India’s credit card market continues to improve as delinquency rates fall and outstanding balances rise four years after the global recession began to hurt its performance.

According to data from the Credit Information Bureau of India Ltd., the average delinquency rate for India's credit card customers whose accounts were at least 90 days past due fell 120 basis points to 1.62% at the end of the fourth quarter of 2011 from 2.82% a year earlier.

The average outstanding credit card balance for cardholders of foreign banks rose 33.5% to 82,455 rupees (US$1,548 or 1,194 euros) in 2011 from 61,758 rupees in 2008.

Domestic bank cardholders' average balances rose 20.3% to 47,370 rupees from 39,368 rupees during the same time period.

Moreover, the proportion of borrowers with a credit score of more than 800 rose from around 23% in 2008 to over 62% in 2011, the bureau said. The bureau measures consumer credit scores in a range from 300 to 900, with 900 being most creditworthy.

The recent performance is a significant improvement from the aftermath of the 2008 financial crisis, when India’s card issuers experienced massive credit card defaults as a result of the global economic crash and widespread job losses in India.

Since then banks have changed courses, moving from a strategy of aggressive growth through mass card-issuance to a strategy of targeting a more-upscale cardholder base, Mrinalini Manral, a Mumbai-based banking analyst tells PaymentsSource.

Manral points out that the bureau itself, which India established in 2000, is also helping to steady the market.

The bureau has gradually expanded its database to cover more cardholders, who in turn have become savvier about managing their credit history, she says.

“Customers know the importance of having a high credit score and so are less prone to racking up extra cards and card debt,” Manral says. “Banks also issue cards according to the credit score, and so they end up issuing to 800 plus score holders only.”

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