Esse"tia##y a cre!it car! a##o$s yo% to'
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• 2%rchase pro!%cts or services $he"ever a"! $herever yo% $a"t4 $itho%t rea!y cash
a"! payi"g for them at a #ater !ate)
• Have the optio" of payi"g o"#y a part of the tota# e.pe"ses) The ba#a"ce amo%"t ca"
be carrie! for$ar!4 $ith a" i"terest charge!)
• Iith!ra$ cash $he"ever4 $herever yo% are4 thro%gh ATMs a"! other $ith!ra$a#
ce"tres)
• E"joy a revo#vi"g cre!it #imit $itho%t a"y charges for a #imite! perio! 7most#y *9 to
/9 !ays8
• Tra"sact mo"ey of more tha" o"e c%rre"cy4 from o"e co%"try to a"other)
• Other faci#ities affor!e! o" a cre!it car! i"c#%!e re$ar! poi"ts o" car! %sage4
i"s%ra"ce cover agai"st air a"! roa! acci!e"ts4 #oss of baggage4 a"! so o") A## cre!it
car!s have b%i#t&i" safety feat%res #i+e sig"at%res a"! perso"a# i!e"tificatio" "%mbers)
1"ter"atio"a# cre!it car!s yo% fi"a"cia# f#e.ibi#ity $he" yo% trave# abroa!)
Ad'an!a&es7
• They a##o$ yo% to ma+e p%rchases o" cre!it $itho%t carryi"g aro%"! a #ot of cash)
This a##o$s yo% a #ot of f#e.ibi#ity)
• They a##o$ acc%rate recor!&+eepi"g by co"so#i!ati"g p%rchases i"to a si"g#e
stateme"t)
• They a##o$ co"ve"ie"t remote p%rchasi"g & or!eri"g:shoppi"g o"#i"e or by pho"e)
They a##o$ yo% to pay for #arge p%rchases i" sma##4 mo"th#y i"sta#me"ts)
• @"!er certai" circ%msta"ces4 they a##o$ yo% to $ithho#! payme"t for mercha"!ise
$hich proves !efective)
• They are cheaper for short&term borro$i"g & i"terest is o"#y pai! o" the remai"i"g
!ebt4 "ot the f%## #oa" amo%"t)
• Ma"y car!s offer a!!itio"a# be"efits s%ch as a!!itio"a# i"s%ra"ce cover o" p%rchases4
cash bac+4 air mi#es a"! !isco%"ts o" ho#i!ays)
Disad'an!a&es7
• Yo% may become a" imp%#sive b%yer a"! te"! to overspe"! beca%se of the ease of
%si"g cre!it car!s) Car!s ca" e"co%rage the p%rchasi"g of goo!s a"! services yo%
ca""ot rea##y affor!)
• Cre!it car!s are a re#ative#y e.pe"sive $ay of obtai"i"g cre!it if yo% !o"Dt %se them
caref%##y4 especia##y beca%se of the high i"terest rates a"! other costs)
• Lost or sto#e" car!s may res%#t i" some %"$a"te! e.pe"se a"! i"co"ve"ie"ce)
• The %se of a #arge "%mber of cre!it car!s ca" get yo% eve" f%rther i"to !ebt)
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• @si"g a cre!it car!4 especia##y remote#y4 i"tro!%ces a" e#eme"t of ris+ as the car!
!etai#s may fa## i"to the $ro"g ha"!s res%#ti"g i" fra%!%#e"t p%rchases o" the car!)
5ra%!%#e"t or %"a%thorie! charges may ta+e mo"ths to !isp%te4 i"vestigate4 a"!
reso#ve)
CHAPTER 8
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C@RRE?T SCE?AR1O
%a#&i#$ sce#ario
The i"!%stry is c%rre"t#y i" a tra"sitio" phase) O" the o"e ha"!4 the 2S>s4 $hich are the
mai"stay of the 1"!ia" >a"+i"g system4 are i" the process of she!!i"g their f#ab i" terms
of e.cessive ma"po$er4 e.cessive "o" 2erformi"g Assets 7?pas8 a"! e.cessive
gover"me"ta# e3%ity4 $hi#e o" the other ha"! the private sector ba"+s are co"so#i!ati"g
themse#ves thro%gh mergers a"! ac3%isitio"s)
2S>s4 $hich c%rre"t#y acco%"t for more tha" E; perce"t of tota# ba"+i"g i"!%stry assets
are sa!!#e! $ith ?2As 7a mi"!&bogg#i"g Rs ;,9 bi##io" i" *99984 fa##i"g reve"%es from
tra!itio"a# so%rces4 #ac+ of mo!er" tech"o#ogy a"! a massive $or+force $hi#e the "e$
private sector ba"+s are forgi"g ahea! a"! re$riti"g the tra!itio"a# ba"+i"g b%si"ess
mo!e# by $ay of their sheer i""ovatio" a"! service) The 2S>s are of co%rse c%rre"t#y
$or+i"g o%t cha##e"gi"g strategies eve" as *9 perce"t of their massive emp#oyee stre"gth
has !$i"!#e! i" the $a+e of the s%ccessf%# Mo#%"tary Retireme"t Schemes 7MRS8
schemes)
The private p#ayers ho$ever ca""ot match the 2S>=s great reach4 great sie a"! access to
#o$ cost !eposits) Therefore o"e of the mea"s for them to combat the 2S>s has bee"
thro%gh the merger a"! ac3%isitio" 7MK A8 ro%te) Over the #ast t$o years4 the i"!%stry
has $it"esse! severa# s%ch i"sta"ces) 5or i"sta"ce4 H!fc >a"+=s merger $ith Times
>a"+4 1cici >a"+=s ac3%isitio" of 1TC C#assic4 A"agram 5i"a"ce a"! >a"+ of Ma!%ra)
Ce"t%rio" >a"+4 1"!%si"! >a"+4 >a"+ of 2%"jab4 Mysya >a"+ are sai! to be o" the
#oo+o%t) The @T1 ba"+& G#oba# Tr%st >a"+ merger ho$ever ope"e! a pa"!ora=s bo. a"!
bro%ght abo%t the rea#iatio" that a## $as "ot $e## i" the f%"ctio"i"g of ma"y of the
private sector ba"+s)
2rivate sector >a"+s have pio"eere! i"ter"et ba"+i"g4 pho"e ba"+i"g4 a"y$here
ba"+i"g4 mobi#e ba"+i"g4 !ebit car!s4 A%tomatic Te##er Machi"es 7ATMs8 a"! combi"e!
vario%s other services a"! i"tegrate! them i"to the mai"stream ba"+i"g are"a4 $hi#e the
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2S>s are sti## grapp#i"g $ith !isgr%"t#e! emp#oyees i" the aftermath of s%ccessf%# MRS
schemes)
A#so4 fo##o$i"g 1"!ia=s commitme"t to the I To agreeme"t i" respect of the services
sector4 foreig" ba"+s4 i"c#%!i"g both "e$ a"! the e.isti"g o"es4 have bee" permitte! to
ope" %p to (* bra"ches a year $ith effect from (CC;&CC as agai"st the ear#ier stip%#atio"
of ; bra"ches) Ta#+s of gover"me"t !i#%ti"g their e3%ity from /( perce"t to ,, perce"t i"
?ovember *999 have a#so ope"e! %p a "e$ opport%"ity for the ta+eover of eve" the
2S>s) The 5D1 r%#es bei"g more ratio"a#ie! i" P(5Y9* may a#so pave the $ay for
foreig" ba"+s ta+i"g the MK A ro%te to ac3%ire $i##i"g 1"!ia" part"ers)
Mea"$hi#e the eco"omic a"! corporate sector s#o$!o$" has #e! to a" i"creasi"g "%mber
of ba"+s foc%si"g o" the retai# segme"t) Ma"y of them are a#so e"teri"g the "e$ vistas of
1"s%ra"ce) >a"+s $ith their phe"ome"a# reach a"! a reg%#ar i"terface $ith the retai#
i"vestor are the best p#ace! to e"ter i"to the i"s%ra"ce sector) >a"+s i" 1"!ia have bee"
a##o$e! to provi!e fee&base! i"s%ra"ce services $itho%t ris+ participatio" i"vest i" a"
i"s%ra"ce compa"y for provi!i"g i"frastr%ct%re a"! services s%pport a"! set %p of a
separate joi"t&ve"t%re i"s%ra"ce compa"y $ith ris+ participatio"
C%rre"t#y4 1"!ia has ;; sche!%#e! commercia# ba"+s 7SC>s8 & *E p%b#ic sector ba"+s
7that is $ith the Gover"me"t of 1"!ia ho#!i"g a sta+e84 *C private ba"+s 7these !o "ot
have gover"me"t sta+eF they may be p%b#ic#y #iste! a"! tra!e! o" stoc+ e.cha"ges8 a"!
,( foreig" ba"+s) They have a combi"e! "et$or+ of over /,4999 bra"ches a"! (E4999
ATMs) Accor!i"g to a report by 1CRA Limite!4 a rati"g age"cy4 the p%b#ic sector ba"+s
ho#! over E/ perce"t of tota# assets of the ba"+i"g i"!%stry4 $ith the private a"! foreig"
ba"+s ho#!i"g (*6 a"! 0)/6 respective#y)
The 1"!ia" ba"+i"g i"!%stry is c%rre"t#y terme! as stro"g4 havi"g $eathere! the g#oba#
eco"omic s#o$!o$" a"! sho$i"g goo! "%mbers $ith stro"g s%pport f#o$i"g i" from the
Reserve >a"+ of 1"!ia 7R>18 meas%res) 5%rthermore4 a report NOpport%"ities i" 1"!ia"
>a"+i"g SectorN4 by mar+et research compa"y4 R?COS4 forecasts that the 1"!ia"
ba"+i"g sector $i## gro$ at a hea#thy compo%"! a""%a# gro$th rate 7CAGR8 of aro%"!
*,), per ce"t ti## *9(() >a"+i"g4 fi"a"cia# services a"! i"s%ra"ce 7>5S184 together
acco%"t for ,; per ce"t of 1"!iaDs o%tso%rci"g i"!%stry 7$orth @SL -E); bi##io" i" *99E8)
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Accor!i"g to a report by McAi"sey a"! ?ASSCOM4 1"!ia has the pote"tia# to process
,9 per ce"t of the ba"+i"g tra"sactio"s i" the @S by the year *9(9) O%tso%rci"g by the
>5S1 to 1"!ia is e.pecte! to gro$ at a" a""%a# rate of ,9Q,/ per ce"t)
Accor!i"g to a st%!y by D%" K >ra!street 7a" i"ter"atio"a# research bo!y8TN1"!iaDs Top
>a"+s *99;NTthere has bee" a sig"ifica"t gro$th i" the ba"+i"g i"frastr%ct%re) Ta+i"g
i"to acco%"t a## ba"+s i" 1"!ia4 there are overa## /040-9 bra"ches or offices4 ;C,4,/0
emp#oyees a"! *E49;; ATMs) 2%b#ic sector ba"+s ma!e %p a #arge ch%"+ of the
i"frastr%ct%re4 $ith ;E)E per ce"t of a## offices4 ;* per ce"t of staff a"! 09), per ce"t of
a## ATMs)
Accor!i"g to the R>14 1"!ia" fi"a"cia# mar+ets have ge"era##y remai"e! or!er#y !%ri"g
*99;&9C) 1" vie$ of the tight #i3%i!ity co"!itio"s i" the !omestic mo"ey mar+ets i"
September *99;4 the Reserve >a"+ a""o%"ce! a series of meas%res begi""i"g September
(04 *99 Th%s4 the average ca## rate $hich $as at (9)/* per ce"t !ec#i"e! to E)/E per
ce"t i" ?ovember *99; %"!er the impact of these meas%res)
Meas%res aime! at e.pa"!i"g the r%pee #i3%i!ity4 i"c#%!e! sig"ifica"t re!%ctio" i" the
cash reserve ratio 7CRR84 re!%ctio" of the stat%tory #i3%i!ity ratio 7SLR84 ope"i"g a
specia# repo $i"!o$ %"!er the #i3%i!ity a!j%stme"t faci#ity 7LA58 for ba"+s for o"&
#e"!i"g to the "o"&ba"+i"g fi"a"cia# compa"ies 7?>5Cs84 ho%si"g fi"a"ce compa"ies
7H5Cs8 a"! m%t%a# f%"!s 7M5s84 a"! e.te"!i"g a specia# refi"a"ce faci#ity4 $hich ba"+s
co%#! access $itho%t a"y co##atera#)
>a"+i"g capita# 7"et8 amo%"te! to @SL -); bi##io" i" Apri#&September *99; as compare!
$ith @SL /)E bi##io" i" Apri#&September *99E) Amo"g the compo"e"ts of ba"+i"g
capita#4 "o"&resi!e"t 1"!ia" 7?R18 !eposits $it"esse! a "et i"f#o$ of @SL ()( bi##io" i"
Apri#&September *99;4 a t%r"aro%"! from "et o%tf#o$ of @SL E; mi##io" i" Apri#&
September *99E)
The reserve mo"ey #yi"g $ith the R>1 as o" ?ovember *(4 *99; as per the Ba"%ary *99C
b%##eti"4 is a tota# amo%"t of @SL (EC)*; bi##io" a"! R>1=s cre!it to the commercia#
sector stoo! at @SL ,)0/ bi##io") 5%rther4 ba"+s i" 1"!ia p%t %p stro"g gro$th a"! profit
"%mbers i" the October&e"!&December *99; perio! o$i"g to high cre!it gro$th a"!
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easi"g of yie#! o" gover"me"t bo"!s) Top 1"!ia" ba"+s have i"crease! their ear"i"gs by
a#most -9 per ce"t year&o"&year for the same perio!) Accor!i"g to #atest Reserve >a"+ of
1"!ia 7R>18 !ata4 ba"+ cre!it gre$ by *-)0 per ce"t year&o"&year as of December (C4
*99 The res%#ti"g cre!it gro$th $as eve" better at -( per ce"t !%ri"g the Apri#&e"!&
December *99; perio!) Deposits gre$ by *9)0 per ce"t as of December (C4 *99
The gro$th i" a!va"ces ref#ects that the "et i"terest i"come 7?1M8 too $o%#! i"!icate
higher gro$th rate) R>1 has ta+e" a "%mber of steps to #o$er the cost of cre!it i" this
3%arter #i+e c%tti"g cash reserve ratio 7CRR84 the amo%"t of f%"!s ba"+s have to +eep o"
!eposit $ith it4 repo a"! reverse repo rate) The CRR rate4 $hich ha! bee" re!%ce! i"
December *99;4 to /)/9 per ce"t4 repo rate to 0)/9 a"! reverse repo rate to /)994 $ere
f%rther re!%ce! Q CRR to / per ce"t4 7its #e"!i"g rate8 repo rate to /)/ per ce"t a"!
reverse repo4 at $hich it absorbs cash from the ba"+i"g system4 to - per ce"t i" Ba"%ary
*99C)
'#dia# %a#&i#$ Sector
A" a"a#ysis of 1"!ia" >a"+i"g sector i"c#%!i"g the Gro$th i" a!va"ces a"! !eposits4
Mar+et share4 ?2As4 CAR4 E.pos%re "orms4 Retai# >a"+i"g 1"itiatives a"! Major
2#ayers)
• The Reserve >a"+ of 1"!ia 7R>184 as the ce"tra# ba"+ of the co%"try4 c#ose#y mo"itors
!eve#opme"ts i" the $ho#e fi"a"cia# sector)
• The ba"+i"g sector is !omi"ate! by Sche!%#e! Commercia# >a"+s 7SC>s8) As at e"!&
March *99*4 there $ere *C0 Commercia# ba"+s operati"g i" 1"!ia) This i"c#%!e! *E
2%b#ic Sector >a"+s 72S>s84 ,( 2rivate4 -* 5oreig" a"! (C0 Regio"a# R%ra# >a"+s) A#so4
there $ere 0E sche!%#e! co&operative ba"+s co"sisti"g of /( sche!%#e! %rba" co&
operative ba"+s a"! (0 sche!%#e! state co&operative ba"+s)
• Sche!%#e! commercia# ba"+s to%che!4 o" the !eposit fro"t4 a gro$th of (-6 as agai"st
(;6 registere! i" the previo%s year) A"! o" a!va"ces4 the gro$th $as (-)/6agai"st (E),
6 of the ear#ier year)
• State >a"+ of 1"!ia is sti## the #argest ba"+ i" 1"!ia $ith the mar+et share of *96) 1cici
a"! its t$o s%bsi!iaries merge! $ith 1cici >a"+4 #ea!i"g creati"g the seco"! #argest ba"+
i" 1"!ia $ith a ba#a"ce sheet sie of Rs(9-9b")
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• Higher provisio"i"g "orms4 tighter asset c#assificatio" "orms4 !ispe"si"g $ith the
co"cept of Jpast !%e= for recog"itio" of ?2As4 #o$eri"g of cei#i"g o" e.pos%re to a si"g#e
borro$er a"! gro%p e.pos%re etc)4 are amo"g the importa"t meas%res i" or!er to improve
the ba"+i"g Sector)
• A mi"im%m stip%#ate! Capita# A!e3%acy Ratio 7CAR8 $as i"tro!%ce! to stre"gthe" the
abi#ity of ba"+s to absorb #osses a"! the ratio has s%bse3%e"t#y bee" raise! from ;6 to
C6) 1t is propose! to hi+e the CAR to (*6 by *99- base! o" the >as#e Committee
recomme"!atio"s)
• Retai# >a"+i"g is the "e$ ma"tra i" the ba"+i"g sector) The home #oa"s a#o"e acco%"t
for "ear#y t$o&thir! of the tota# retai# portfo#io of the ba"+) Accor!i"g to o"e estimate4
the retai# segme"t is e.pecte! to gro$ at ,9&-96 i" the comi"g years)
• ?et ba"+i"g4 pho"e ba"+i"g4 mobi#e ba"+i"g4 ATMs a"! bi## payme"ts are the "e$ b%
$or!s that ba"+s are %si"g to #%re c%stomers)
• Iith a vie$ to provi!e a" i"stit%tio"a# mecha"ism for shari"g of i"formatio" o"
borro$ers: pote"tia# borro$ers by ba"+s a"! 5i"a"cia# 1"stit%tio"s4 the Cre!it
1"formatio" >%rea% 71"!ia8 Lt!) 7Cibi#8 $as set %p i" A%g%st *999) The >%rea% provi!es
a frame$or+ for co##ecti"g4 processi"g a"! shari"g cre!it i"formatio" o" borro$ers of
cre!it i"stit%tio"s) S>1 a"! H!fc are the promoters of the Cibi#)
• The R>1 is "o$ p#a""i"g to tra"sfer of its sta+es i" the S>14 ?H> a"! ?atio"a# >a"+ for
Agric%#t%ra# a"! R%ra# Deve#opme"t to the private p#ayers) A#so4 the Gover"me"t has
so%ght to #o$er its ho#!i"g i" 2S>s to a mi"im%m of ,, per ce"t of tota# capita# by
a##o$i"g them to raise capita# from the mar+et)
• >a"+s are free to ac3%ire shares4 co"vertib#e !ebe"t%res of corporates a"! %"its of
e3%ity&orie"te! m%t%a# f%"!s4 s%bject to a cei#i"g of /6 of the tota# o%tsta"!i"g a!va"ces
7i"c#%!i"g Commercia# 2aper8 as o" March ,( of the previo%s year)
• The fi"a"ce mi"istry spe#t o%t str%ct%re of the gover"me"t&spo"sore! ARC ca##e! the
Asset Reco"str%ctio" Compa"y 71"!ia8 Limite! 7Arci#84 this pi#ot project of the mi"istry
$o%#! pave $ay for smoother f%"ctio"i"g of the cre!it mar+et i" the co%"try) The
Gover"me"t $i## ho#! -C6 sta+e a"! private p#ayers $i## ho#! the rest /(6 & the
majority bei"g he#! by 1C1C1 >a"+ 7*-)/68)
Gro+th of %a#&s
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HD5C >a"+ a"! A.is >a"+ co"ti"%e to remai" as #ea!ers of the private sector ba"+s)
>oth the ba"+s have mai"tai"e! the a!va"ces gro$th a"! ?1M) S>14 2%"jab ?atio"a#
>a"+4 >a"+ of 1"!ia a"! @"io" >a"+ are e.pecte! to #ea! amo"g 2S@ >a"+s)
The State >a"+ of 1"!ia is p#a""i"g to ope" (4999 "e$ bra"ches across the co%"try to
cover (994999 vi##ages i" the comi"g 5Y *99C&(94 accor!i"g to the ba"+ Chairma"4 Mr
O 2 >hatt) The ba"+ ha! !eci!e! to rope i" ,99 "e$ c%stomers every year for each
bra"ch %si"g i"itiatives) Accor!i"g to Mr >hatt4 the ba"+ co%#! get a recor! @SL /)/-
bi##io" !%ri"g December *99;4 the highest amo%"t co##ecte! by a"y ba"+ i" the co%"try)
5%rther4 p%b#ic sector ba"+s 72S>s8 o" Ba"%ary (*4 *99C a#so !eci!e! to #o$er i"terest
rates o" b%#+ !eposits a"! to offer a ma.im%m rate of E)/ per ce"t for o"e&year mat%rity)
Ear#ier4 o" Ba"%ary (4 ba"+s ha! #o$ere! the i"terest rates o" b%#+ !eposits from C)/ per
ce"t to / per ce"t) Accor!i"g to the #atest R>1 !ata4 gro$th i" broa! mo"ey 7M,84 year&
o"&year 7y&o&y84 $as (C)0 per ce"t 7@SL (/()9- bi##io"8 o" Ba"%ary *4 *99C #o$er tha"
**)0 per ce"t 7@SL (-();* bi##io"8 a year ago) Aggregate !eposits of ba"+s4 year&o"&year4
e.pa"!e! *9)* per ce"t 7@SL (,,)9; bi##io"8 o" Ba"%ary *4 *99C as compare! $ith *-)9
per ce"t 7@SL (*E)-C bi##io"8 a year ago)
The gro$th i" ba"+ cre!it co"ti"%e! to remai" high) ?o"&foo! cre!it by sche!%#e!
commercia# ba"+s 7SC>s8 $as *,)C per ce"t 7@SL (9*)E; bi##io"84 year&o"&year4 as o"
Ba"%ary *4 *99C from **)9 per ce"t 7@SL EE)EC bi##io"8 a year ago) Sche!%#e!
commercia# ba"+s= cre!it to the commercia# sector e.pa"!e! by *E)9 per ce"t 7year&o"&
year8 as o" ?ovember *(4 *99;4 as compare! $ith *,)( per ce"t a year ago) ?o"&foo!
cre!it of sche!%#e! commercia# ba"+s e.pa"!e! by *0)C per ce"t4 year&o"&year4 as o"
?ovember *(4 *99;4 higher tha" *,)E per ce"t a year ago)
Accor!i"g to ear#ier R>1 !ata4 for the thir! 3%arter 7September *0&December *E4 *99;84
tota# ba"+ cre!it $as %p @SL *()C( bi##io" compare! $ith a gro$th of @SL **)C( bi##io"
i" the same perio! a year ago) 1" the prece!i"g 3%arter4 cre!it ha! rise" by @SL *0)/9
bi##io")
R>1 !ata for !eposits sho$s that for the Oct&e"! December ,(4 *99; perio!4 a#tho%gh
!eposit gro$th has s#o$e! to @SL */)CC bi##io" agai"st @SL ,,)(; bi##io" i" the Apri#&
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e"! to September4 *99; perio!4 it $as sti## stro"ger i" the December ,( 3%arter perio!4
*99;4 as compare! to the year&ago 3%arter $he" abso#%te gro$th $as @SL (0),E bi##io")
?et ba"+i"g capita# amo%"te! to @SL -); bi##io" i" Apri#&September *99; as compare!
$ith @SL /)E bi##io" i" Apri#&September *99E) Acco%"ti"g for a part of ba"+i"g capita#4
"o"&resi!e"t 1"!ia" 7?R18 !eposits sho$e! a "et i"f#o$ of @S L ()( bi##io" i" Apri#&
September *99;4 i"creasi"g from "et o%tf#o$ of @SL E; mi##io" i" Apri#&September
*99E)
Le"!i"g by ba"+s a#so rose more tha" E0 per ce"t to Rs *4;94999 crore 7@SL /E)*0
bi##io"8 !%ri"g Apri#&?ovember *99;&9C from the same perio! a year ago4 accor!i"g to
!ata avai#ab#e $ith the Reserve >a"+ of 1"!ia 7R>18) The Reserve >a"+ of 1"!ia o"
Ba"%ary *(4 *99C fi.e! the Refere"ce rate for the @S c%rre"cy at Rs -C, per !o##ar a"!
the si"g#e E%ropea" %"it at Rs 0,)E9 per e%ro from Rs -C)(* per !o##ar a"! Rs 0,)0( per
e%ro4 respective#y)
Credit card !ar&et i# '#dia
-arke! Share
1C1C1 >a"+ emerge! as the #ea!er i" the cre!it car! iss%a"ce category for the year4
$ith its co"ti"%e! aggressive strategy4 registeri"g a 0* perce"t gro$th rate) 1C1C1
>a"+ crosse! the ,0 #a+h mar+ i" terms of cre!it car!s4 ga##opi"g ahea! 7$ithi"
fo%r years of its #a%"ch8 of pio"eer Citiba"+ 7*E #a+h car!s84 the g#oba# #ea!er i"
cre!it car!s)
1C1C1 >a"+ ho#!s *E6 mar+et share fo##o$e! by Citiba"+ $ith (C6 mar+et share)
S>1&GE occ%pies the thir! s#ot $ith (- 6 mar+et share)
Estimates for the year *99/&90 i"!icate a simi#ar s%rge a"! aggressive"ess) The
cre!it car! "%mbers are e.pecte! to cross *9; #a+h by March *990)
5or the year *99-&9/4 "o "e$ ba"+ foraye! i" cre!it car! mar+et) Ho$ever some
of the +ey ba"+s #i+e @T1 >a"+4 BKA >a"+4 @"io" >a"+ of 1"!ia4 2?> etc)
a""o%"ce! their !ecisio" to #a%"ch their car!s i" the year *99/&90)
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'#dustry Spe#d
Iith over (-( #a+h cre!it car!s i" %se i" 1"!ia4 the patter" of %sage is a#so %"!ergoi"g a
sea cha"ge) The tota# spe"!s i" the payme"t i"!%stry for the year *99-&9/ crosse! Rs)
,,4999 crores at the 2OS) This ref#ects a gro$th of /,6 over the previo%s year) 1C1C1
>a"+ is the #ea!er i" capt%ri"g ma.im%m spe"!s $ith ,*6 mar+et share4 fo##o$e! by
Citiba"+ at *96 mar+et share) The combi"e! share i" terms of spe"!s of the M?C
>a"+s is abo%t -,6)
1C1C1 >a"+ sa$ its spe"!s shoot %p si"ce *99- e"!4 poi"ti"g o%t that a combi"atio" of
factors are respo"sib#e for the j%mp & the high spe"!i"g festiva# seaso" a"! three
sim%#ta"eo%s promotio"a# programmes)
1"!ia c%rre"t#y has over (-( #a+h cre!it car!ho#!ers4 $ho ma+e p%rchases tota##i"g Rs)
,,4999 crores per a""%m) Compare! to the Asia" mar+et4 the car! mar+et i" 1"!ia is at a
"asce"t stage) Tota# car! spe"!i"g i" 1"!ia is o"#y at aro%"! ()**6 of Asia" spe"!i"g)
Mar+et for cre!it car!s i" 1"!ia is ma!e %p of (; major ba"+s a"!
fi"a"cia# i"stit%tio"s provi!i"g cre!it car! pro!%cts a"! services) There
are (( major types of cre!it car!s avai#ab#e i" 1"!ia)
-a6or Credi! Card Pro'iders in (ndia
5o##o$i"g are major cre!it car! provi!ers i" 1"!ia'
• A>? Amro
• HD5C
• America" E.press
• 1C1C1 >a"+
• A.is >a"+
• S>1
• >a"+ of >aro!a
• Ca"ara >a"+
• Citiba"+
• Misa
N. R. INSTITUTE OF BUSINESS MANAGEMENT
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• HS>C
• MasterCar!
• De%tsche >a"+
• Ame.
• >arc#ays >a"+
• Di"ers C#%b
• Sta"!ar! Chartere!
• Aota+ Mahi"!ra
9arious !yes o$ credi! card schemes o$$ered by di$$eren! banks
AB+ Amro Credi! Cards
A>? Amro is iss%i"g "i"e cre!it car!s i" 1"!ia) They may be me"tio"e! as be#o$'
• A>? AMRO 5ree!om Cre!it Car!
• A>? AMRO O"e Cre!it Car!
• A>? AMRO Smart Go#! Cre!it Car!
• A>? AMRO Tita"i%m O"e Cre!it Car!
• A>? AMRO Ie##"ess Cre!it Car!
• A>? AMRO Ma+eMyTrip Go Cre!it Car!
• A>? AMRO >arista Cre!it Car!
• A>? AMRO 2#ati"%m Cre!it Car!
• A>? AMRO A!#abs Cre!it Car!
A-E: Credi! Cards
AMER is iss%i"g e#eve" cre!it car!s i" 1"!ia) They may be me"tio"e! as be#o$'
• America" E.press Ai"gfisher 5irst Cre!it Car!
• America" E.press Cre!it Car!
• America" E.press 2#ati"%m Cre!it Car!
• America" E.press 1"!ia To!ay Gro%p Cre!it Car!
• America" E.press 1"!ia" Air#i"es Cre!it Car!
• America" E.press 1"!ia" Air#i"es Go#! Charge Car!
• America" E.press H2CL Cre!it Car!
• America" E.press 1"!ia" Air#i"es Gree" Charge Car!
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• America" E.press Go#! Cre!it Car!
• America" E.press Go#! Charge Car!
• America" E.press E Cre!it Car!
A*is Bank /;T(0 Credi! Cards
A.is >a"+ 7@T18 is offeri"g "i"e cre!it car!s i" 1"!ia) They may be e"%merate! as be#o$'
• A.is >a"+ Go#! 2#%s Cre!it Car!
• A.is >a"+ Corporate Cre!it Car!
• A.is >a"+ Go#! Cre!it Car!
• A.is >a"+ Sec%re! Cre!it Car!
• A.is >a"+ Misa 2#ati"%m Cre!it Car!
• A.is >a"+ Shriram Cre!it Car!
• A.is >a"+ Si#ver 2#%s Cre!it Car!
• A.is >a"+ Trave# C%rre"cy Car!
• A.is >a"+ Si#ver Cre!it Car!
Bank o$ Baroda /B1B0 Credi! Cards
>a"+ of >aro!a 7>O>8 is iss%i"g eight cre!it car!s i" 1"!ia) They may be e"%merate! as
be#o$'
• >O>CARD Corporate G#oba# Cre!it Car!
• >O>CARD E.c#%sive Ioma" cre!it car!
• ?ERTGE? >O>CARD Go#! Cre!it Car!
• >O>ACRD E.c#%sive Yo%th Cre!it Car!
• >O>ACRD Go#! Misa Cre!it Car!
• >O>ACARD Si#ver Cre!it Car!
• >O>ACRD Go#! MasterCar! Cre!it Car!
• >O>ACARD E.c#%sive Cre!it Car!
Ci!ibank
Citiba"+ is iss%i"g *0 cre!it car!s i" 1"!ia) They may be "ame! as be#o$'
• Citiba"+ 2#ati"%m Cre!it Car!
• Citiba"+ Choice Cre!it Car!
• 5irst Citie" Citiba"+ Cre!it Car!
• Re#ia"ce Go#! Cre!it Car!
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• Citiba"+ Cash >ac+ Cre!it Car!
• Re#ia"ce Si#ver Cre!it Car!
• Bet Air$ays Citiba"+ Go#! Cre!it Car!
• Mo!afo"e Citiba"+ Cre!it Car!
• Bet Air$ays Citiba"+ 2#ati"%m Cre!it Car!
• MTM Citiba"+ Cre!it Car!
• Bet Air$ays Citi>%si"ess Cre!it Car!
• 1"ter"atio"a# Times Cre!it Car!
• Bet Air$ays Citiba"+ Si#ver Cre!it Car!
• CRY Citiba"+ Cre!it Car!
• Di"ers C#%b >ritish Air$ays Cre!it Car!
• II5 Citiba"+ Cre!it Car!
• 1"!ia"Oi# Citiba"+ Go#! Cre!it Car!
• Citiba"+ Ioma"=s Cre!it Car!
• 1"!ia"Oi# Citiba"+ Cre!it Car!
• Citiba"+ Ioma"=s Misa Mi"i Cre!it Car!
• Mar%ti S%%+i A%to Cre!it Car!
• Di"ers C#%b 1"ter"atio"a# Cre!it Car!
• Citiba"+ Go#! Cre!it Car!
• Taj Epic%re Di"ers C#%b Cre!it Car!
• Citiba"+ Si#ver Cre!it Car!
• De#hi Metro Citiba"+ Cre!it Car!
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HD.C Bank is brin&in& ou! ele'en credi! card roduc!s in (ndia. These cards
o$$er a #ide ran&e o$ bene$i!s and re#ards $or cardholders.
HD.C Bank Sil'er Credi! Card
5o##o$i"g are some feat%res of HD5C >a"+ Si#ver Cre!it Car!'
• Car!ho#!ers ca" ear" ( re$ar! poi"t for every 1?R (/9 they spe"! $ith the car!)
• Reg%#ar i"terest rate is *)C/6 per mo"th)
• There are ero #iabi#ities i" case of #ost car!s)
• Cash a!va"ce fee is *)/6) Mi"im%m cash a!va"ce fee is 1?R ,99)
• Boi"i"g fee is 1?R ,99)
• 1ss%er is MasterCar!)
• Re"e$a# fee is 1?R E99)
HD5C >a"+ Go#! Cre!it Car!
5o##o$i"g are some facts abo%t HD5C >a"+ Go#! Cre!it Car!'
• Car!ho#!ers receive a ma.im%m of /6 cash bac+) This offer is app#icab#e for trai"
A"! air tic+ets)
• Re"e$a# fee is 1?R *4999)
• Car!ho#!ers receive !isco%"ts o" pro!%cts a"! services of HS>C >a"+)
• Reg%#ar i"terest rate is *)C/6 per mo"th)
• Cre!it #imit is higher tha" most car!s)
• Cash a!va"ce fee is *)/6 per mo"th) Mi"im%m cash a!va"ce fee is 1?R ,99)
• Car!ho#!ers ear" * re$ar! poi"ts i" case of every 1?R (/9 spe"t $ith the car!)
• 1ss%er is M1SA)
• Boi"i"g fee is 1?R /99)
HD.C Bank Ti!anium Credi! Card
5o##o$i"g are sa#ie"t feat%res of HD5C >a"+ Tita"i%m Cre!it Car!'
• Car!ho#!ers receive e.c#%sive co"cierge services)
• 5ees for joi"i"g a"! re"e$a# vary)
• Car!ho#!ers receive rebates at hote#s a"! c#%bs)
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• Reg%#ar i"terest rate is *)0/6 per mo"th)
• Rate of i"terest is #o$)
• Cash a!va"ce fee is *)/6 per mo"th) Mi"im%m cash a!va"ce fee is 1?R ,99)
• There is a" acce#erate! re$ar! program that is base! o" e.pe"ses ma!e $ith the car!)
• 1ss%er is MasterCar!)
• There are ba#a"ce tra"sfer a"! 96 f%e# s%rcharge faci#ities)
HD.C %si"ess Cre!it Car!s
• >a#a"ce Tra"sfer Cre!it Car!s
• Co&bra"!e! Cre!it Car!s
• Lo$ 1"terest Cre!it Car!s
• Lifetime 5ree Cre!it Car!s
• Re$ar!s
There are some a!!itio"a# cre!it car!s that are avai#ab#e i" 1"!ia as $e##) Re$ar!s cre!it
car!s avai#ab#e i" 1"!ia ca" be s%b!ivi!e! i"to si. categories Q 2oi"ts4 Hote#s a"!
Trave#s4 Retai#4 A%to a"! 5%e#)
A number o$ banks are o$$erin& lo# in!eres! credi! cards in (ndia in order !o
hel !he cardholders mana&e !heir $inances in a be!!er #ay. These cards are
hi&hly a'ailed by (ndian consumers on accoun! o$ !heir lo# in!eres! ra!es.
(C(C( Bank Pla!inum Credi! Card
5o##o$i"g are some sa#ie"t feat%res of 1C1C1 >a"+ 2#ati"%m Cre!it Car!'
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• Car!ho#!ers receive priority access faci#ities to airport #o%"ges)
• Reg%#ar i"terest rate is ()CC6 per mo"th)
• Car!ho#!ers receive air acci!e"t i"s%ra"ce coverage $orth 1?R ( crore)
• Cash a!va"ce fee is ,)(/6 per mo"th)
• Car!ho#!ers have higher cash #imits a"! cre!it #imits)
• Car! iss%er is M1SA)
• The car! is offere! via i"vitatio" o"#y)
• 1ss%i"g ba"+ is 1C1C1 >a"+)
• Boi"i"g fee is 1?R */4999)
• There are 96 f%e# s%rcharge faci#ities)
• Re"e$a# fee is 1?R *4/99)

American E*ress (ndian Airlines Credi! Card
America" E.press 1"!ia" Air#i"es Cre!it Car! has the fo##o$i"g sa#ie"t feat%res'
• The car!ho#!ers receive (96 !isco%"ts o" b%si"ess c#ass f#ights a"! (/6 !isco%"ts
o" eco"omy f#ights)
• Re"e$a# fee is 1?R ,E/9)
• There is a /6 !isco%"t o" s%per saver fares)
• Reg%#ar i"terest rate is ()C6)
• Car!ho#!ers receive b%si"ess c#ass %pgra!es for free)
• Cash a!va"ce fee is ()C6)
• Car!ho#!ers receive comp#ime"tary tic+ets)
• Cre!it car! iss%er is AMER)
• Boi"i"g fee is 1?R ,E/9)
• There are 96 f%e# s%rcharge faci#ities that ca" o"#y be avai#e! at H2CL o%t#ets)
HD.C Bank Ti!anium Credi! Card
5o##o$i"g are the sa#ie"t feat%res of HD5C >a"+ Tita"i%m Cre!it Car!'
• Car!ho#!ers receive e.c#%sive co"cierge services)
• Reg%#ar i"terest rate is *)0/6 per mo"th)
• Car!ho#!ers receive rebates at hote#s a"! c#%bs)
• Cash a!va"ce fee is *)/6 per mo"th) The mi"im%m cash a!va"ce fee is 1?R ,99)
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• There are acce#erate! re$ar!s programs that are provi!e! o" the basis of e.pe"!it%re
$ith the car!)
• 1ss%er is MasterCar!)
• Car!ho#!ers receive 96 f%e# s%rcharge a"! ba#a"ce tra"sfer faci#ities)
• 1ss%i"g ba"+ is HD5C >a"+)
• Boi"i"g fees a"! re"e$a# fees are variab#e)
5o##o$i"g are some other #o$ i"terest cre!it car!s that are avai#ab#e i" 1"!ia'
• HD5C >a"+ Misa Sig"at%re Cre!it Car!
• >O>CARD E.c#%sive Ioma" cre!it car!
• HD5C >a"+ 2#ati"%m 2#%s Cre!it Car!
• >O>ACRD E.c#%sive Yo%th Cre!it Car!
• HD5C >a"+ Corporate Cre!it Car!
• >O>ACARD Si#ver Cre!it Car!
• Hero Ho"!a S>1 Cre!it Car!
• >O>ACARD E.c#%sive Cre!it Car!
• >O>CARD Corporate G#oba# Cre!it Car!
• A.is >a"+ Sec%re! Cre!it Car!
• ?ERTGE? >O>CARD Go#! Cre!it Car!
• HS>C 2#ati"%m Cre!it Car!
• >O>ACRD Go#! Misa Cre!it Car!
• Yatra >arc#aycar! 2#ati"%m Cre!it Car!
• >O>ACRD Go#! MasterCar! Cre!it Car!
• A>? AMRO 2#ati"%m Cre!it Car!
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CRED(T CARD .RA;DS
There is a" i"ter"atio"a# rac+et of cyber crimi"a#s) Cre!it car! i"formatio" i" 1"!ia is
so#! to cyber crimi"a#s i" other co%"tries) The i"formatio" is mis%se! for carryi"g o%t
major fi"a"cia# fra%!s) ) D%e to #ac+ of a$are"ess4 peop#e s%bmit perso"a# !etai#s a"!
cre!it car! i"formatio" to fra%!%#e"t emai#s) Sometimes4 fra%!sters stea# cre!it car!
i"formatio") Some fra%!sters go thro%gh trash to fi"! !iscar!e! receipts or carbo" for
obtai"i"g i"formatio" a"! the" %se the acco%"t "%mber i##ega##y)
There $ere %"!ergro%"! Gcar!erH for%ms $here cre!it car! "%mbers are bo%ght a"!
so#!) These for%ms bri"g together peop#e $ho stea# the "%mbers a"! those $ho %se them)
A" i"!ivi!%a# researcher i" cyber crime a"! cyber #a$s4 2ati# sai! eco"omic offe"ces
%si"g cre!it car!s have i"crease! i" 1"!ia a"! co%"tries #i+e @S) A" 5>1 report i"!icate!
that cre!it car!s $ere #arge#y respo"sib#e for the L ,(/ bi##io" #oss the @S e"!%re! from
fi"a"cia# fra%! i" *99/) A st%!y i" E%rope revea#e! that over ** mi##io" c%stomers fe##
victim to cre!it car! fra%! i" *990) GThe "%mbers are i"creasi"g)
GThe fra%!s are i"creasi"g beca%se of prob#em face! i" e.tra!itio" of cyber crimi"a#s
from other co%"tries) Eve" !%ri"g the pa"e# !isc%ssio" o" cyber terrorism at the hac+er=s
co"ve"tio"4 cyber #a$ e.pert Rohas ?agpa# sai! 1"!ia $as so far "ot associate! $ith a"y
e.tra!itio" treaty $ith a foreig" co%"try !%e $hich the cyber crimi"a#s i" co%#! "ot be
he#!) @S e.pert Chris Gogga"s sai! eve" @S is faci"g !iffic%#ties i" e.tra!itio" of
crimi"a#s)
To!ay p#astic is the co"ve"ie"t4 easy a"! fashio"ab#e a#ter"ative to $a!s of paper) Iith
o"e s$ipe4 cre!it car!s have cha"ge! the $ay $e #ive) @"fort%"ate#y4 a#o"g $ith the
co"ve"ie"ce has come re#ate! crime) Cre!it car! fra%! i"vo#ves $ith!ra$a# of f%"!s a"!
obtai"i"g of goo!s a"! services by %si"g a" %"a%thorie! acco%"t) Other$ise
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i"accessib#e perso"a# i"formatio" store! o" comp%ters is sto#e" i" or!er to %se a car!)
D%e to the virt%a# e.p#osio" of cre!it car! b%si"ess thro%gho%t the $or#!4 sec%rity has
become critica# i" the e"tire process) There $ere abo%t 09 mi##io" cre!it car! ho#!ers i"
the si.ties a"! accor!i"g to a" estimate4 the "%mber has go"e %p to more tha" a tri##io"
"o$)
1" 1"!ia4 cre!it car! compa"ies ma+e a provisio" i" their co"tract $ith the c#ie"t that
they4 the compa"y4 $o%#! "ot be #iab#e for the fra%!%#e"t tra"sactio" %"#ess the c#ie"t
#oses his:her car! a"! reports the #oss imme!iate#y) Sometimes the ba"+s a"! cre!it car!
compa"ies try to save their s+i" by i"serti"g a c#a%se i" the re#eva"t co"tract) This is
p%rporte! to abso#ve the compa"y i" case a fra%! occ%rs o" the sto#e" car! a"! the c#ie"t
fai#s to "otify the #oss i" time) This %"i#atera# provisio" ho$ever has "ot stoo! the test of
#ega# scr%ti"y) The co%rts have p#ace! the b%r!e" of #oss o" the iss%ers)
1" 1"!ia4 the Mai# Or!er Te#epho"e Or!er 7MOTO8 type acco%"t for the b%#+ of cre!it
car! fra%!s) This occ%rs $he" the car! is "ot act%a##y prese"te!4 b%t the !etai#s are give"
o" the app#icatio" form to b%y goo!s or services or $he" the tra"sactio" is !o"e o" the
te#epho"e)
5ra%! thro%gh fa+e car!s is "ot as rampa"t i" 1"!ia as i" the @SA) Tech"i3%es have bee"
!eve#ope! $hereby the "%mber a"! other i"formatio" o" the mag"etic strip is erase! a"!
a "e$ "%mber is embosse!) Ihe" the car! !oes "ot $or+ o" the s$ipi"g machi"e4 the
mercha"t ma"%a##y processes the !etai#s of the car! to comp#ete the sa#e)
This proce!%re is ca##e! s+immi"g of the car!s) 1" the @SA4 i!e"tity theft is a#so 3%ite
preva#e"t a"! is s%ppose! to be o"e of the fastest gro$i"g offe"ces i" America) The
fra%!sters a!opt a"other perso"=s i!e"tity to gai" access to their mo"etary so%rces) 1" the
case of o"#i"e tra"sactio"s4 Jsite c#o"i"g= is resorte! to $here the site c#o"e create! is
ma!e to #oo+ #i+e the origi"a# site i" or!er to obtai" the cre!it car! !etai#s of
%"s%specti"g c%stomers) Simi#ar#y4 fa#se mercha"t sites are a#so create! $here cheap
goo!s #%re c%stomers i"to givi"g their car! !etai#s)
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Scare! by the ever i"creasi"g cases of cre!it car! fra%!4 the affecte! compa"ies a"!
ba"+s have ta+e" vario%s steps to mi"imie it) Ma"%a# revie$s of the tra"sactio"s o" the
car! are %"!erta+e"4 b%t this re3%ires a high #eve# of h%ma" i"terve"tio" a"! i"creases
costs) 1" the @SA4 A!!ress Merificatio" System 7AMS8 has bee" !eve#ope! for %se i" the
Jcar! "ot prese"t= sce"ario
The system is !esig"e! to chec+ $hether the a!!ress give" by the b%yer matches $ith
the o"e o" recor!) Misa has !evise! a 2ayer A%the"ticatio" System base! o" 21? simi#ar
to the system %se! o" ATM car!s) This is a cha""e# bet$ee" the ba"+ a"! the c%stomer
%se! to a%thorie o"#i"e tra"sactio"s) Iith the i"crease i" cross bor!er ecommerce the
iss%ers i" 1"!ia $i## have to %p!ate their arse"a# to combat the forgers o" the same #i"es
as their Iester" co%"terparts)
The 1"formatio" Tech"o#ogy Act a"! R%#es4 passe! i" *9994 provi!e pe"a#ties for the
tamperi"g of comp%ter so%rce !oc%me"ts a"! hac+i"g of comp%ter systems) ?o specific
me"tio" has4 ho$ever4 bee" ma!e of Cre!it car!s or fi"a"cia# tra"sactio"s) The R>1 has
forme! the Cre!it 1"formatio" >%rea% of 1"!ia 7C1>1L8 i" co##aboratio" $ith D%" a"!
>ra!street $ho $i## mai"tai" the recor!s of a## i"!ivi!%a#s $ho $a"t to avai# of fi"a"ce
from ba"+s a"! cre!it car! compa"ies i" 1"!ia)
-a#tastic E.a!p"e of Credit Card -raud
Amit Ti$ari ha! ma"y "ames4 ba"+ acco%"ts a"! c#ie"ts) ?o"e of them $ere for rea#)
Iith a p#a" that $as both i"ge"io%s a"! "aWve4 the *(&year&o#! e"gi"eeri"g st%!e"t from
2%"e trie! to !efra%! a M%mbai&base! cre!it car! processi"g compa"y4 CC Ave"%e4 of
"ear#y Rs C994999)He $as arreste! by the M%mbai 2o#ice o" A%g%st *(4 *99, after
"ear#y a" year of hi!e a"! see+ $ith CC Ave"%e) HeDs bee" charge! for cheati"g %"!er
Sectio" -*9) Amit $i## remai" i" c%sto!y ti## 5ri!ay4 A%g%st *C)
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2rotect yo%rse#f from cre!it Car! fra%! by fo##o$i"g the simp#e s%ggestio"s give" be#o$'
Do?s
• • 1f yo% #ose yo%r cre!it car!4 p#ease report the #oss imme!iate#y)
• • Ihe" yo% !ispose of a car! at the time of re"e$a#:%p gra!atio"4 p#ease ma+e s%re
to c%t it !iago"a##y before !isposa#)
• • 2#ease +eep yo%r car! i" a safe p#ace) Treat it as caref%##y as yo% $o%#! treat yo%r
cash)
• • 2#ease e"s%re the car! is s$ipe! i" yo%r prese"ce)
• • 2#ease ma+e s%re yo% co"!%ct a"y ATM tra"sactio" i" comp#ete privacy)
• • 1f yo%r car! is he#! bac+ by the ATM4 p#ease i"form the co"cer"e! Ca##
Ce"ter:>ra"ch perso""e# imme!iate#y)
• • >efore yo% %se a" ATM4 p#ease e"s%re that there are "o stra"ge objects i" the
i"sertio" pa"e# of the ATM)
• • 2#ease remember to ta+e yo%r Debit:Cre!it Car! bac+ after comp#eti"g yo%r ATM
tra"sactio")
• • 1f yo% spot a"y s%spicio%s #oo+i"g peop#e at or aro%"! a"y ATM4 p#ease i"form the
sec%rity g%ar! imme!iate#y)
• • 2#ease cha"ge yo%r ATM 21? o"ce every , mo"ths)
• • Ihe" yo% ma+e a"y tra"sactio"s4 p#ease ma+e s%re that the charge s#ip is comp#ete
before sig"i"g)
• • 2#ease pay atte"tio" to yo%r bi##i"g cyc#es) 2#ease fo##o$ %p $ith >a"+=s Cre!it
Car!s C%stomer Care if yo%r bi##s !o"Dt arrive o" time) A missi"g cre!it car! bi##
co%#! mea" a" i!e"tity thief has ta+e" over yo%r acco%"t a"! cha"ge! yo%r bi##i"g
a!!ress to cover his trac+s)
• • 2#ease be $ary of promotio"a# scams) 1!e"tity thieves may %se pho"y offers to get
yo% to give them yo%r perso"a# i"formatio")
• • 2#ease sec%re a## perso"a# i"formatio" i" yo%r home4 especia##y if yo% have
roommates4 emp#oy o%tsi!e he#p or are havi"g service $or+ !o"e i" yo%r home)
• • 2#ease sig" yo%r cre!it car!s as soo" as yo% get them)
• • 2#ease chec+ yo%r car!s perio!ica##y to ma+e s%re "o"e are missi"g)
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• • 2#ease !estroy a"! !ispose of copies of receipts4 air#i"e tic+ets4 trave# iti"eraries
a"! a"ythi"g e#se that !isp#ays yo%r car! "%mbers)
• • 2#ease +eep items $ith perso"a# i"formatio" i" a safe p#ace) 2#ease +eep a #ist of a##
cre!it car!s4 acco%"t "%mbers4 e.piry !ates4 a"! the c%stomer service pho"e
"%mbers i" a sec%re p#ace so that yo% ca" 3%ic+#y co"tact >a"+=s Cre!it Car!s
C%stomer Care i" case yo%r car!s are #ost or sto#e")
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
Do"=ts
• • 2#ease !o "ot !isc#ose yo%r Cre!it Car! ?%mber:ATM 21? to a"yo"e)
• • 2#ease !o "ot ha"! over the car! to a"yo"e4 eve" if he:she c#aims to represe"t the
>a"+)
• • ?ever get carrie! a$ay by stra"gers $ho try to he#p yo% %se the ATM machi"e)
• • 2#ease !o "ot $rite the ATM 21? o" the car! or o" a paper $hich yo% carry a#o"g
$ith the car!)
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N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
Do?s and don?!s $or online !ransac!ions7
•
• A#$ays >a"+Ds ?etsafe feat%re for ma+i"g o"#i"e tra"sactio"s) 1t is safe a"! sec%re)
1f yo% have "ot registere! for it4 p#ease visit the ?etsafe page)
• • 2referab#y tra"sact o" sites $hich ma"!ate va#i!atio" of CMC* va#%e 7the #ast ,
!igits after the car! "%mber4 me"tio"e! o" the sig"at%re pa"e# at the bac+ of the
car!8 or at $ebsites that are certifie! by Merifie!&by&Misa or MasterCar! Sec%re
Co!e)
• • 2#ease be caref%# $he" provi!i"g perso"a# i"formatio" o"#i"e) ?ever give o%t yo%r
perso"a# or acco%"t i"formatio" to a"yo"e yo% !o "ot tr%st) 2#ease ma+e s%re that
yo% verify a b%si"essDs #egitimacy by visiti"g its $eb site4 ca##i"g a pho"e "%mber
obtai"e! from a tr%ste! so%rce4 a"!r chec+i"g $ith a re#iab#e reso%rce)
• • 2#ease +eep yo%r pass$or!s secret) Some o"#i"e stores may re3%ire yo% to register
$ith them via a %ser"ame a"! pass$or! before b%yi"g) O"#i"e pass$or!s sho%#!
be +ept secret from o%tsi!e parties the same $ay yo% protect yo%r ATM 21?)
• • 2#ease #oo+ for sig"s of sec%rity) 1!e"tify sec%rity c#%es s%ch as a #oc+ image at the
bottom of yo%r bro$ser4 or a @RL that begi"s $ith https': These sig"s i"!icate
that o"#y yo% a"! the mercha"t ca" vie$ yo%r payme"t i"formatio")
• • ?ever se"! payme"t i"formatio" via emai#) 1"formatio" that trave#s over the
1"ter"et 7s%ch as emai#8 is "ot f%##y protecte! from bei"g rea! by o%tsi!e parties)
Most rep%te! mercha"t sites %se e"cryptio" tech"o#ogies that $i## protect yo%r
private !ata from bei"g accesse! by others as yo% co"!%ct a" o"#i"e tra"sactio")
• • 2#ease +eep a recor! of yo%r tra"sactio"s) B%st as yo% save store receipts4 yo%
sho%#! +eep recor!s of yo%r o"#i"e p%rchases) >ac+ %p yo%r tra"sactio" by savi"g
a"!r pri"ti"g the or!er co"firmatio")
• • 2#ease revie$ yo%r mo"th#y acco%"t stateme"t thoro%gh#y) 1mme!iate#y i"vestigate
s%spicio%s activity to preve"t a"y possib#e a!!itio"a# fra%! before it occ%rs)
2rompt#y "otify yo%r fi"a"cia# i"stit%tio" of a"y s%spicio%s emai# activities)
• • 2#ease be $ary of promotio"a# scams) 1!e"tity thieves may %se pho"y offers to get
yo% to give them yo%r perso"a# i"formatio")
• • 1" case yo% %se yo%r Cre!it Car! for o"#i"e tra"sactio"s i" 1"ter"et cafes or p%b#ic&
%se comp%ters4 p#ease e"s%re that yo% erase the history of $ebsites
visite!:accesse!)
• • 2#ease ope" a"! respo"! o"#y to emai#s that pass some basic tests4 s%ch as'&
• 1s the emai# from somebo!y yo% +"o$S
• Have yo% receive! emai#s from this se"!er beforeS
• Are yo% e.pecti"g emai# $ith a" attachme"t from this se"!erS
• Does emai# from this se"!er $ith the co"te"ts !escribe! i" the s%bject #i"e a"! the
"ame of the attachme"t ma+e se"seS
• Does this emai# co"tai" a vir%sS
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CHAPTER 4
1?D@STRY A?ALYS1S
Por!er=s .(9E .1RCE analysis $or (ndian Credi! Card (ndus!ry
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
BARGAINING POWER OF
SUPPLIERS
-low suppl!" #$"%$&&%
pow!"
- '!w $l(!"&$()!s $)$l$#l!
-su#*!+( (o RBI "ul!s ,
IN-USTR.
RI/ALR.
I&(!&s!
+o0p!((o&
THREAT OF
SUBSTITUTES
H%1 (1"!$( '"o0
su#s((u(!s
THREAT OF NEW
ENTRANT
-LOW BARRIERS TO
ENTR.
- Go)(. pol+!s $"!
suppo"()!
-Glo#$l2$(o& $&3
l#!"$l2$(o& pol+4
BARGAINING POWER OF
CUSTOMERS
-H%1 #$"%$&&% pow!"
- Low sw(+1&% +os(
- L$"%! &o. o' $l(!"&$()!s
-Ho0o%!&ous s!")+!s #4 #$&5s
Do?s and don?!s $or online !ransac!ions7
• • A#$ays >a"+Ds ?etsafe feat%re for ma+i"g o"#i"e tra"sactio"s) 1t is safe a"! sec%re)
1f yo% have "ot registere! for it4 p#ease visit the ?etsafe page)
•
• 2referab#y tra"sact o" sites $hich ma"!ate va#i!atio" of CMC* va#%e 7the #ast ,
!igits after the car! "%mber4 me"tio"e! o" the sig"at%re pa"e# at the bac+ of the
car!8 or at $ebsites that are certifie! by Merifie!&by&Misa or MasterCar! Sec%re
Co!e)
• • 2#ease be caref%# $he" provi!i"g perso"a# i"formatio" o"#i"e) ?ever give o%t yo%r
perso"a# or acco%"t i"formatio" to a"yo"e yo% !o "ot tr%st) 2#ease ma+e s%re that
yo% verify a b%si"essDs #egitimacy by visiti"g its $eb site4 ca##i"g a pho"e "%mber
obtai"e! from a tr%ste! so%rce4 a"!r chec+i"g $ith a re#iab#e reso%rce)
• • 2#ease +eep yo%r pass$or!s secret) Some o"#i"e stores may re3%ire yo% to register
$ith them via a %ser"ame a"! pass$or! before b%yi"g) O"#i"e pass$or!s sho%#!
be +ept secret from o%tsi!e parties the same $ay yo% protect yo%r ATM 21?)
• • 2#ease #oo+ for sig"s of sec%rity) 1!e"tify sec%rity c#%es s%ch as a #oc+ image at the
bottom of yo%r bro$ser4 or a @RL that begi"s $ith https': These sig"s i"!icate
that o"#y yo% a"! the mercha"t ca" vie$ yo%r payme"t i"formatio")
• • ?ever se"! payme"t i"formatio" via emai#) 1"formatio" that trave#s over the
1"ter"et 7s%ch as emai#8 is "ot f%##y protecte! from bei"g rea! by o%tsi!e parties)
Most rep%te! mercha"t sites %se e"cryptio" tech"o#ogies that $i## protect yo%r
private !ata from bei"g accesse! by others as yo% co"!%ct a" o"#i"e tra"sactio")
• • 2#ease +eep a recor! of yo%r tra"sactio"s) B%st as yo% save store receipts4 yo%
sho%#! +eep recor!s of yo%r o"#i"e p%rchases) >ac+ %p yo%r tra"sactio" by savi"g
a"!r pri"ti"g the or!er co"firmatio")
• • 2#ease revie$ yo%r mo"th#y acco%"t stateme"t thoro%gh#y) 1mme!iate#y i"vestigate
s%spicio%s activity to preve"t a"y possib#e a!!itio"a# fra%! before it occ%rs)
2rompt#y "otify yo%r fi"a"cia# i"stit%tio" of a"y s%spicio%s emai# activities)
• • 2#ease be $ary of promotio"a# scams) 1!e"tity thieves may %se pho"y offers to get
yo% to give them yo%r perso"a# i"formatio")
• • 1" case yo% %se yo%r Cre!it Car! for o"#i"e tra"sactio"s i" 1"ter"et cafes or p%b#ic&
%se comp%ters4 p#ease e"s%re that yo% erase the history of $ebsites
visite!:accesse!)
• • 2#ease ope" a"! respo"! o"#y to emai#s that pass some basic tests4 s%ch as'&
• 1s the emai# from somebo!y yo% +"o$S
• Have yo% receive! emai#s from this se"!er beforeS
• Are yo% e.pecti"g emai# $ith a" attachme"t from this se"!erS
• Does emai# from this se"!er $ith the co"te"ts !escribe! i" the s%bject #i"e a"! the
"ame of the attachme"t ma+e se"seS
• Does this emai# co"tai" a vir%sS
130
@EA P1(+TS7
Suly7
Cre!it po#icies are !eci!e! by ba"+s i" co"s%#tatio" $ith the Reserve >a"+ of 1"!ia7R>18)
Demand7
1"!ia is a gro$i"g eco"omy a"! !ema"! for ho%seho#! cre!it is high tho%gh it co%#! be
cyc#ica#)
Barriers !o en!ry7
Lice"si"g re3%ireme"t4 i"vestme"t i" tech"o#ogy a"! bra"ch "et$or+)
Bar&ainin& o#er o$ suliers7
5e$ s%pp#iers avai#ab#e s%ch as Mastercar!4 Misa4 Ame. etc)
Bar&ainin& o#er o$ cus!omers7
5or goo! cre!it$orthy borro$ers bargai"i"g po$er is high !%e to the avai#abi#ity of #arge
"%mber of ba"+s a"! cre!it car! provi!ers)
Come!i!ion) Hi&h
There are p%b#ic sector ba"+s4 private sector a"! foreig" ba"+s competi"g i" simi#ar b%si"ess
#i"es)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
R(9A,RA A-1+2 THE (+D;STRA
Riva#ry amo"g the i"!%stry is very high) There are so ma"y private4 p%b#ic a"! foreig" ba"+s
operati"g i" the i"!%stry) They are fighti"g for same c%stomers) D%e to gover"me"t
#ibera#iatio" a"! g#oba#iatio" po#icy4 ba"+i"g sector became ope" for everybo!y) So4 "e$er
a"! "e$er private K foreig" firms are ope"i"g their bra"ches i" 1"!ia) This has i"te"sifie!
the competitio") The "%mbers of factors that have co"trib%te! to the i"crease riva#ry are as
fo##o$s'
1. A lar&e no. o$ Banks ro'idin& credi! card $acili!y7
There are so ma"y ba"+s a"! "o"&fi"a"cia# i"stit%tio"s fighti"g for same&pie4 $hich has
i"te"sifie! competitio")
2. Hi&h marke! &ro#!h ra!e7
1"!ia is see" as o"e of the biggest mar+et p#ace a"! gro$th rate i" 1"!ia" cre!it car! i"!%stry
is a#so very high) This has ig"ite! the competitio")
3. ,o# s#i!chin& cos!7
C%stomer s$itchi"g cost is very #o$) They ca" easi#y s$itch from o"e cre!it car! to a"other
cre!it car! a"! very #itt#e #oya#ty e.ists)
8. (n di$$eren!ia!e ser'ices7
A#most every cre!it car! provi!es simi#ar services) ?o !iffere"tiatio" e.ists) Every ba"+ tries
to copy each other=s services a"! tech"o#ogy4 $hich i"creases the #eve# of competitio")
4. Hi&h .i*ed cos!7
B. Hi&h e*i! barrier7
High e.it barriers h%mi#iate ba"+s a"! cre!it car! provi!ers to ear" profit a"! retai"
c%stomers by provi!i"g $or#!&c#ass services)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
C. ,o# &o'ernmen! re&ula!ions7
There are #o$ reg%#atio" e.ist to start a "e$ b%si"ess !%e L2G po#icy a!opte! by 1"!ia) So4
sector is ope" for everybo!y)
BAR2A(+(+2 P1a"+s= cre!it po#icies are s%bject to R>1 r%#es a"! reg%#atio"s) >a"+s have to behave i" the
$ay that R>1 $a"ts) So4 R>1 ta+es a## !ecisio"s re#ati"g to i"terest rates4 tra"sactio" charges
etc) This re!%ces s%pp#iers bargai"i"g po$er)
8. Suliers are no! concen!ra!ed
>a"+i"g i"!%stry=s s%pp#iers are "ot co"ce"trate!) There are "%mero%s s%pp#iers $ith
"eg#igib#e portio" to offer) So4 this re!%ces their bargai"i"g po$er) 1f they $ere co"ce"trate!
the" they ca" bargai" $ith ba"+s or ca" co##ective#y i"vest i" other "o&ris+y projects)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
BAR2A(+(+2 P1< of the respo"!e"ts $ere from the private sector4 *(6 $ere
professio"a#s4 a"! (-6 each from govt)sector4 b%si"ess a"! se#f emp#oye!) 1t sho$s peop#e
$or+i"g i" the private sector are the major target a%!ie"ce of the cre!it car! compa"ies)
Sex
M$l!
F!0$l!
The chart sho$s that more tha" *:,
r!
of the respo"!e"ts $ere ma#e) The major reaso" for this
co%#! be that ma#e have reg%#ar so%rce of i"come) E0 6 of the respo"!e"ts $ere ma#e
compare! to j%st *-6 of the fema#e respo"!e"ts) This Ma"y of the ho%se$ives $ho %ses the
cre!it car! are those $hich are bee" iss%e! as free car! a#o"g $ith e.isti"g car!)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
TEST OF H.POTHESIS
(SS;(+2 BA+@ A+D THE SE: 1. THE CARD H1,DER
The above tab#e sho$s the re#atio"ship bet$ee" the cre!it car! iss%e! by !iffere"t ba"+ s%ch
as S>14 HD5C4 1C1C14 HS>C a"! Others a"! the se. of the car! ho#!ers)
+ull Hyo!hesis7 There is "o sig"ifica"t associatio" bet$ee" the iss%i"g ba"+ a"! the se. of
the car!ho#!er)
More tha" E/ 6 of the car!ho#!ers are ma#e beca%se they stab#e so%rce of i"come) Most of
the fema#es4 $ho are ho%se$ives4 %se the a!!itio"a# car!s $hich are iss%e! at co"cessio"a#
fee for fami#y members) E(6 of the car!ho#!ers %se S>14 HD5C a"! 1C1C1)
Conclusion7 The ?%## hypothesis is accepte! as the ca#c%#ate! va#%e X ,)(/C a"! the tab#e
va#%e is C)-;
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
GENDER
FEMALE MALE
SBI 5 17
HDFC 8 20
ICICI 3 18
HSBC 3 13
OTHERS 5 8
24 76
130
(SS;(+2 BA+@ A+D A2E 1. CARD H1,DER
AGE
< 18 YEARS 18 - 25 YEARS 25 - 40 YEARS 40 - 60 YEARS
ABOVE 60
YEARS
SBI 0 3 9 7 3
HDFC 0 0 15 9 4
ICICI 0 1 10 8 2
HSBC 0 3 7 5 1
OTHERS 0 2 2 9 0
The tab#e a"! the graph have bee" !ra$" to sho$ if the iss%i"g ba"+ varies amo"g the car!
ho#!ers of !iffere"t age gro%p) 1t is c#ear from the tab#e that "ear#y /*6 car!ho#!ers be#o"g to
the age gro%p of (; Q -9 years) This category co"sists of st%!e"ts $ho are %si"g a!! o" car!s
or yo%"gsters $ho are yet to sett#e i" #ifeF these peop#e have a greater "ee! for cre!it car!s)
O" the other ha"!4 the "%mber of car!ho#!ers i" the age gro%p of above -9 years is #o$
comparative#y) These peop#e are sett#e! i" #ife4 they have the prope"sity to save more tha"
spe"!)
+ull Hyo!hesis7 There is "o sig"ifica"t associatio" bet$ee" the iss%i"g ba"+ a"! age of the
car!ho#!er)
Ca#c%#ate! Ma#%e X (/)*-,4 Tab#e Ma#%e X *()9*0
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
Conclusion7 Si"ce the ca#c%#ate! va#%e of chi&s3%are is #ess tha" the tab#e va#%e4 the
hypothesis that the cre!it car! chose" by the car!ho#!er !oes "ot !epe"! o" the age is
accepte!)
(SS;(+2 BA+@ A+D 1CC;PAT(1+ 1. CARD H1,DER
OCC!ATION
SELF
EM!LOYED BSINESS
!RIVATE
SECTOR !ROFESSIONAL GOVT" SECTOR
CC#BAN$ SBI 4 1 9 4 4
HDFC 3 2 15 4 4
ICICI 1 5 4 9 2
HSBC 6 1 4 3 2
OTHERS 0 5 5 1 2
5rom the tab#e it ca" be see" that more tha" /9 6 of the car!ho#!ers be#o"g to the sa#arie!
c#ass i)e) the private a"! gover"me"t sector emp#oyees4 as they have a #imite! so%rce of
i"come $hereas the other -C6 car!ho#!ers be#o"g to the se#f emp#oye! a"! professio"a#
gro%p) The cre!it car! he#ps the car!ho#!ers to meet s%!!e" e.pe"ses i" case of "o"&
avai#abi#ity of cash)
+ull Hyo!hesis7 There is "o re#atio"ship bet$ee" the iss%i"g ba"+ a"! the occ%patio" of the
car! ho#!er)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
Conclusion7 Ca#c%#ate! Ma#%e X ,()EEC Tab#e Ma#%e X *0)*C0) Therefore the "%## hypothesis
that there is "o re#atio" bet$ee" iss%i"g ba"+ a"! the occ%patio" of the car!ho#!er is rejecte!)
(SS;(+2 BA+@ A+D (+C1-E 1. CARD H1,DER
INCOME
< RS" 10000
RS" 10000 - RS"
15000
RS" 15000 - RS"
20000 ABOVE 20000
CC#BAN$ SBI 0 1 7 14
HDFC 0 0 6 22
ICICI 0 4 6 11
HSBC 0 3 5 8
OTHERS 0 0 3 10
The above tab#e a"! graph has bee" !ra$" to !etermi"e the re#atio"ship bet$ee" the !iffere"t
ba"+s iss%i"g cre!it car!s a"! the mo"th#y i"come of the car! ho#!ers) Most of the peop#e
$ho have ta+e" cre!it car!s are those $hose i"come is greater tha" (9999 pm) Those $ith
higher i"come are more $i##i"g to avai# the type of services offere! by ba"+s) A#so ba"+s ta+e
a## preca%tio"s i" se#ecti"g the car!ho#!ersF they ge"era##y !o "ot iss%e car!s to a perso"
%"#ess they are satisfie! abo%t the cre!it $orthi"ess of the app#ica"ts)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
+ull Hyo!hesis7 There is "o associatio" bet$ee" the iss%i"g ba"+ a"! the mo"th#y i"come
of the car! ho#!ers)
Ca#c%#ate! Ma#%e X
(()C;E4 Tab#e X
(/)/9E
Conclusion7 The
Chi&s3%are va#%e is
#ess tha" the tab#e
va#%e) The
Hypothesis that there
is "o associatio" bet$ee" the cre!it car! se#ecte! a"! mo"th#y i"come of the car! ho#!er is
tr%e)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
(SS;(+2 BA+@ A+D SA9(+2S 1. CARD H1,DER
SAVINGS
< 10% 10% - 20% 20% - 30% ABOVE 30%
CC#BAN$ SBI 0 3 13 6
HDFC 0 9 18 1
ICICI 0 4 16 1
HSBC 0 6 9 1
OTHERS 0 2 7 4
130
The tab#e sho$s the re#atio"ship bet$ee" ba"+ iss%i"g cre!it car!s a"! savi"gs of the
car!ho#!ers) Savi"gs is sho$" as a perce"tage of the mo"th#y i"come) Appro.imate#y4 the
te"!e"cy of the peop#e is to above somethi"g i" bet$ee" *96 & ,96 of their mo"th#y
i"come) Cre!it car!s "ot o"#y he#p the car!ho#!ers to ac3%ire p%rchasi"g po$er4 b%t a#so he#p
i" rotatio" of f%"!s)
+ull Hyo!hesis7
The iss%i"g ba"+ a"!
mo"th#y savi"gs of the
car!ho#!er are i"!epe"!e"t of
each other)
Ca#c%#ate! Ma#%e' (-)0C04 Tab#e Ma#%e X (/)/9E
Conclusion7 The ca#c%#ate! va#%e of chi&s3%are is #ess tha" the tab#e va#%e4 he"ce it ca" be
i"ferre! that the basis o" $hich the car!ho#!ers se#ects the iss%i"g ba"+ !oes"=t !epe"! o"
their mo"th#y i"come)
CHA+2E (+ B;A(+2 BEHA9(1;R A+D SE: 1. CARD H1,DER
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
GENDER
FEMALE MALE
YES 11 19
NO 13 57
130
This tab#e is !ra$" to sho$ if the cha"ge i" b%yi"g behavio%r of a cre!it car! ho#!er is
associate! $ith se.) Respo"!e"ts $ere as+e! to tic+ either GYesH or G?oH to sho$ if cre!it
car!s have bro%ght a cha"ge i" their b%yi"g patter" a"! the !ata co##ecte! $as tab%#ate!)
Abo%t ,96 of them fee# that cre!it car!s have cha"ge! their b%yi"g behavio%r sig"ifica"t#y)
They go for i"sta"t p%rchases or meet s%!!e" cash shortage $ith the he#p of car!s)
Comparative#y4 ;-6 of fema#es fee# that there is a cha"ge i" their b%yi"g behavio%r)
+ull Hyo!hesis7 The cha"ge i" b%yi"g behavio%r is "ot re#ate! to the se. of the car! ho#!er)
Ca#c%#ate! Ma#%e X ,)EE94 Tab#e Ma#%e X ,);-(
Conclusion7 Si"ce the ca#c%#ate! va#%e is #ess tha" the tab#e va#%e4 the hypothesis that
cha"ges i" b%yi"g behavio%r are "ot re#ate! to the se. of the car! ho#!er is accepte!)
SPE+D(+2 ,(-(T 1+ CRED(T CARD A+D (+C1-E 1. CARD
H1,DER
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
INCOME
RS" 10000 - RS"
15000
RS" 15000 - RS"
20000 ABOVE 20000
< 5000 1 1 1
5000 - 10000 1 6 1
15000 - 25000 6 18 20
ABOVE 25000 2 2 41
130
The above tab#e a"! graph $o%#! he#p %s !ra$ a" i"fere"ce abo%t the re#atio"ship bet$ee"
the average mo"th#y spe"!i"g #imit %si"g cre!it car!s a"! the mo"th#y i"come) The fig%re
says that those $ith i"come #eve# above *9999 pm have bee" avai#e! spe"!i"g #imit above
*/999 to #arge e.te"t) Therefore the !istrib%tio" for this $o%#! be s+e$e!4 i" the se"se that
those $ho have higher i"come $o%#! have higher spe"!i"g #imit)
+ull Hyo!hesis7 The mo"th#y spe"!i"g #imit of the car!ho#!er is "ot re#ate! to the mo"th#y
i"come) Ca#c%#ate! va#%e X ,,)09C4 Tab#e Ma#%e X (*)/C*
Conclusion7 The Ca#c%#ate! va#%e is greater tha" the tab#e va#%e $hich mea"s that the
hypothesis that mo"th#y spe"!i"g #imit of the car!ho#!er is "ot re#ate! to the mo"th#y i"come
is rejecte!)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
P;RP1SE 1. CRED(T CARD A+D A2E 1. CARD H1,DER
AGE
18 - 25 YEARS 25 - 40 YEARS 40 - 60 YEARS
ABOVE 60
YEARS
SHO!!ING
HOTELS
HEALTH
!ETROL !M!
TRAVEL & OTHERS
3 11 10 2
1 8 7 3
1 1 1 1
3 22 18 3
2 1 1 1
130
The tab#e a"! the graph above !etermi"es the re#atio"ship bet$ee" p%rpose for $hich the
cre!it car! is %se! a"! the age of the car! ho#!er) The ear#y "ester&first time %ser4 (; Q -/
years of age4 j%st marrie!4 "e$ to his career4 has greater "ee! for co"s%mer fi"a"ce to b%y
!%rab#es4 c#othes etc) The car!ho#!ers above -9 years are more pr%!e"t a"! ca%tio%s $he"
they p%rchase as they !o"t $a"t to get i" heavy !ebts)
+ull Hyo!hesis7 The p%rpose of cre!it car! %sage !oes"ot !epe"! %po" the age of the car!
ho#!er)
Ca#c%#ate! Ma#%e' (9)C004 Tab#e Ma#%e X *()9*0
Conclusion7 The va#%e of chi&s3a%re is #ess tha" the tab#e va#%e4 the hypoyhesis that there is
"o associatio" bet$ee" the age of the car!ho#!ers a"! the p%rpose for $hich car!s are %se!
ho#!s goo!)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
P;RP1SE 1. CRED(T CARD A+D (+C1-E 1. CARD
H1,DER
INCOME
RS" 10000 - RS"
15000
RS" 15000 - RS"
20000 ABOVE 20000
SHO!!ING
HOTELS
HEALTH
!ETROL !M!
TRAVEL & OTHERS
1 9 16
3 8 8
0 2 2
5 6 35
1 2 2
130
The above tab#e !etermi"es the re#atio"ship bet$ee" the p%rpose for $hich the cre!it car! is
%se! a"! the i"come of the car!ho#!ers) 1f a perso" $a"ts to ma+e p%rchase4 he "ee!s mo"eyF
other$ise he has to postpo"e the p%rchase) >%t cre!it car!s he#p him to p%rchase $hatever he
$a"ts a"! pay #ater)
+ull Hyo!hesis7 The p%rpose for $hich the cre!it car! is %se! is i"!epe"!e"t of the car!
ho#!ers= i"come)
Ca#c%#ate! va#%e X (*)*,C4 Tab#e Ma#%e X (/)/9E
Conclusion7 The va#%e of chi&s3%are is #ess tha" the tab#e va#%e4 he"ce the hypothesis is
accepte!)
MEM>ERSH12 D@RAT1O? A?D OCC@2AT1O? O5 THE CARD HOLDERS
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
OCC!ATION
SELF
EM!LOYED BSINESS
!RIVATE
SECTOR
!ROFESSION
AL
GOVT"
SECTOR
< 2 YEARS 2 0 0 0 0
2 - 4 YEARS 5 1 14 3 3
4 - 6 YEARS 7 10 22 12 8
ABOVE 6 YEARS 0 3 1 6 3
130
The above tab#e sho$s the re#atio"ship bet$ee" the !%ratio" of the membership a"! the
occ%patio" of the car!ho#!er) ?ear#y 096 of them have bee" %si"g the cre!it car! for the
perio! greater tha" - years a"! #ess tha" 0 years)
+ull Hyo!hesis7 There is "o sig"ifica"t !iffere"ce bet$ee" membership !%ratio" a"!
occ%patio" Ma#%e' *E,C4 Tab#e Ma#%e' *()9*0
Conclusion7 The ca#c%#ate! va#%e is greater tha" the tab#e va#%e he"ce the "%## hypothesis is
rejecte!) This mea"s that there is sig"ifica"t re#atio" bet$ee" membership !%ratio" a"! the
occ%patio" of the car!ho#!ers)
CORRELAT1O? A?ALYS1S
GENDER * SPD_LIMIT Cross tabulation
C'()*
S!D#LIMIT
T'*+, < 5000 5000 - 10000 15000 - 25000 ABOVE 25000
GENDER FEMALE 2 5 7 10 24
MALE 1 3 37 35 76
T'*+, 3 8 44 45 100
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
5rom the above $e ca" i"fer that E06 of the respo"!e"ts are ma#e $hich more
tha" *:,
r!
of the samp#e sie) -(6 of the fema#es have cre!it #imit above */4999
$hereas -06 of the ma#es have cre!it #imit above */4999) This is obvio%s as
ma#es have stab#e so%rce of i"come a"! agai" a## the fema#es %si"g cre!it car!
are "ot $or+i"g $ome") Ma"y ho%se$ives %ses cre!it car! $hich are iss%e! at
co"cessio"a# fees a#o"g $ith car! ho#! by the ma#e) Overa## fig%res revea# that
majority of the car!ho#!ers have the cre!it above (/4999)
N. R. INSTITUTE OF BUSINESS MANAGEMENT
BATCH 08-10
130
INCOME * SPD_LIMIT Cross tabulation
C'()*
S!D#LIMIT
T'*+, < 5000 5000 - 10000 15000 - 25000 ABOVE 25000
INCOME RS" 10000 - RS" 15000 1 1 6 2 10
RS" 15000 - RS" 20000 1 6 18 2 27
ABOVE 20000 1 1 20 41 63
T'*+, 3 8 44 45 100
The above tab#e a"! graph c#ear#y sho$s that their !irect corre#atio" bet$ee" the
i"come of the car! ho#!er a"! the spe"!i"g #imit a##o$e! to the car! ho#!er) As
the i"come of the car! ho#!er i"creases the spe"!i"g #imit o" the car! a#so
i"creases) This is obvio%s as ba"+ ca""ot gra"! higher cre!it #imit to those $ho
!oes"=t have repayme"t capacity a"! !oi"g so i"creases the cha"ces of !efa%#t)
5rom the fig%res ca" !erive that more tha" C96 of the cre!it car! ho#!ers have
cre!it #imit above (/4999 a"! a#most C96 of them have i"come above (/4999 per
mo"th)
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OCCUPATION * SPD_LIMIT Cross tabulation
C'()*
S!D#LIMIT
T'*+, < 5000 5000 - 10000 15000 - 25000 ABOVE 25000
OCC!ATION SELF EM!LOYED 1 0 9 4 14
BSINESS 0 2 4 8 14
!RIVATE SECTOR 1 4 22 10 37
!ROFESSIONAL 0 0 5 16 21
GOVT" SECTOR 1 2 4 7 14
T'*+, 3 8 44 45 100
The fig%re gives c#ear i"!icatio" that more tha" /96 of the car!ho#!ers are
sa#arie! c#ass peop#e a"! this category is scattere! over a## the categories of
spe"!i"g #imit i)e) !epe"!i"g o" the sa#ary of the perso" the cre!it is gra"te!)
Ihereas o" the other ha"! the fig%res of the professio"a#s a"! b%si"ess c#ass
peop#e sho$ that they have cre!it #imit above (/4999) This is so beca%se ba"+s
ge"era##y iss%es cre!it car!s to those professio"a#s a"! b%si"ess peop#e $ho are
$e## estab#ishe!)
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CO?S@MER S2E?D1?G >EHAM1O@R ACCORD1?G OCC@2AT1O?
SHO!!ING HOTELS HEALTH
!ETROL
!M!
TRAVEL
&
OTHERS TOTAL
SELF
EM!LOYED
: 9 7 11 9 7>
BSINESS
11 ? 7 @ 9 31
!RIVATE
SECTOR
7: 11 @ 7? 10 81
!ROFESSIONAL
1> 8 9 1? 3 9>
GOVT" SECTOR
@ : 9 @ 9 37
The statistics sho$s that private sector emp#oyees ma+es the most %se of the
cre!it car!) They %se the car! to cover %p the cash shortage at the mo"th e"!)
The t$o mai" p%rpose for $hich the cre!it car! is %se! are for f%e# a"!
shoppi"g) A#most 0,6 of the private sector peop#e %se cre!it car! these t$o
p%rpose) These t$o p%rpose !omi"ate the cre!it car! %sage i" a## categories)
CO?S@MER S2E?D1?G >EHAM1O@R ACCORD1?G 1?COME
SHO!!ING HOTELS HEALTH
!ETROL
!M!
TRAVEL
&
OTHERS TOTAL
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RS"
10000 -
RS"
15000
3 9 1 > 3 18
RS"
15000 -
RS"
20000
73 @ 9 1@ : :1
ABOVE
20000
93 71 1: 93 1: 13@
The respo"!e"ts havi"g i"come of above *9999 are the highest %ser of the cre!it
car!) 1" a## the categories these peop#e !omi"ate the cre!it car! %sage) This is so
beca%se they have higher capacity to repay the cre!it a"! a#so they have higher
cre!it #imit) 1"come gro%p of (/999 to *9999 most#y %se the cre!it car! for
shoppi"g a"! f%e#)
CO?S@MER >@Y1?G 2ATTER? A?D AGE O5 THE CARD HOLDER
SHO!!ING HOTELS HEALTH
!ETROL
!M!
TRAVEL
&
OTHERS TOTAL
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18 - 25
YEARS
9 7 3 8 3 70
25 - 40
YEARS
39 11 8 31 17 @:
40 - 60
YEARS
7? 1: > 7? > 80
ABOVE
60
YEARS : ? 3 ? 3 77
This corre#atio" tab#e sho$s that peop#e fa##i"g i" the age gro%p of */ Q 09 are
the major %ser of the cre!it car! ho#!ers) This c#ass co"stit%te of those $ho are
sett#i"g i" the #ife4 $ho have spe"! for the !omestic "ee!s4 for e!%catio" of the
chi#!re") 1" short $e ca" say that this gro%p have higher ob#igatio") Agai" i" this
%sage patter" the is $i!e#y %se! for shoppi"g a"! f%e# refi##i"g) The %sage of the
peop#e $ithi" */ to 09 years acco%"ts for more tha" ;96 of the car! %sage)
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AGE * SPD_LIMIT Cross tabulation
C'()*
S!D#LIMIT
T'*+, < 5000 5000 - 10000 15000 - 25000 ABOVE 25000
AGE 18 - 25 YEARS 2 2 4 2 10
25 - 40 YEARS 0 3 24 16 43
40 - 60 YEARS 1 2 9 25 37
ABOVE 60 YEARS 0 1 7 2 10
T'*+, 3 8 44 45 100
The pict%re $hich emerges from the above chart is that age gro%p of */ Q -9
years most#y have cre!it #imit of (/4999 to *94999 $hereas age gro%p of -9 &09
years have cre!it #imit of above *94999) The major reaso" for this ca" be the age
gro%p of */ Q -9 years is sti## "ot yet sett#e or "ot as $e## sett#e! as age gro%p of
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-9 &09 years) He"ce ba"+s are more #ibera# o" gra"ti"g cre!it #imit to age gro%p
of -9 Q 09 years tha" to */ Q -9 years of age gro%p)
AGE * SAVINGS Cross tabulation
C'()*
SAVINGS
T'*+, 10% - 20% 20% - 30% ABOVE 30%
AGE 18 - 25 YEARS 4 6 0 10
25 - 40 YEARS 13 30 0 43
40 - 60 YEARS 2 24 11 37
ABOVE 60 YEARS 5 3 2 10
T'*+, 24 63 13 100
The above tab#e sho$ the re#atio"ship bet$ee" the age gro%p a"! the perce"tage
savi"gs of the respo"!e"ts) The tre"! is very c#ear) More tha" 0,6 of the
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respo"!e"ts are savi"g bet$ee" *9 to ,9 6 of their mo"th#y i"come) A"other
tre"! $hich ca" be observe! is that peop#e i" the age gro%p of -9 Q 09 years
saves more tha" other age gro%ps) This is agai" obvio%s as the b%r!e" o" their
sho%#!er is more tha" a"y other) ?o"e of the respo"!e"ts i" the age gro%p of (;
Q -9 years of age are ab#e to save more tha" ,96) The reaso" agai" might be that
they may "ot be $e## sett#e! a"! "ee! to spe"! e.tra bit o" the "ecessities) A#so
this gro%p spe"!s more free#y tha" other age gro%ps)
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CHAPTER C
51?D1?GS A?D
RECOMME?DAT1O?S
-i#di#$s of the Study
The fo##o$i"g are the major fi"!i"gs $ith regar! to the st%!y o" the %sage patter" of the
cre!it car! ho#!ers)
() Most of the respo"!e"ts are ma#e car!ho#!ers4 beca%se they are emp#oye! a"! have a
goo! so%rce of i"come) 7E068
*) Most of the respo"!e"ts are i" the age gro%p */ Q -9 years) The te"!e"cy a"! "ee! to
p%rchase is more at this age) 7-,68
,) Majority of the car!ho#!ers be#o"g to the sa#arie! c#ass of the Gover"me"t a"! 2rivate
Sector4 $he" their sa#ary is e.ha%ste! at the e"! of the mo"th4 the cre!it car! he#ps
them to overcome a temporary cash crisis) 7/(68
-) Respo"!e"ts $ith higher sa#ary %ti#ie the car!s to the ma.im%m $hereas those $ith
#o$er sa#ary are more ca%tio%s)
/) Lo$er the savi"gs4 higher is the re3%ireme"t for the %se of car!s) 2%rchases ca" be
ma!e thro%gh car!s a"! ca" be pai! from "e.t mo"th=s sa#ary beca%se the #imit is -/
!ays for sett#i"g the !%es)
0) Ma#e respo"!e"ts fee# that there is a !efi"ite cha"ge i" their co"s%mptio" behavio%r)
Cre!it car!s ca" be %se! for both perso"a# a"! b%si"ess p%rpose) There is "o "ee! for
postpo"eme"t of p%rchases !%e to cash shortage)
E) Cre!it car!ho#!ers $ith higher i"come fee# that cre!it car!s have cha"ge! their
co"s%mptio" patter") The cre!it car! p%rchase is "ot a#$ays a ratio"a# b%yF some part
of it is a#so imp%#se b%yi"g)
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Co"s%mers are catchi"g o" the co"ve"ie"ce of p#astic) The "%mber of car! ho#!ers
has i"crease! i" the rece"t as it is evi!e"t from the rise i" the "%mber of members i"
t$o years)
C) Sa#esme" of the ba"+s are the mai" so%rce of a$are"ess to the car!ho#!ers)
(9) Master a"! visa car!s are t$o of the #ea!i"g car! bra"!s i" 1"!ia) O"e of the mai"
reaso"s for MasterCar!=s !omi"a"ce is its a!vertisi"g $hich is appropriate#y
J1"!ia"ie!=)
(() HD5C ba"+ car!s are more pop%#ar a"! $i!e#y accepte!) O" the mai" reaso"s for
HD5C !omi"a"ce is its a!vertisi"g) The ba"+ has !o"e rea##y goo! job by attracti"g
the "%mber of c%stomers thro%gh perso"a# co"tacts a"! a!vertiseme"ts) HD5C
provi!e a #ot of a!!itio"a# be"efits #i+e pho"e ba"+i"g4 bo"%s poi"ts a"! i"ter"et
ba"+i"g etc to meet the "ee!s of the !iffere"t c#ass of peop#e)
(*) 1" rece"t years4 the "%mber of member estab#ishme"ts accepti"g cre!it car!s has
i"crease! $hich i"!%ces the c%stomer to avai# the cre!it faci#ity a"! i"crease their
p%rchasi"g po$er)
1t is see" from the fi"!i"g of the st%!y that cre!it car!s are most#y %se! by car!ho#!ers for
p%rchase) He"ce cre!it car!s he#p the co"scio%s co"s%mers of the #argest gro%p of sa#ary
c#ass to e"ha"ce their p%rchasi"g po$er)
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S)GGEST'O/S
Iith the m%#tip#yi"g vo#%mes a"! the co"test for efficie"cy4 mar+eters vie $ith each
other o%t to the e.isti"g a"! pote"tia# car! ho#!ers) A sha+eo%t is i"evitab#e i" this fie#! of
mar+eti"g) The car! iss%ers face ma"y !iffic%#ties a"! the cre!it car! service mar+et a#so
s%ffers from certai" bott#e "ec+s $hich ca" be o%t#i"e! be#o$)
() The ba"+s m%st re!%ce the service charge $hich is to be pai! by the car! ho#!ers
for tic+et boo+i"g4 petro# fi##s a"! certai" estab#ishme"ts that charge * to ,6 o"
the tota# price)
*) Iome" sho%#! be i"!%ce! to %se cre!it car!s by creati"g a$are"ess o" the
be"efits !erive! from them) ?e$ schemes sho%#! be i"tro!%ce! to cater to their
specific "ee!s)
,) The metho!s sho%#! be a!opte! to bri"g !egree of pop%#ariatio" thro%gh mass
me!ia cha""e#s #i+e Te#evisio"4 Ra!io4 Airports Ce"tres4 Star Hote#s4 Rai#$ay
Ce"tres4 a"! S%per Mar+ets etc)
-) C%stomer e!%catio" is "ee!e! for i"crease! a$are"ess4 faci#ity !erive! a"! $ays
to ma+e the best %se of the car!)
/) The cre!it car! ho#!er sho%#! si"cere#y a"! ho"est#y repay the ba#a"ces i" time
a"! faci#itate the system to $or+ o%t smooth#y)
0) The cre!it car!ho#!ers sho%#! p#a" their eco"omic affairs i)e) they sho%#! "ot b%y
%""ecessary or %"$a"te! thi"gs simp#y beca%se they have cre!its $hich !oes "ot
re3%ire imme!iate payme"t) They sho%#! a#$ays thi"+ abo%t the f%t%re
commitme"ts a"! arra"ge f%"!s for i" time)
E) The A!missio" fees a"! re"e$a# fees sho%#! be re!%ce! so that it ca" attract more
c%stomers)
The i"terest charge! by the cre!it car! age"cies is m%ch higher tha" the "orma#
#e"!i"g rates by the ba"+ers a"! it sho%#! be re!%ce!)
C) The o"#y $ay ba"+s are goi"g to s%rvive i" the cre!it car! b%si"ess is by
improvi"g their overa## f%"ctio"i"g a"! i"frastr%ct%ra# systems) This especia##y
tr%e of some "atio"a#ie! ba"+s that !e#ay bi##i"gs !%e to a #ac+ of a!e3%ate
i"formatio"a# systems a"! trai"e! perso"s)
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CHAPTER D
CO?CL@S1O?
The #ibera#iatio" of the eco"omy4 boost to e.ports a"! the i"crease! b%si"ess
trave##i"g a"! spe"!i"g i" 1"!ia favo%r the cre!it car! i"!%stry) The prese"t
e"viro"me"t "ee!s to be matche! by i"crease! a$are"ess abo%t cre!it car!s
amo"g retai#ers a"! sho%#! be foo# proof for preve"ti"g mis%se) Cre!it car!s are
catchi"g %p $ith the mi!!#e c#ass !espite its #ate e"try i" the 1"!ia" mar+et)
They are "o #o"ger a stat%s symbo# as it is o"#y a mo!e of co"ve"ie"ce a"!
i"tegra# part of the b%sy #ife sty#e of the peop#e4 matchi"g $ith the pace of
!eve#opme"t) Cre!it car!s a## set to ma+e a !efi"ite impact o" the b%yi"g
behavio%r of peop#e) 1" prese"t !ays4 the cre!it car! is most#y %se! by %rba"
peop#e b%t it is "ot easi#y avai#ab#e to r%ra# peop#e) He"ce4 a## commercia# ba"+s
sho%#! ta+e "ecessary steps to provi!e cre!it car!s to r%ra# peop#e) 1t #ea!s to
i"creasi"g the perso"a# i"come4 b%si"ess !eve#opme"t of ba"+ as $e## as
eco"omic !eve#opme"t)
5rom the a"a#ysis of the i"!ivi!%a# 3%estio"s $e ca" come to the co"c#%sio" that
most preferre! ba"+ by the cre!it car! ho#!ers is HD5C ba"+ fo##o$e! by 1C1C1
ba"+) MasterCar! is the $i!e#y preferre! car! compa"y) Majority of the
respo"!e"ts approache! $ere %si"g cre!it car! for the perio! of - Q 0 years)
A#most ;96 of the respo"!e"ts are i" the ra"ge of "e%tra# to satisfie! #eve# $ith
their cre!it car! service) Cre!it car!s are $i!e#y %se! by respo"!e"ts for mai"#y
t$o p%rposes vi) 5%e# a"! shoppi"g) Savi"gs as perce"tage of mo"th#y i"come
is #arge#y i" the *96 to ,96)
5rom the a"a#ysis of the i"!ivi!%a# 3%estio"s $e ca" come to the co"c#%sio" that
most preferre! ba"+ by the cre!it car! ho#!ers is HD5C ba"+ fo##o$e! by 1C1C1
ba"+) MasterCar! is the $i!e#y preferre! car! compa"y) Majority of the
respo"!e"ts approache! $ere %si"g cre!it car! for the perio! of - Q 0 years)
A#most ;96 of the respo"!e"ts are i" the ra"ge of "e%tra# to satisfie! #eve# $ith
their cre!it car! service) Cre!it car!s are $i!e#y %se! by respo"!e"ts for mai"#y
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t$o p%rposes vi) 5%e# a"! shoppi"g) Savi"g as perce"tage of mo"th#y i"come is
#arge#y i" the ra"ge of *9
Majority of the "%## hypothesis has bee" accepte! e.cept re#atio"ship bet$ee"
occ%patio" of the car!ho#!er a"! mo"th#y spe"!i"g #imit a"! mo"th#y i"come of
the car!ho#!er) This c#ear#y mea"s that there is "o e.p#icit re#atio"ship bet$ee"
other variab#es other tha" occ%patio" a"! mo"th#y i"come a"! spe"!i"g #imit
mo"th#y i"come of the car! ho#!ers) This is obvio%s as ba"+s !o co"si!er the
occ%patio" a"! the i"come #eve# of the car! ho#!ers $hi#e gra"ti"g the spe"!i"g
#imit for each car! ho#!er)
Corre#atio" a"a#ysis revea#s that the corre#atio" e.ists bet$ee" spe"!i"g #imit
a"! the ge"!er a"! a#so $ith the i"come #eve# of the respo"!e"ts) A#so the %sage
patter" a"! the occ%patio" of the car! ho#!ers are corre#ate! as private are more
i" "ee! of the cre!it at the e"! of the mo"th)
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>1>L1OGRA2HY
() A%s %be# # 7 (CC(8 4 GThe f ai # %r e of compet i t i o" i " t he cr e!i t car !
mar +et s H4 Amer i can Economi c Revi ew4 Mo# ) ;(4 ?o) ( pp) /9& ;(
*) >r i t o D L a"! Har t # eyp 7 (CC/8 GCo"s %mer r at i o"a# i t y a"! Cr e!i t
car !s H4 B o%r "a# of po# i t i ca# eco"omy4 Mo# ) (9,4 pp) -99& -,,
,) Ca# em 2 S a"! Mes t er L B 7 (CC/8 = GCo"s %mer behavi or a"!
s t i c+i "es s of cr e!i t car ! i "t er es t r at es H4 Amer i can Economi c
Revi ew4 Mo# ;/4 ?o) /4 22) (,*E& (,,0
-) >er # i " M a"! Mes t er B 7 *99-8 4 Gcr e!i t car ! r at es a"! co"s %mer
s ear chH4 Revi ew of f i nanci al Economi cs Mo# ) (,4 pp) (EC& (C;
Bo%r"a#s
1C5A1 jo%r"a# of service mar+eti"g) Mo# 0 "o ( *99;
1C5A1 jo%r"a# of service mar+eti"g) Mo# - *99;
1"!ia" jo%r"a# of fi"a"ce Apri# *99C
Iebsites
$$$)R%peeTa#+)i"
$$$)cre!itbhai)com
$$$) a"s $er s ) com
$$$) hs bc) co) i ": *: per s o"a# : cr e!i t & car !s
$$$) i ci ci ba"+) com: pf s %s er : car !s : cr e!i t car !: ccYhome) ht m
$$$) cyber ce# # m%mbai ) com: cyber & cr i mes : cr e!i t & car !& f r a%!
$$$)h!fc)com
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A??ER@RE
!ote
W!= (1! s(u3!&(s o' N. R. I&s((u(! o' Bus&!ss M$&$%!0!&(= 1$)! u&3!"($5!& (1!
p"o*!+( (o s(u34 (1! us$%! p$((!"& o' +"!3( +$"3 1ol3!"s o' A10!3$#$3 +(4.
T1! 3!($ls p"o)3!3 & (1s Au!s(o&&$"! woul3 #! 5!p( +o&;3!&($l $&3 woul3
#! us!3 pu"!l4 'o" (1! $+$3!0+ pu"pos!.
"o you use credit card?
.!s
No
!ame BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB
Sex
M$l!
F!0$l!
#ge
6 18 4!$"s
18 8 7? 4!$"s
7? 8 90 4!$"s
90 8 :0 4!$"s
A#o)! :0 4!$"s
Occupation
S!l' E0plo4!3
Bus&!ss
P")$(! S!+(o"
P"o'!sso&$l
Go)(. S!+(o"
$% Which credit card do you use?
/s$
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M$s(!"C$"3
$0!C
OTHERS
&% Which type of credit card do you use?
Sl)!"
'old
(latinum
Others
)% Which is the issuing bank of credit card?
SBI
H-FC
ICICI
HSBC
O(1!"s Sp!+'4D BBBBBBBBBBBBBBBBBBBBB
*% Since how long you have been using the credit card?
6 7 4!$"s
7 8 9 4!$"s
9- : 4!$"s
A#o)! : 4!$"s
+% How much satisfed you are with your existing credit card?
H%1l4 s$(s;!3
S$(s;!3
N!u("$l
-ss$(s;!3
H%1l4 3ss$(s;!3
,% -rom where did you have the information about the credit
card?
P"&( M!3$
S$l!s P!"so&
F"!&3s
I&(!"&!(
T!l!)so&
.% What is your monthly income?
6 10=000
10=000 8 1?=000
1?=000 8 70=000
A#o)! 70=000
/% What percentage of income do you save monthly?
6 10<
10< - 70<
70< - 30<
A#o)! 30<
0% What is the spending limit of your credit card?
6 ?000
?000 8 1?=000
1?=000 8 7?=000
A#o)! 7?=000
$1% Has credit card brought any changes in your monthly
spending?
.!s
No
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$$% What are the major purposes for which you use credit card?
S1opp&%
Ho(!ls
H!$l(1
P!("ol Pu0p
T"$)!l $&3 o(1!"s
HAP1THES(S 1;TP;T .R1- SPSS S1.T )/.2'3* 3(H *+H,/"
I" T>/ C>:-36(+./ 3*+*:3*:5 :3 3:=):?:5+)* +* *>/ 0"05
,/9/,"
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Notes
O(*-(* C./+*/0 20-M+.-2010 22101154
C'22/)*3
I)-(* D+*+ C143/.345'2-+64D/37*'-4GRAND!RO8EC
T"3+9
A5*:9/ D+*+3/* D+*+S/*1
F:,*/. )/.2'3* 3(H *+H,/"
N. R. INSTITUTE OF BUSINESS MANAGEMENT
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Notes
O(*-(* C./+*/0 20-M+.-2010 22103102
C'22/)*3
I)-(* D+*+ C143/.345'2-+64D/37*'-4GRAND!RO8EC
T"3+9
A5*:9/ D+*+3/* D+*+S/*1
F:,*/. / C>:-36(+./ 3*+*:3*:5 :3 3:=):?:5+)* +* *>/
0"05 ,/9/,"
Notes
O(*-(* C./+*/0 20-M+.-2010 22110126
C'22/)*3
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doc_470984142.doc