Buy now, pay how? Inside the worrying surge in India’s household debt

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₹51 crore from the previous quarter, while write-offs themselves rose by ₹105 crore over the same period. Abhijit Chakravorty, chief executive of SBI Cards, told analysts in a conference call: “The primary reasons for the increase in credit cost…is that customers obtained multiple trade lines from other lenders after taking a card, and this over-leveraging has impacted their repayment capacity." The credit card business is a tough one and can be highly cyclical. Importantly, the business in general is the canary in a coal mine for economic conditions.

When consumers start to feel the pinch, they typically don’t default on their ‘big-ticket’ loans at first, like home loans or vehicle loans. It’s the smaller-ticket loans, which tend to be not secured by any asset, that they tend to stop paying first. If this happens on a large enough scale, it's worth taking notice.

What Chakravorty said later in the call was worrying. He was asked a question on whether he saw any patterns in customer defaults, or whether defaults were especially strong for specific types of customers or ‘cohorts’ (for example, newer customers versus more established ones who have held an SBI Card for many years). To this, Chakravorty replied: “We find that the delinquency is moving across the segment.

There is still no cohort identifiable. While, if we talk about vintage, we have seen accounts which have been doing well for the last four to five years also suddenly become delinquent. And the behaviour part is very unique.

Once this account becomes delinquent, PDD [past due date], not a single penny comes. And that’s when we go for collection efforts, we largely find that there has been a lifetime event that has happened. That is one.