Consider stricter rules on credit card issuance

Published: 2009/08/06

Banks may need to consider more stringent criteria on credit card issuance, says Deputy Finance Minister Datuk Dr Awang Adek Hussin.



This need has risen from concerns on credit card indebtedness, he said during the opening of a focus group discussion for Budget 2010 in Kuala Lumpur yesterday.

Awang Adek said non-performing loans (NPLs) due to credit cards accounted for RM580 million, or 2.3 per cent of total NPLs as at end-April 2009, while bankruptcies due to credit cards were 550 persons, or 4 per cent, of total bankruptcies in 2008.

However, a banking analyst contacted by Business Times said banks have already been implementing more stringent measures in the past year when issuing new credit cards.

"Because the credit card business is a volumes game and a high-margin business, the banks may seem more aggressive now in pushing to recruit new cardholders. However, the approval rate for new cards is low," said an analyst, who declined to be named.



The analyst said banks are more prudent now to ensure that they are taking on new customers that are financially sound.

According to Bank Negara Malaysia June 2009 statistical bulletin data, the number of cards (principal and supplementary) in circulation from January to June 2009 grew by 1.8 per cent compared to 4 per cent for the same period last year.

Meanwhile, another area discussed at the Budget 2010 focus group was on striking a balance between consumers and the banks in terms of bank charges; and the spread between the base lending rate and deposit rates.

Other issues included low market penetration of the life insurance and takaful market, the need to further promote real estate investment trusts, small venture capital fund size and the lack of private pension funds.