Banks push card offers but debt growth remains tepid

Growth in Sri Lanka’s credit card debt showed signs of slowing in June, rising by just Rs.539 million, compared with a Rs.534 million increase in May, even as the overall consumer spending picked up.

In the six months through June, the total outstanding credit card debt increased by Rs.2,950 million to Rs.160.91 billion, lagging behind the broader expansion in private sector credit.

Data from the Central Bank shows that while the overall private sector lending surged, rising Rs.132.9 billion in May, Rs.221.6 billion in June and Rs.201.5 billion in July, the credit card debt growth has remained muted. In April, the outstanding credit card balances jumped Rs.4,381 million but subsequently slowed sharply over the following two months.

According to analysts, several factors may be constraining growth in card debt. High interest rates on the outstanding balances beyond the due date, currently around 26 percent, remain elevated relative to other lending rates, potentially discouraging reliance on short-term, high-cost credit.

The cardholders may also be managing their payments more prudently, settling the dues on time while taking advantage of the promotional offers, discounts and instalment plans offered by the banks to encourage card use.

Active credit card numbers edged up to 2,075,744 by end-June, a monthly increase of 10,934 cards, with the banks issuing a total of 67,288 new cards over the first half of the year.

Despite these promotional efforts, analysts note that credit card spend is still not a reliable proxy for overall consumer expenditure in Sri Lanka.