Sri Lanka’s outstanding credit card balance slipped in May after rising in April in a sign that people are still reluctant to use credit card debt due to exponentially high rates which are long overdue for correction.
Rate on unpaid card balance still remains around 28, an inexplicable level considering the eased financial conditions
The data for May showed that the outstanding credit card balance has declined by Rs.1,894 million to a total outstanding of Rs.149.7 billion.
In April, this balance rose by a relatively robust Rs.2,891 million as people swiped their cards more often during the month of festivities and extended holidays.
The banks have since ramped up promotional campaigns, offers, discounts and easy payment schemes to persuade their card holders to swipe their cards more often.
Offers on leisure packages, healthcare payments and other big ticket purchases are becoming more ubiquitous by almost all banks and some have even said to cut off their lifetime annual fee to certain groups to lure more customers.
In the first five months, the total outstanding card balance has slipped by Rs.1,687 million.
Although the prime lending rate has come down substantially to around 8 percent levels by the end of last week, the rate on unpaid card balance still remains around 28 percent, an inexplicable level considering the eased financial conditions.
The banks are accused vehemently from all around for cutting the rates only for their big clients but not for the small businesses and others, holding back the potential growth in the economy.
While the consumer demand has certainly picked up from where it was a year ago, it is undermined by still high rates on consumer credit, tight credit conditions and unconscionable levels of taxes.
The business confidence has however risen to over one year levels, reaching 101 index points in June reflecting that the corporates are feeling better on their top and bottom-lines.
However, the lower taxes are required to translate it meaningfully to the consumers who are substantially worse off financially after the hyper-inflationary spiral during 2022 and part of 2023.
