Count yourself lucky if you have been able to pay your credit card dues on time in these days of recession and job losses.
While there are no valid excuses for defaulters in the eyes of the card issuers, sometimes situations do get a bit beyond control.
Read what senior executives at leading banks in UAE have to say about the situation.
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The UAE is estimated to have Dh20 billion as outstanding payment on credit cards. Also, about 8-10 per cent of that could be distressed or delinquent, bank officials told Emirates Business.
“We can expect to see ‘distressed debt’ on credit cards of Dh2bn within the country,” officials said on condition of anonymity. The trend, they added, is expected to continue.
“Yes, we will see a rise in defaults. We’ve seen an increase in delinquencies in the past six months and I expect that to continue for another six months,” said Suvo Sarkar, Executive Vice-President and General Manager – Retail Banking at Emirates NBD.
Vimal Kumar, Senior Vice-President and Cards Business Manager, Mashreq, said, “Given the scale of the correction in the financial and real estate sectors, it is natural to expect an escalation in the level of impaired assets in the [credit] card business.
“We estimate that growth in the payment card market will slow down considerably in the next 12-18 months and borrowing levels may be impacted by the liquidity squeeze, correction in the economic environment and related job losses. We believe this is just the beginning of a long journey for organisations to restructure their operating models to survive in this environment,” Kumar said. He added that the penetration of unsecured exposure as a percentage of GDP is still at a fairly low level.
Sarkar said after very strong growth during 2008, the credit card industry has seen a slowdown. “For most banks, card spend would be down 10-15 per cent compared to the last quarter of 2008. Essentially, consumers are being thrifty and spending less and travelling less often,” he said.
Kumar said the large expatriate population adds to the rise in defaults.
Thimal Perera, Regional Head of Cards, HSBC Bank Middle East, added: “In adverse economic conditions, skips [by expatriate workers] rise and so does bad debt – it is cyclical.”
However, Sarkar pointed out that delinquencies do not necessarily translate to bad debts. “While delinquencies have gone up, with increased collection efforts, we are seeing an increased amount of
recoveries,” he said.
“There are customers who want to consolidate their debt and convert it in to longer term installment loans at lower interest rates – and banks are encouraging this. These are challenging times and banks will have to work closely with customers to work for mutual interest,” he said.
Source Courtery: Shuchita Kapur – Business24-7.ae
Posted June 30, 2009 
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