ICICI on Credit card industry

ICICI Bank was slapped a fine of 55 lakh recently by a consumer court in Delhi. The reason was that the recovery agents of the bank mercilessly beat a person and threw him out of the car. The person sustained multiple fractures and was hospitalized for a long time.

While everyone who has ever held a credit card knows that the companies use force and intimidation to recover money, banks seem to think otherwise. In an interview published in Business Line, ICICI Bank’s Senior General Manager – Customer Service Phone Banking Group, Mr B. Madhivanan, said: “When a customer has skipped a payment (sometimes because of records not being updated), we treat it as a service issue. But when it becomes a question of intent to repay, not capability, we have no option but to hand it over to an agency. I can only say now service is the problem. One or two cases turn negative. We are sorry about it. We condone it. But if you look at the total number of complaints — it is in double digits — compare that with the total base of customers of 25 million. If we take 3 per cent as NPA, then we have about 7.5 lakh customers who have collection issues. I have got only about 50 complaints.”

Clearly, Indian consumer is used to take things lying down. 50 complaints over a base of 9 million seems too low to be true otherwise. Other important implication of this passive attitude of the customer could be high interest rates he is forced to pay. The SGM gave an evasive reply to why interest rates were not coming down in response to stiff competition.

With average spends on credit cards at about Rs 30,000 per annum per card, and the high interest rate charged from the customer as well as the dealers, the credit card industry is obviously sitting on a huge profit even after discounting for NPAs.

Not that the central banker is not aware of the problems. Repeated warnings fro RBI as well as by different courts have resulted in acceptance by the banks that the consumer is lured by false promises. However, Madhivanan cleverly put the blame on the customers, absolving the banks of any violation of ethics: “ We are telling [customers], please understand what you are getting into. Don’t be naïve. As a culture, Indians don’t read — forget the fine print, even the core print. Please understand what you are getting into. In the developed world, education is mandated. We have started that process of trying to educate the customer.”

ref: http://www.thehindubusinessline.com/2007/11/05/stories/2007110550531400.htm