Commercial banks are issuing around 36 new credit cards per day, as popularity of plastic money is growing in the country due to gradual hike in number of outlets that accept electronic payment.

Commercial banks issued 13,017 credit cards in the one-year period between June 2016 and June 2017, show the latest data of the Nepal Rastra Bank (NRB). This means 35.7 units of credit cards were issued per day on average in the one-year period. In the one-year period between June 2015 and June 2016, 8,328 credit cards, or average of 22.8 cards per day, were issued.

With the rise in issuance of credit cards, transactions made using the plastic money also went up. Credit card transaction topped Rs876.5 million till June 2017, up 58.2 percent than in June 2016, show the NRB data.

One of the reasons for rise in credit card transaction is entry of new players in credit card business. Since June 2016, nine commercial banks, namely Everest, NIC Asia, Machhapuchchhre, Kumari, Siddhartha, Prime, Prabhu, Century and Sanima, have formally entered the credit card business, NRB data show.

These new entrants recorded credit card transaction of almost Rs196.6 million in the one-year period. Old players in the business, namely Nabil, Nepal Investment, Standard Chartered, Himalayan, Bank of Kathmandu, Laxmi, Global IME, Citizens, NMB and Mega, reported credit card transaction of Rs679.9 million as of June 2017, up 23 percent than in the same period a year ago.

Credit card business is generally considered as “high risk” business, as the credit is extended on the back of personal guarantee. Banks here currently extend credit line largely on the basis of income and repayment capacity of applicants. An individual considered eligible for credit card generally get a minimum credit line of around Rs10,000. 

“Over the years, subscribers of these cards have started paying the instalment on time, which has reduced loan default rate,” said Anil Shah, CEO of Mega Bank. Yet default rate is still higher in credit card business than in other business. “But high service fee, which currently stands at around 2.5 percent per month, generally negates losses incurred from defaults,” Shah said. 

Although credit offered through these cards is expensive, many youths are drawn towards it because more and more commercial outlets have started accepting card payments. Also, schemes tailored for credit card holders to purchase various products, from cell phones and jewellery to overseas vacation trips, on instalment have also prompted many to subscribe to credit cards.

Despite the growing popularity of credit cards, banks like Nepal Bank, Rastriya Banijya, Nepal SBI, Nepal Bangladesh, NCC, Agricultural Development, Sunrise, Janata and Civil are yet to formally enter into this business, NRB data show. Currently, only commercial banks issue credit cards in Nepal