Tuesday, June 18, 2024

Latest Posts

Sri Lanka’s credit card usage goes up slightly after a prolonged period

By: Staff Writer

May 21, Colombo (LNW): Sri Lanka’s credit card industry is set to gain momentum gradually as its ceiling rate is due for downward revision as other lending rates descend fast increasingly, Central Bank data showed.  

The e number of new cards issued declines yet the purchase volume and transaction value have slightly increased.

Even though Sri Lanka’s credit card penetration is considered to be fairly sufficient, it is comparatively low to its Southeast Asian counterparts

The credit card activity, which remained lull for a prolonged period, appears to have broken its trend and set off to consumer spending in the period ahead.

The cardholders were seen swiping more frequently for their festive spending and leisure and travelling needs in March this year.

However, users’ inability to manage spending may lead to excessive outstanding balances, prolonged repayment periods, and increased interest payments.

Outstanding credit card balance of the licensed commercial banking sector has little changed in March from February despite an uptick signaling the trend that would follow as the consumers grow more optimistic about the economy. The interest rates have fallen to single digit levels.

The outstanding card balance has crept up by only Rs.62 million in March from its February levels to Rs.148.7 billion, but the first quarter still shows a contraction by Rs.2.7 billion.

While the credit card spend doesn’t show the full picture of consumer spending, the outstanding balance could see tangible movements from the second quarter onwards as people were taking more trips making use of the offers and discounts offered by banks for their credit cards.

Outstanding credit card balance doesn’t necessarily reflect the true consumer spend because there are still only about 1.9 million active cards in Sri Lanka and many still prefer to transact through cash or via digital payments.

And those who do transact via cards in fact settle their accounts within their credit cycle before their balance gets accumulated.

Further, the rate charged on credit cards is also due for an immediate revision downwards from its current 28 percent levels as it doesn’t make sense when the rest of the loan rate has fallen well below 15 percent while the prime rate touched single digits two weeks ago.

Therefore, it is expected that the Central Bank would soon issue instructions for the banks, setting lower ceiling rates for cards unless banks bring their rates down on their own accord.

Meanwhile, the number of cards active remained down by 5,469 in the first three months from the levels of 2023, although the banks together have managed to approve 1,520 new cards in March bringing the new cards portfolio of the banking sector to 1,911,616.

Latest Posts


Don't Miss

Stay in touch

To be updated with all the latest news, offers and special announcements.