By promoting responsible lending practices and enhancing credit risk management, secured credit cards contribute to a healthier financial ecosystem, says Rakshit Agarwal, Co-founder, Rupicard.
In an interview with MintGenie, Agarwal said that secured credit cards provide a structured solution, requiring collateral like fixed deposits.
In response to the RBI’s recent actions to raise risk weights on personal loans and credit card exposures, secured credit emerges as a crucial component in the financial landscape. With a surge in personal credit witnessed recently, highlighted by increased credit card transactions and loan disbursements, the need for prudence in lending practices is evident.
Secured credit cards provide a structured solution, requiring collateral like fixed deposits (FDs), thereby enhancing the resilience of banks' portfolios against potential defaults. This approach enables banks to extend credit to a broader segment of the population while safeguarding their interests and promoting inclusivity in access to credit.
Moreover, by promoting responsible lending practices and enhancing credit risk management, secured credit cards contribute to a healthier financial ecosystem. They play a pivotal role in reducing the likelihood of defaults and NPA accumulation, aligning with the RBI's objectives of creating a robust banking sector and benefiting both banks and consumers.
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