PNB sells credit card outstandings worth 3% of its card portfolio

Punjab National Bank (PNB) sold non-performing credit card outstandings worth over 3% of its portfolio in the category in September, according to people aware of the development. Outstandings worth Rs 8.77 crore were put on sale out of a total outstanding of Rs 280 crore in the credit card segment.

It could not be immediately ascertained who bought the portfolio and at what price.

In a notice put out in September, PNB had set the reserve price for the non-performing assets (NPAs) on sale at Rs 2.98 crore for an all-cash sale and at `3.51 crore for sales involving security receipts (SRs). These reserve prices imply a haircut in the range of 60-66%.

Credit cards, along with unsecured personal loans, have of late been leading loan growth at banks. Credit-card outstandings for the entire banking sector grew 37.4% between August 18, 2017, and August 31, 2018 to `78,499 crore, according to latest data released by the Reserve Bank of India (RBI).

Concern around the quality of unsecured credit being disbursed by the system has also been rising. A September 25 report by TransUnion Cibil said that while the total number of credit card accounts had grown 24.8% year-on-year to 35.1 million in the June quarter, the serious delinquency rate in the category rose 22 basis points (bps) to 1.73% over the same period. The serious delinquency rate includes accounts where repayments have been due for 90 days or more.

Credit cards are the most concentrated retail credit product, with Tier-1 cities accounting for around 75% of the aggregate balance sheet, TransUnion Cibil observed. The credit bureau attributed the jump in credit card outstandings to the demonetisation exercise of 2016-17. “The significant increase in growth in activity from the first quarter of 2017 onwards indicates that credit cards have been the biggest beneficiaries of the demonetisation exercise. The number of consumers with access to credit cards as well as aggregate balances reached all-time high levels,” it said in the report.

Punjab National Bank