CHAPTER 1

Research Methodology
Objectives of the Project
The primary objective of the report is categorized into following sub-topics:
1.
2.
3.
4.
5.
6.

To study the demographic factors of credit card holders.

To know the using purpose of credit card by the holders.
To assess the behavioural changes of credit card holders.
To examine the consumption pattern of credit card holders.
To find out the satisfaction level of existing credit card holders.
To suggest measures to improve the credit card system in India

Data sources
Primary sources
Primary data has been collected through the structured questionnaire
consisting mainly of the closed ended questions.
Secondary sources
Secondary data has been collected from the internet, journals, reference books
etc.

Scope of the study

All the questions have been analysed by adding up the responses against each
alternative and answers from the various respondents. The collected data has
been subject to statistical analysis to draw inferences and suitable
conclusions. Statistical tools like chi-square and percentage are used. For
calculating the table value for analysis with chi-square, 5% significance level
is used.

RESEARCH METHODOLOGY

The study is based on primary data, which has been collected from the credit
card users with the help of a well drafted and structured questionnaire (see
annexure). For the collection of primary data, we have confined ourselves to
Ahmedabad, India. Our sample consists of a total of 150 respondents. The
respondents are basically credit card users, who have been selected by
following the non-probabilistic sampling, simple purposive sampling and
convenience sampling techniques.
Further, it is essential to mention two things: firstly, in convenience-sampling,
respondents (who were seen using/have possession of credit cards) were
selected because they happened to be in the right place at the right time and
secondly, convenience sampling technique is not recommended for descriptive
or casual research, but they can be used in exploratory research for the
generation of ideas (Malhotra, 2005). The questions inquired the choice of
credit card, and the users were given 28 statements. In addition, the
respondents had to rate the credit cards according to the importance, on the
`five-point Likert scale.

Sampling Plan
Target Population: Credit Card holders
Sample Size: 100 respondents
Sampling technique: Convenience sampling

Beneficiaries
1. Banks
Banks may come to know about the usage pattern of the credit card holders
based on the demographics, purposes and consumption pattern and may aim to
target new customers based on the derived facts.

2. Probable subscribers
New prospects may find it helpful in selecting the credit card company and
the bank issuing the credit based on the satisfaction level of the existing
credit card holders.

3. Researchers
Study gives the researchers the insight about the credit card system prevailing
and the usage pattern and satisfaction level of the existing credit card holders.

Research Design
The research design that has been used is Descriptive Research.
Involves gathering data that describe events and then organizes,
tabulates, depicts, and describes the data.
Uses description as a tool to organize data into patterns that emerge
during analysis.
Often uses visual aids such as graphs and charts to aid the reader
Description Research takes a what if approach
Refers to the nature of the research question
The design of the research
The way that data will be analyzed for the topic that will be researched
There are four methods of data collection under descriptive research. They
are:

Surveys
Interviews
Observations
Portfolios

The methods used for this research would be mainly by the response to the
questionnaire by the credit card holders.

Limitations of the study

1. The study is confined to the city of Ahmedabad only.

2. The respondents were generally co-operative, yet some of them might have
biased their reply for certain sensitive questions
3. The duration of the study is also in accordance with the academic objective of
the course curriculum. So in pursuit of academic exercise, the restriction on
time has also brought into study some limitations.

CHAPTER 2

INTRODUCTION TO BANKING
INDUSTRY
Banking in India originated in the last decades of the 18th century. The oldest
bank in existence in India is the State Bank of India , a government-owned bank
that traces its origins back to June 1806 and that is the largest commercial bank
in the country. Central banking is the responsibility of the Reserve Bank of
India , which in 1935 formally took over these responsibilities from the then
Imperial Bank of India, relegating it to commercial banking functions. After
India's independence in 1947, the Reserve Bank was nationalized and given
broader powers. In 1969 the government nationalized the 14 largest commercial
banks; the government nationalized the six next largest in 1980.
The Indian Banking industry, which is governed by the Banking Regulation Act
of India, 1949 can be broadly classified into two major categories, nonscheduled banks and scheduled banks. Scheduled banks comprise commercial
banks and the co-operative banks. In terms of ownership, commercial banks can
be further grouped into nationalized banks, the State Bank of India and its group
banks, regional rural banks and private sector banks (the old/ new domestic and
foreign). These banks have over 67,000 branches spread across the country.
The first phase of financial reforms resulted in the nationalization of 14 major
banks in 1969 and resulted in a shift from Class banking to Mass banking. This
in turn resulted in a significant growth in the geographical coverage of banks.
Every bank had to earmark a minimum percentage of their loan portfolio to
sectors identified as priority sectors. The manufacturing sector also grew
during the 1970s in protected environs and the banking sector was a critical

source. The next wave of reforms saw the nationalization of 6 more commercial
banks in 1980. Since then the number of scheduled commercial banks increased
four-fold and the number of bank branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector
in the early nineties, the Public Sector Banks (PSB) s found it extremely difficult
to compete with the new private sector banks and the foreign banks. The new
private sector banks first made their appearance after the guidelines permitting
them were issued in January 1993. Eight new private sector banks are presently
in operation. These banks due to their late start have access to state-of-the-art
technology, which in turn helps them to save on manpower costs and provide
better services.
During the year 2000, the State Bank of India (SBI) and its 7 associates
accounted for a 25 percent share in deposits and 28.1 percent share in credit. The
20 nationalized banks accounted for 53.2 percent of the deposits and 47.5
percent of credit during the same period. The share of foreign banks (numbering
42), regional rural banks and other scheduled commercial banks accounted for
5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41
percent, 3.14 percent and 12.85 percent respectively in credit during the year
2000.

Aggregate Performance of the Banking Industry

Aggregate deposits of scheduled commercial banks increased at a compounded
annual average growth rate (CAGR) of 17.8 percent during 1969-99, while bank
credit expanded at a CAGR of 16.3 percent per annum. Banks investments in
government and other approved securities recorded a CAGR of 18.8 percent per
annum during the same period.
In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP)
growth of only 6.0 percent as against the previous years 6.4 percent. The WPI
Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in
FY00. Similarly, money supply (M3) grew by around 16.2 percent as against
14.6 percent a year ago.

The growth in aggregate deposits of the scheduled commercial banks at 15.4

percent in FY01 percent was lower than that of 19.3 percent in the previous year,
while the growth in credit by SCBs slowed down to 15.6 percent in FY01 against
23 percent a year ago.
The industrial slowdown also affected the earnings of listed banks. The net
profits of 20 listed banks dropped by 34.43 percent in the quarter ended March
2001. Net profits grew by 40.75 percent in the first quarter of 2000-2001, but
dropped to 4.56 percent in the fourth quarter of 2000-2001.
On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill
the norms, it was a feat achieved with its own share of difficulties. The CAR,
which at present is 9.0 percent, is likely to be hiked to 12.0 percent by the year
2004 based on the Basle Committee recommendations. Any bank that wishes to
grow its assets needs to also shore up its capital at the same time so that its
capital as a percentage of the risk-weighted assets is maintained at the stipulated
rate. While the IPO route was a much-fancied one in the early 90s, the current
scenario doesnt look too attractive for bank majors.
Consequently, banks have been forced to explore other avenues to shore up their
capital base. While some are wooing foreign partners to add to the capital others
are employing the M& A route. Many are also going in for right issues at prices
considerably lower than the market prices to woo the investors.

Interest Rate Scene

The two years, post the East Asian crises in 1997-98 saw a climb in the global
interest rates. It was only in the latter half of FY01 that the US Fed cut interest
rates. India has however remained more or less insulated. The past 2 years in our
country was characterized by a mounting intention of the Reserve Bank of India
(RBI) to steadily reduce interest rates resulting in a narrowing differential
between global and domestic rates.

The RBI has been affecting bank rate and CRR cuts at regular intervals to
improve liquidity and reduce rates. The only exception was in July 2000 when
the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee
against the dollar. The steady fall in the interest rates resulted in squeezed
margins for the banks in general.

Government initiatives
During 2008-09 (as per data up to November 18, 2008), as per RBI guidelines,
scheduled commercial banks (SCBs) increased their deposit rates for various
maturities by 50-175 basis points. The interest rates range offered by public
sector banks (PSBs) on deposits of maturity of one year to three years increased
to 9.00-10.50 per cent in November 2008 from 8.25-9.25 per cent in March
2008. On the lending side, the benchmark prime lending rates (BPLRs) of PSBs
increased to 13.00-14.75 per cent by November 2008 from 12.25-13.50 per cent
in March 2008. Private sector banks and foreign banks also increased their BPLR
to 13.00-17.75 per cent and 10.00-17.00 per cent from 13.00-16.50 per cent and
10.00-15.50 per cent, respectively, during the same period.
Accordingly, the weighted average BPLR of public sector banks, private sector
banks and foreign banks increased to 13.99 per cent, 16.42 per cent and 14.73
per cent, respectively. The number of automated teller machines (ATMs) has
risen and the usage of ATMs has gone up substantially during the last few years.
Use of other banks ATMs would also not attract any fee except when used for
cash withdrawal for which the maximum charge levied was brought down to US$
.409 per withdrawal by March 31, 2008. Further, all cash withdrawals from all
ATMs would be free with effect from April 1, 2009.

Bank initiatives
Since December 2008, the government has announced series of measures to
augment flow of credits to around US$ 2, 66,274 to SMEs. To improve the flow
of credit to industrial clusters and facilitate their overall development, 15 banks
operating in Orissa including the public sector State Bank of India (SBI) and the

Small Industries Development Bank of India (SIDBI) have adopted 48 clusters

specially in sectors like engineering tools, foundry, handloom, food processing,
weaving, rice mill, cashew processing, pharmaceuticals, bell metals and
carpentry etc.
PSBs are now cashing in the auto loan segment after the exit of private players
owing to the slowdown. Auto loans usually have three components - car loans,
two-wheeler loans and commercial vehicle loans. PSBs are primarily focusing on
car and two-wheeler loans. Prevalent interest rates in the car loan segment now
range between 11 per cent and 12.5 per cent per annum. For instance, according
to the Union Bank of India Chairman and Managing Director, MV Nair, his bank
had recently tied up with Maruti Suzuki India for financing the latter's product
and it has a US$ 163.84 million auto loan portfolio.
The government has told public sector banks (PSBs) to extend credit to fundstarved Indian industry, especially exporters and small and medium sector
enterprises to address their credit needs. SIDBI would be lending US$ 1.33
billion out of US$ 1.47 billion credit from RBI to public sector banks. This is
being provided to the PSBs at 6.5 per cent (SIDBI is getting the credit at 5.5 per
cent) under the condition that the banks will have to lend this credit to the
medium and small-scale industry units at an interest rate of 10 per cent before
March 31, 2010.
According to SBI Chairman, O P Bhatt, contribution of small and medium
enterprises (SMEs) is nearly 40-50 per cent to GDP growth of the nation, and
this sector also accounts for 50 per cent of the industrial output. "Banks could
accrue revenue of over US$ 5.73 billion by encouraging the SMEs," Bhatt said
adding, "SME's sector is to grow fastest in the next five years, with 14 per cent
growth in terms of revenue and 13 per cent in terms of profits." The bank in
order to help units tide over the current downturn, had introduced products like
SME Care specially in Jharkhand, which provides units to access 20 per cent
additional funds over and above their existing overdraft limit. Already, according
to an official, the MSME ministry has proposed to RBI that the sector be given a
mandatory 15 per cent share of the total priority sector lending. The banking

industry is thereby now lending both strength and support in form of cash and
policies majorly in putting back the economy into track.

Recent Banking Development in India

The Indian banking sector has witnessed wide ranging changes under the
influence of the financial sector reforms initiated during the early 1990s. The
approach to such reforms in India has been one of gradual and non-disruptive
progress through a consultative process. The emphasis has been on deregulation
and opening up the banking sector to market forces. The Reserve Bank has been
consistently working towards the establishment of an enabling regulatory
framework with prompt and
Effective supervision as well as the development of technological and
institutional infrastructure.
Persistent efforts have been made towards adoption of international benchmarks
as appropriate to Indian conditions. While certain changes in the legal
infrastructure are yet to be effected, the developments so far have brought the
Indian financial system closer to global standards.
Statutory Pre-emptions
In the pre-reforms phase, the Indian banking system operated with a high level
of statutory preemptions, in the form of both the Cash Reserve Ratio (CRR) and
the Statutory Liquidity Ratio (SLR), reflecting the high level of the countrys
fiscal deficit and its high degree of monetisation. Efforts in the recent period
have been focused on lowering both the CRR and SLR. The statutory minimum
of 25 per cent for the SLR was reached as early as 1997, and while the Reserve
Bank continues to
pursue its medium-term objective of reducing the CRR to the statutory minimum
level of 3.0 per cent, the CRR of the Scheduled Commercial Banks (SCBs) is
currently placed at 5.0 per cent of NDTL (net demand and time liabilities). The
legislative changes proposed by the Government in the Union Budget, 2005-06
to remove the limits on the SLR and CRR are expected to provide freedom to the
Reserve Bank in the conduct of monetary policy and also lend further flexibility
to the banking system in the deployment of resources.

Interest Rate Structure

Deregulation of interest rates has been one of the key features of financial sector
reforms. In recent years, it has improved the competitiveness of the financial
environment and strengthened the transmission mechanism of monetary policy.
Sequencing of interest rate deregulation has also enabled better price discovery
and imparted greater efficiency to the resource allocation process. The process
has been gradual and predicated upon the institution of prudential regulation of
the banking
system, market behaviour, financial opening and, above all, the underlying
macroeconomic conditions.
Interest rates have now been largely deregulated except in the case of: (i)
savings deposit accounts; (ii) non-resident Indian (NRI) deposits; (iii) small
loans up to Rs.2 lakh; and (iv) export credit.
After the interest rate deregulation, banks became free to determine their own
lending interest rates.
As advised by the Indian Banks Association (a self-regulatory organisation for
banks), commercial banks determine their respective BPLRs (benchmark prime
lending rates) taking into consideration:
(i) actual cost of funds; (ii) operating expenses; and (iii) a minimum margin to
cover regulatory requirements of provisioning and capital charge and profit
margin. These factors differ from bank to bank and feed into the determination
of BPLR and spreads of banks. The BPLRs of public sector banks declined to
10.25-11.25 per cent in March 2005 from 10.25-11.50 per cent in March 2004.
With a view to granting operational autonomy to public sector banks, public
ownership in these banks was reduced by allowing them to raise capital from the
equity market of up to 49 per cent of paid-up capital. Competition is being
fostered by permitting new private sector banks, and more liberal entry of
branches of foreign banks, joint-venture banks and insurance companies.
Recently, a roadmap for the
presence of foreign banks in India was released which sets out the process of the
gradual opening-up of the banking sector in a transparent manner. Foreign
investments in the financial sector in the form 238 BIS Papers No 28 of Foreign

Direct Investment (FDI) as well as portfolio investment have been permitted.

Furthermore, banks have been allowed to diversify product portfolio and
business activities. The share of public sector banks in the banking business is
going down, particularly in metropolitan areas. Some diversification of
ownership in select public sector banks has helped further the move towards
autonomy

and thus

provided

some

response

to

competitive

pressures.

Transparency and disclosure standards have been enhanced to meet international

standards in an ongoing manner.
Prudential Regulation
Prudential norms related to risk-weighted capital adequacy requirements,
accounting, income recognition, provisioning and exposure were introduced in
1992 and gradually these norms have been brought up to international standards.
Other initiatives in the area of strengthening prudential norms include measures
to strengthen risk management through recognition of different components of
risk,
assignment of risk-weights to various asset classes, norms on connected lending
and risk concentration, application of the mark-to-market principle for
investment portfolios and limits on deployment of funds in sensitive activities.
Keeping in view the Reserve Banks goal to achieve consistency and harmony
with international standards and our approach to adopt these standards at a pace
appropriate to our context, it has been decided to migrate to Basel II. Banks are
required to maintain a minimum CRAR (capital to risk weighted assets ratio) of
9 per cent on an ongoing basis. The capital requirements are uniformly applied
to all banks, including foreign banks operating in India, by way of prudential
guidelines on capital adequacy. Commercial banks in India will start
implementing Basel II with effect from March 31, 2007. They will initially adopt
the Standardised Approach for credit risk and the Basic Indicator Approach for
operational risk. After adequate skills have been developed, at both bank and
supervisory level, some banks may be allowed to migrate to the Internal RatingsBased (IRB) Approach. Banks have also been advised to formulate and
operationalise the Capital Adequacy Assessment Process (CAAP) as required
under Pillar II of the New Framework.

Some of the other regulatory initiatives relevant to Basel II that have been
implemented by the Reserve Bank are:
Ensuring that banks have a suitable risk management framework oriented
towards their requirements and dictated by the size and complexity of their
business, risk philosophy, market perceptions and expected level of capital.
Introducing Risk-Based Supervision (RBS) in select banks on a pilot basis.
Encouraging banks to formalise their CAAP in alignment with their business
plan and performance budgeting system. This, together with the adoption of
RBS, should aid in fulfilling the Pillar II requirements under Basel II.
Expanding the area of disclosures (Pillar III) so as to achieve greater
transparency regarding the financial position and risk profile of banks.
Building capacity to ensure the regulators ability to identify eligible banks and
permit them to adopt IRB/Advanced Measurement approaches.
With a view to ensuring migration to Basel II in a non-disruptive manner, a
consultative and participative approach has been adopted for both designing and
implementing the New Framework. A Steering Committee comprising senior
officials from 14 banks (public, private and foreign) with representation from the
Indian Banks Association and the Reserve Bank has been constituted. On the
basis of recommendations of the Steering Committee, draft guidelines on
implementation of the New Capital Adequacy Framework have been issued to
banks.
In order to assess the impact of Basel II adoption in various jurisdictions and recalibrate the proposals, the BCBS is currently undertaking the Fifth Quantitative
Impact Study (QIS 5). India will be participating in the study, and has selected
11 banks which form a representative sample for this purpose. These banks
account for 51.20 per cent of market share in terms of assets. They have been
advised to familiarise themselves with the QIS 5 requirements to enable them to
participate in the exercise effectively. The Reserve Bank is currently focusing on
the issue of recognition of the external rating agencies for use in the
Standardised Approach for credit risk.
As

well-established

risk

management

system

is

pre-requisite

for

implementation of advanced approaches under the New Capital Adequacy

Framework, banks were required to examine the various options available under

the Framework and draw up a roadmap for migration to Basel II. The feedback
received from banks suggests that a few may be keen on implementing the
advanced approaches. However, not all are fully equipped to do so straightaway
and are, therefore, looking to migrate to the advanced approaches at a later date.
Basel II provides that banks should be allowed to adopt/migrate to advanced
approaches only with the specific approval of the supervisor, after ensuring that
they satisfy the minimum requirements specified in the Framework, not only at
the time of adoption/migration, but on a continuing basis. Hence, banks desirous
of adopting the advanced approaches must perform a stringent assessment of
their compliance with the minimum requirements before they shift gears to
migrate to these approaches. In this context, current non-availability of
acceptable and qualitative historical data relevant to internal credit risk ratings
and operational risk losses, along with the related costs involved in building up
and maintaining the requisite database, is expected to influence the pace of
migration to the advanced approaches available under Basel II.
Exposure Norms
The Reserve Bank has prescribed regulatory limits on banks exposure to
individual and group borrowers to avoid concentration of credit, and has advised
banks to fix limits on their exposure to specific industries or sectors (real estate)
to ensure better risk management. In addition, banks are also required to observe
certain statutory and regulatory limits in respect of their exposures to capital
markets.
Asset-Liability Management
In view of the growing need for banks to be able to identify, measure, monitor
and control risks, appropriate risk management guidelines have been issued from
time to time by the Reserve Bank, including guidelines on Asset-Liability
Management (ALM). These guidelines are intended to serve as a benchmark for
banks to establish an integrated risk management system. However, banks can
also develop their own systems compatible with type and size of operations as
well as risk perception and
put in place a proper system for covering the existing deficiencies and the
requisite upgrading. Detailed guidelines on the management of credit risk,

market risk, operational risk, etc. have also been issued to banks by the Reserve
Bank.
The progress made by the banks is monitored on a quarterly basis. With regard to
risk management techniques, banks are at different stages of drawing up a
comprehensive credit rating system, undertaking a credit risk assessment on a
half yearly basis, pricing loans on the basis of risk rating, adopting the RiskAdjusted Return on Capital (RAROC) framework of pricing, etc. Some banks
stipulate a quantitative ceiling on aggregate exposures in specified risk
categories, analyse rating-wise distribution of borrowers in various industries,
etc.
In respect of market risk, almost all banks have an Asset-Liability Management
Committee. They have articulated market risk management policies and
procedures, and have undertaken studies of behavioural maturity patterns of
various components of on-/off-balance sheet items.
NPL Management
Banks have been provided with a menu of options for disposal/recovery of NPLs
(non-performing

loans).

Banks

resolve/recover

their

NPLs

through

compromise/one time settlement, filing of suits, Debt Recovery Tribunals, the

Lok Adalat (peoples court) forum, Corporate Debt Restructuring (CDR), sale to
securitisation/reconstruction companies and other banks or to non-banking
finance companies (NBFCs). The promulgation of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest
(SARFAESI) Act, 2002 and its subsequent amendment have strengthened the
position of creditors. Another significant measure has been the setting-up of the
240 BIS Papers No 28 Credit Information Bureau for information sharing on
defaulters and other borrowers. The role of Credit Information Bureau of India
Ltd. (CIBIL) in improving the quality of credit analysis by financial institutions
and banks need hardly be overemphasised. With the enactment of the Credit
Information Companies (Regulation) Act, 2005, the legal framework has been
put in place to facilitate the full fledged operationalisation of CIBIL and the
introduction of other credit bureaus.

Board for Financial Supervision (BFS)

An independent Board for Financial Supervision (BFS) under the aegis of the
Reserve Bank has been established as the apex supervisory authority for
commercial banks, financial institutions, urban banks and NBFCs. Consistent
with international practice, the Boards focus is on offsite and on-site inspections
and on banks internal control systems. Offsite surveillance has been
strengthened through control returns. The role of statutory auditors has been
emphasised with increased internal control through strengthening of the internal
audit function. Significant progress has been made in implementation of the
Core Principles for Effective Banking Supervision. The supervisory rating
system under CAMELS has been established, coupled with a move towards riskbased supervision.
Consolidated supervision of financial conglomerates has since been introduced
with bi-annual discussions with the financial conglomerates. There have also
been initiatives aimed at strengthening corporate governance through enhanced
due diligence on important shareholders, and fit and proper tests for directors.
A scheme of Prompt Corrective Action (PCA) is in place for attending to banks
showing steady deterioration in financial health. Three financial indicators, viz.
capital to risk-weighted assets ratio (CRAR), net non-performing assets (net
NPA) and Return on Assets (RoA) have been identified with specific threshold
limits. When the indicators fall below the threshold level (CRAR, RoA) or go
above it (net NPAs), the PCA scheme envisages certain structured/discretionary
actions to be taken by the regulator.
The structured actions in the case of CRAR falling below the trigger point may
include, among other things, submission and implementation of a capital
restoration plan, restriction on expansion of risk weighted assets, restriction on
entering into new lines of business, reducing/skipping dividend payments, and
requirement for recapitalisation. The structured actions in the case of RoA
falling below the trigger level may include, among other things, restriction on
accessing/renewing costly deposits and CDs, a requirement to take steps to
increase fee-based income and to contain administrative expenses, not to enter
new lines of business, imposition of restrictions on borrowings from the
interbank market, etc.

In the case of increasing net NPAs, structured actions will include, among other
things, undertaking a special drive to reduce the stock of NPAs and containing
the generation of fresh NPAs, reviewing the loan policy of the bank, taking steps
to upgrade credit appraisal skills and systems and to strengthen follow-up of
advances, including a loan review mechanism for large loans, following up suit
filed/ decreed debts effectively, putting in place proper credit risk management
policies/processes/procedures/prudential limits, reducing loan concentration, etc.
Discretionary action may include restrictions on capital expenditure, expansion
in staff, and increase of stake in subsidiaries. The Reserve Bank/Government
may take steps to change promoters/ ownership and may even take steps to
merge/amalgamate/liquidate the bank or impose a moratorium on it if its position
does not improve within an agreed period.
Technological Infrastructure
In recent years, the Reserve Bank has endeavoured to improve the efficiency of
the financial system by ensuring the presence of a safe, secure and effective
payment and settlement system. In the process, apart from performing regulatory
and oversight functions the Reserve Bank has also played an important role in
promoting the systems functionality and modernisation on an ongoing basis.
The

consolidation

of

the

existing

payment

systems

revolves

around

strengthening computerised cheque clearing, and expanding the reach of

Electronic Clearing Services (ECS) and Electronic Funds.
Transfer (EFT). The critical elements of the developmental strategy are the
opening of new clearing houses, interconnection of clearing houses through the
Indian Financial Network (INFINET) and the development of a Real-Time Gross
Settlement (RTGS) System, a Centralised Funds Management System (CFMS), a
Negotiated Dealing System (NDS) and the Structured Financial Messaging
System (SFMS). Similarly, integration of the various payment products with the
systems of individual banks has been another thrust area.
An Assessment
These reform measures have had a major impact on the overall efficiency and
stability of the banking system in India. The dependence of the Indian banking
system on volatile liabilities to finance its assets is quite limited, with the

funding volatility ratio at -0.17 per cent as compared with a global range of
-0.17 to 0.11 per cent. The overall capital adequacy ratio of banks at end-March
2005 was 12.8 per cent as against the regulatory requirement of 9 per cent which
itself is higher than the Basel norm of 8 per cent. The capital adequacy ratio was
broadly comparable with the global range. There has been a marked
improvement in asset quality with the percentage of gross NPAs to gross
advances for the banking system declining from 14.4 per cent in 1998 to 5.2 per
cent in 2005. Globally, the NPL ratio varies widely from a low of 0.3 per cent to
3.0 per cent in developed economies, to over 10.0 per cent in several Latin
American economies. The reform measures have also resulted in an improvement
in the profitability of banks. RoA rose from 0.4 per cent in the year 1991-92 to
0.9 per cent in 2004-05. Considering that, globally, RoA was in the range -1.2 to
6.2 per cent for 2004, Indian banks are well placed. The banking sector reforms
have also emphasised the need to review manpower resources and rationalise
requirements by drawing up a realistic plan so as to reduce operating cost and
improve profitability. The cost to income ratio of 0.5 per cent for Indian banks
compares favourably with the global range of 0.46 per cent to 0.68 per cent and
vis-a-vis 0.48 per cent to 1.16 per cent for the worlds largest banks. In recent
years, the Indian economy has been undergoing a phase of high growth coupled
with internal and external stability characterised by price stability, fiscal
consolidation, overall balance of payments alignment, improvement in the
performance of financial institutions and stable financial market conditions and
the service sector taking an increasing share, enhanced competitiveness,
increased emphasis on infrastructure, improved market microstructure, an
enabling legislative environment and significant capital inflows. This has
provided the backdrop for a more sustained development of financial markets
and reform.

CHAPTER 3

INTRODUCTION TO CREDIT CARD

INDUSTRY
History
Our society was once upon a time functioning without money; it is again likely to
become moneyless. While ancient society was confronted with the problems of adjusting
mutually satisfactory rates and basis of exchange, future society, with the help of
computers, electronics and telecommunications, credit cards, telephone and other modern
means of communications, would settle financial transactions instantly. Money as a
medium of exchange will serve its function. The difference will be that in future coins,
currency notes, cheques, etc., will be dispensed with in favour of records. India has
entered the stage of credit card system and credit cards are gaining increasing relevance
to facilitate industrial, commercial and agricultural transactions.
Credit was first used in Assyria, Babylon and Egypt 3,000 years ago. The Bill of
Exchange the forerunner of bank notes - was established in the 14th century. Debts
settled by one-third cash and two-thirds bill of exchange paper money followed only in
the 17th century. The first advertisement for credit was placed in 1730 by Christopher
Thornton who offered furniture that could be paid off weekly.
From the 18th century until the early part of the 20th, tallymen sold clothes in return for
small weekly payments; they were called tallymen because they kept a record of tally
of what people had brought on a wooden stick. One side of the stick was marked with
notches to represent the amount of debt and the other side was a record of payments. In
the 1920s shoppers plate buy now, pay later system was introduced in USA. It
could only be used in shops which issued it.
The credit card was the successor of a variety of merchant credit schemes. It was first
used in the 1920s, in the United States, specifically to sell fuel to a growing number of
automobile owners. In 1938 several companies started to accept each other's cards. The

concept of paying merchants using a card was invented in 1950 by Ralph Schneider and
Frank X. McNamara in order to consolidate multiple cards. The Diners Club, which was
created partially through a merger with Dine and Sign, produced the first "general
purpose" charge card, which is similar but required the entire bill to be paid with each
statement; it was followed shortly thereafter by American Express and Carte Blanche.
Western Union had begun issuing charge cards to its frequent customers in 1914.
Bank of America created the BankAmericard in 1958, a product which eventually
evolved into the Visa system ("Chargex" also became Visa). MasterCard came to being
in 1966 when a group of credit-issuing banks established Master Charge. The fractured
nature of the US banking system meant that credit cards became an effective way for
those who were travelling around the country to move their credit to places where they
could not directly use their banking facilities. In 1966 Barclaycard in the UK launched
the first credit card outside of the US.
There are now countless variations on the basic concept of revolving credit for
individuals (as issued by banks and honored by a network of financial institutions),
including organization-branded credit cards, corporate-user credit cards, store cards and
so on.
In contrast, although having reached very high adoption levels in the US, Canada and the
UK, it is important to note that many cultures were much more cash-oriented in the latter
half of the twentieth century, or had developed alternative forms of cash-less payments,
like Carte bleue, or the EC-card (Germany, France, Switzerland, among many others). In
these places, the take-up of credit cards was initially much slower. It took until the 1990s
to reach anything like the percentage market-penetration levels achieved in the US,
Canada or UK. In many countries acceptance still remains poor as the use of a credit card
system depends on the banking system being perceived as reliable.
In contrast, because of the legislative framework surrounding banking system overdrafts,
some countries, France in particular, were much faster to develop and adopt chip-based
credit cards which are now seen as major anti-fraud credit devices.

The design of the credit card itself has become a major selling point in recent years. The
value of the card to the issuer being related to the Customer's usage of the card. This has
led to the rise of Co-Brand and Affinity cards - where the cards design is related to the
"affinity" (a university, for example) leading to higher card usage. In most cases a
percentage of the value of the card is returned to the affinity group.

Concept of credit card

Progress in civilization in its turn has brought out radical changes in the manner of
trading. The need for something intrinsically useful and easily applicable in everyday
dealing is clearly felt. Cash in the form of currency notes and coins makes up just one
form of the payment system. Development in banking while also giving inputs to the
further development of cash brought about a second phase in payment namely paper
instructions such as cheques and credit transfers. The requirement for greater flexibility
and convenience has led to electronic payments, and this is where plastic cards have
proved their worth. It allows the card issuers to limit the sum of money the card-holders
wish to spend. The spending of card-holders who have defaulted on payments or who are
over their credit limit can be restricted until the balances are cleared.

Definition of credit card

A credit card is a credit-token within the meaning of section 14(1), Consumer Credit Act
1974 of the UK which defines a credit-token as a card, cheque, voucher, coupon, stamp,
form booklet or other document or thing given to an individual by a person carrying on a
consumer credit business, who undertakes:- that on the production of it (whether or not
some other action is also required), he will supply, cash, goods and services (or any of
them) on credit, or that were, on the production of it to third party (whether or not any
other action is also required), the third party supplies cash, goods and services (whether
or not deducting any discount or commission), in return for payment to him by the
individual.
In very simple words credit card can be termed as an unsecured personal loan offered to
customers by the banks where the card-holder could purchase goods and services from
authorized merchant or merchant establishments (MEs) of the bank up to a fixed limit on
credit. Such credit is normally made available for a period of 30 to 45 days. This is turn

helps earn income by way of commission from its merchant establishments; the scheme
provided large scope for sale and increased turnover with assured and prompt payment.
In 1951, the Franklin National Bank in New York issued the first modern credit card.
Unsolicited credit cards were sent to prospective card-holders who were not subject to
credit screening prior to being sent a card. Merchants signed agreements to accept the
cards. When a purchase was made, the card-holder presented the card to the merchant,
who would copy the information on the merchants account at Franklin Bank in the
amount of the transactions, less the discount rate. If a purchase exceeded the merchants
floor limit, the merchant was required to call the bank for approval. Franklin National
Banks Credit Card programme was copied by hundreds of other banks in the late 1950s
and early 1960s.
The Bank of America issued Bank Americard in 1958 and eight years later, in 1966, the
banks comprising the Western State Bank Card Association issued the Master Charge
Card. Bank America and Master charge card became the focal points for the eventual
groupings of all bank cards throughout the world. The VISA and the MASTER the
largest credit cards today appeared in market in 1966. These two international cards are
very popular and are accepted and honored all over the world in 170 countries. These
two independent card companies led to latest innovations in the credit card business.
Now the credit card system has become universally popular throughout the world
including the Communist countries. At the end of 1995 and 1980 a million cards were
used in the world. The total number of credit card users in India is currently in excess of
80 lakh and now more than 30 banks are chasing customers with their cards.
A credit card allows consumers to purchase products or services without cash and to pay
for them at a later date. To qualify for this type of credit, the consumer must open an
account with a bank or company, which sponsors a card. They then receive a line of
credit with a specified dollar amount. They can use the card to make purchases from
participating merchants until they reach this credit limit. Every month the sponsor
provides a bill, which tallies the card activity during the previous 30 days. Depending on
the terms of the card, the customer may pay interest charges on the amount that they do
not pay for on a monthly basis. Also, credit cards may be sponsored by large retailers

(such as major clothing or department stores) or by banks or corporations (like VISA or

American Express).
Credits cards are a relatively recent development. The VISA Company, for example,
traces its history back to 1958 when the Bank of America began its BankAmerica
program. In the mid-1960s, the Bank of America began to license banks in the United
States the rights to issue its special BankAmericards. In 1977 the name Visa was adopted
internationally to cover all these cards. VISA became the first credit card to be
recognized worldwide.
The banks and companies that sponsor credit cards profit in three ways. Primarily they
make money from the interest payments charged on the unpaid balance, but they also can
make money by charging an annual fee for the use of the card. The income from this fee,
which is typically only $50 or $75 per customer per year, can be substantial considering
that the larger companies have tens of millions of customers. In addition, the sponsors
make money by charging merchants a small percentage of income for the service of the
card. This arrangement is acceptable to the merchants because they can let their
customers pay by credit card instead of requiring cash. The merchant makes
arrangements to participate in a credit card program with a merchant bank, which in turn
works with a card-issuing bank. The merchant bank determines what percentage of the
total purchase value has to be paid by the merchant to the card-issuing bank. The amount
varies depending on the volume and type of business, but in general it is between 1-2%.
A percentage of that amount is kept by the merchant bank as a transaction-processing
fee. For companies like American Express which sponsor cards, the processing fee may
be significantly higher. Furthermore, sponsors may generate income by leasing credit
card verification equipment to merchants (especially if the merchants cannot afford to
purchase the equipment themselves.) Finally, sponsors may profit by charging service
fees for late payments

CREDIT CARDS IN INDIA

Credit card or the plastic money, as it is popularly referred to, was slow to enter the
Indian market because of the high sentimental value that Indian consumers attach to hard
cash. Prevalence of small value transaction, credit shy culture and inadequate banking
habits of the population were other hindrances.
Credit cards arrived in India about two decades ago. In the early stages its growth was
very slow in terms of number and value. Even the number of players was limited and
mainly foreign banks like HSBC, Citibank and Standard Chartered Bank dominated the
market. Indian banks did not show much interest in the product in the initial stages. This
is evident from the fact that it took State Bank of India (SBI), Indias largest bank, almost
a decade to begin dealing in credit cards. SBI, despite its widespread reach, has
aggressively started promoting credit cards only three years ago.
However, in the recent past the scenario has changed dramatically. The number of
nationalized and private banks issuing credit cards has increased significantly. Credit
cards are now not only integral parts of the consumers life in metros, but even residents
of smaller cities and towns have taken to them. This can be attributed to the aggressive
strategy of nationalized and private banks to promote card products in smaller town and
cities. These banks have far wider reach and depth in smaller cities and town as
compared to foreign banks. They have capitalized on this advantage to play a major role
in expanding the credit card base in terms of number and usage in smaller cities and
town.
Transactions using plastic money involve the payment of a small fee to the issuing bank
in the form of an application/joining fee and an annual fee. Consumers collect a
percentage-based commission in the form of reward points for card usage at
shops/establishments. The usage of credit card is very simple and easy. The consumers
do not have to carry cash and can use the card to pay their shopping/restaurant bills. All
you are required to do is give your credit card at the payment counter, the person

handling the counter swipes the card into the system to check the details of the card and
you need to sign on the bill. The payment is done electronically. With only a signature
your payment is taken care of. Isnt it very simple?
Yes it is, but everyone isnt eligible for a credit card. There are certain requirements,
varying across banks, to get a credit card. Typically credit card companies (or issuing
banks, as they are known) require the applicant to have a minimum income level before
he can apply for the card. Proof of income is given by way of documents. These
documents could be a copy of tax return filed; salary slips if applicable, balance sheet
and profit and loss account detail if you are self-employed. These serve as the starting
point while applying for a card. The minimum income level varies from bank to bank
and fluctuates between Rs 60,000 - 150,000 per annum depending upon your risk profile
and the type of card. This requirement helps the issuing bank to assess whether or not
you will be able to repay the expenses incurred through your credit card. In addition to
income eligibility, you need to be at least 21 years of age (maximum 65 years).
There is no doubt that credit cards are very convenient, especially in case of daily
expenses. In addition you earn bonus points while you spend via the card. It is because of
these reasons that in the recent past card usage has increased dramatically. In fact, plastic
currency has almost wiped off hard currency from the US, resulting in far less
expenditure associated with cash transactions.
Currently, four major bishops are ruling the card empire - Citibank, Standard Chartered
Bank, HSBC and State Bank of India (SBI). The industry, which is catering to over 3.8
million1 card users, is expected to double by the fiscal 2003. According to a study
conducted by State Bank of India, Citibank is the dominant player, having issued 1.5
million cards so far. Standard Chartered Bank follows way behind with 0.67 million,
while Hongkong Bank has 0.3 million credit card customers. Among the nationalized
banks, SBI tops the list with 0.28 million cards, followed by Bank of Baroda at 0.22
million.
The credit card market in India, which started out in 1981, is on the verge of an
unprecedented boom. Between 1987 and 2000, the market has virtually grown to over
3.8 million cards with almost 25-30 per cent growth in new card-holders.

India is generating more credit card spenders than spending places. While card-base and
appends are growing at a spiffy 25-30 per cent2 annually, the number of merchant
establishments which accept cards is growing selectively sluggish. The figure was put at
75,00080,000 a couple of years ago, and now stands at 100,000 on both the Visa and
MasterCard loops. As opposed to that, there are 2.5 million card-holders and 3.3 million
cards (some, obviously, have more than one) and the numbers are growing very strongly.
The seven million Indian credit card industry has been growing over 25 per cent3
annually and has now more than 30 banks chasing customers with their cards. Still, credit
cards in India have made business sense only to a few.
The annual growth rate is good, but it is only 20 per cent of the card base, that is
generating revenue, says Roopan Asthana, manager, Card Products Division of HSBC.
Nearly 45-50 per cent of the card-holders are estimated to be inactive, while another 30
per cent use the card as a charge card without using the revolving facility cards are
expected to account for 33 per cent of all purchases by 2000 and 43 per cent by 2005.
The credit card embodies two essential aspects of the basic banking function - the
transmission of payments and the granting of credit. Therefore, in its true sense, a credit
card must offer the opinion of revolving credit. This is very akin to the overdraft facility
offered by banks to their account holders. A credit card holder does not necessarily have
to settle his entire account at the end of the month for he has the option to make partial
payment in subsequent months. In fact, when the card-holder makes the full payment at
the end of the month he is said to be using his credit card as a charge card. Incidentally,
the interest paid by the card-holder on the credit utilized by him is what makes the
business of credit cards profitable from the point of view of the bank issuing the card.
Indians are still not sure of the plastic money. Credit cards spend as a proportion of the
total expenditure by Indians is one of the lowest in the world. While Indians swiped
plastic money worth $6 billion in 2006, credit card users in Korea cumulatively spent
$136 billion.

Indians spend just 1% of their total purchases through credit cards while the Koreans
make one-fifth of their total purchases through credit cards. The world average hovers
around 9%.
The very low levels of penetration in India offer immense potential for credit card
companies. Also, there are fewer credit card companies than those in other parts of the
world. The high growth in spending is attracting a lot of entrants into the segment. What
is drawing a large number of companies and financial institutions including Life
Insurance Corporation of India (LIC) to India is the 61% year-on-year growth being
witnessed in retail spending, the highest in the world.
Interestingly, even among the rich, credit card ownership in India is the lowest in the
world. While 90% of the affluent in Hong Kong have credit cards and the corresponding
figure for Sydney stands at 87%, in India, only 28% of the affluent have credit card.
Manila, Jakarta, Taipei , Hong Kong have 48-76% of the affluent population owning
credit cards, according to Visa research in Asia. Seoul has 84% of its affluent population
owning a credit card. Korea, however, has a history of defaults on credit cards where the
government had to bail out the credit card companies.
Sources in the industry say with such low penetration levels there are at least half a
dozen companies that are looking to roll out credit card operations in India. AIG,
Barclays, and LIC are some of the companies eager to enter the Indian market. Punjab
National Bank (PNB) is also learnt to be in negotiations to launch another credit card.

Credit Card Operations of banks- Guidelines Dated

21st Nov 2005
Pursuant to the announcement made in the Annual Policy Statement 2004-05, the
Reserve Bank of India had constituted a Working Group on Regulatory Mechanism for
Cards. The Group has suggested various regulatory measures aimed at encouraging
growth of credit cards in a safe, secure and efficient manner as well as to ensure that the
rules, regulations, standards and practices of the card issuing banks are in alignment with
the best customer practices. The following guidelines on credit card operations of banks
have been framed based on the recommendations of the Group as also the feedback
received from the members of the public, card issuing banks and others. All the credit
card issuing banks / NBFCs should implement these guidelines immediately.
Each bank / NBFC must have a well documented policy and a Fair Practices Code for
credit card operations. In March 2005, the IBA released a Fair Practices Code for credit
card operations which could be adopted by banks / NBFCs. The bank / NBFC's Fair
Practice Code should, at a minimum, incorporate the relevant guidelines contained in this
circular. Banks / NBFCs should widely disseminate the contents thereof including
through their websites, at the latest by November 30, 2005.

Guidelines for Implementation

Issue of cards
a.

Banks / NBFCs should independently assess the credit risk while issuing cards to
persons, especially to students and others with no independent financial means. Add-on
cards i.e. those that are subsidiary to the principal card, may be issued with the clear
understanding that the liability will be that of the principal cardholder.

b. As holding several credit cards enhances the total credit available to any consumer,
banks / NBFCs should assess the credit limit for a credit card customer having regard to

the limits enjoyed by the cardholder from other banks on the basis of self declaration/
credit information.
c. The card issuing banks / NBFCs would be solely responsible for fulfilment of all KYC
requirements, even where DSAs / DMAs or other agents solicit business on their
behalf.
d.

While issuing cards, the terms and conditions for issue and usage of a credit card
should be mentioned in clear and simple language (preferably in English, Hindi and the
local language) comprehensible to a card user. The Most Important Terms and
Conditions (MITCs) termed as standard set of conditions, as given in the Appendix,
should be highlighted and advertised/ sent separately to the prospective customer/
customers at all the stages i.e. during marketing, at the time of application, at the
acceptance stage (welcome kit) and in important subsequent communications.

Interest rates and other charges

a. Card issuers should ensure that there is no delay in dispatching bills and the customer has
sufficient number of days (at least one fortnight) for making payment before the interest
starts getting charged.
b. Card issuers should quote annualized percentage rates (APR) on card products
(separately for retail purchase and for cash advance, if different). The method of
calculation of APR should be given with a couple of examples for better comprehension.
The APR charged and the annual fee should be shown with equal prominence. The late
payment charges, including the method of calculation of such charges and the number of
days, should be prominently indicated. The manner in which the outstanding unpaid
amount will be included for calculation of interest should also be specifically shown with
prominence in all monthly statements. Even where the minimum amount indicated to
keep the card valid has been paid, it should be indicated in bold letters that the interest
will be charged on the amount due after the due date of payment. These aspects may be
shown in the Welcome Kit in addition to being shown in the monthly statement.
c. The bank / NBFC should not levy any charge that was not explicitly indicated to the
credit card holder at the time of issue of the card and getting his / her consent. However,

this would not be applicable to charges like service taxes, etc. which may subsequently
be levied by the Government or any other statutory authority.
d. The terms and conditions for payment of credit card dues, including the minimum
payment due, should be stipulated so as to ensure that there is no negative amortization.
e. Changes in charges (other than interest) may be made only with prospective effect giving
notice of at least one month. If a credit card holder desires to surrender his credit card on
account of any change in credit card charges to his disadvantage, he may be permitted to
do so without the bank levying any extra charge for such closure.

Wrongful billing
a. The card issuing bank / NBFC should ensure that wrong bills are not raised and issued to
customers. In case, a customer protests any bill, the bank / NBFC should provide
explanation and, if necessary, documentary evidence to the customer within a maximum
period of sixty days with a spirit to amicably redress the grievances.
b. To obviate frequent complaints of delayed billing, the credit card issuing bank / NBFC
may consider providing bills and statements of accounts online, with suitable security
built therefore.

Use of DSAs / DMAs and other agents

a. When banks / NBFCs outsource the various credit card operations, they have to be
extremely careful that the appointments of such service providers do not compromise
with the quality of the customer service and the bank / NBFCs ability to manage credit,
liquidity and operational risks. In the choice of the service provider, the bank / NBFCs
have to be guided by the need to ensure confidentiality of the customers records, respect
customer privacy, and adhere to fair practices in debt collection.
b. The Code of Conduct for Direct Sales Agents (DSAs) formulated by the Indian Banks
Association (IBA) could be used by banks / NBFCs in formulating their own codes for
the purpose. The bank / NBFC should ensure that the DSAs engaged by them for
marketing their credit card products scrupulously adhere to the bank / NBFCs own Code
of Conduct for credit card operations which should be displayed on the bank / NBFCs
website and be available easily to any credit card holder.

c. The bank / NBFC should have a system of random checks and mystery shopping to
ensure that their agents have been properly briefed and trained in order to handle with
care and caution their responsibilities, particularly in the aspects included in these
guidelines like soliciting customers, hours for calling, privacy of customer information,
conveying the correct terms and conditions of the product on offer, etc.

Redressal of Grievances
a. Generally, a time limit of sixty (60) days may be given to the customers for preferring
their complaints grievances.
b.

The card issuing bank / NBFC should constitute Grievance Redressal machinery within
the bank / NBFC and give wide publicity about it through electronic and print media.
The name and contact number of designated grievance redressal officer of the bank /
NBFC should be mentioned on the credit card bills. The designated officer should ensure
that genuine grievances of credit card subscribers are redressed promptly without
involving delay.

c. The grievance redressal procedure of the bank / NBFC and the time frame fixed for
responding to the complaints should be placed on the bank / NBFC's website. The name,
designation, address and contact number of important executives as well as the
Grievance Redressal Officer of the bank / NBFC may be displayed on the website. There
should be a system of acknowledging customers' complaints for follow up, such as
complaint number / docket number, even if the complaints are received on phone.
d.

If a complainant does not get satisfactory response from the bank / NBFC within a
maximum period of thirty (30) days from the date of his lodging the complaint, he will
have the option to approach the Office of the concerned Banking Ombudsman for
redressal of his grievance/s. The bank / NBFC shall be liable to compensate the
complainant for the loss of his time, expenses, financial loss as well as for the
harassment and mental anguish suffered by him for the fault of the bank and where the
grievance has not been redressed in time.

Internal control and monitoring systems

With a view to ensuring that the quality of customer service is ensured on an on-going
basis in banks / NBFCs, the Standing Committee on Customer Service in each bank /
NBFC may review on a monthly basis the credit card operations including reports of
defaulters to the CIBIL, credit card related complaints and take measures to improve the
services and ensure the orderly growth in the credit card operations. Banks / NBFCs
should put up detailed quarterly analysis of credit card related complaints to their Top
Management. Card issuing banks should have in place a suitable monitoring mechanism
to randomly check the genuineness of merchant transactions.

Right to impose penalty

The Reserve Bank of India reserves the right to impose any penalty on a bank / NBFC
under the provisions of the Banking Regulation Act, 1949 for violation of any of these
guidelines.

How credit cards work

An example of the front of a typical credit card:

1.

Issuing bank logo

2.

EMV chip

3.

Hologram

4.

Card number

5.

Card brand logo

6.

Expiry Date

7.

Cardholder's name

An example of the reverse side of a typical credit card:

1.

Magnetic Stripe

2.

Signature Strip

3.

Card Security Code

A user is issued credit after an account has been approved by the credit provider, and is
given a credit card, with which the user will be able to make purchases from merchants
accepting that credit card up to a pre-established credit limit. Often a general bank issues
the credit, but sometimes a captive bank created to issue a particular brand of credit card,
such as Chase, Wells Fargo or Bank of America issues the credit.
When a purchase is made, the credit card user agrees to pay the card issuer. The
cardholder indicates their consent to pay, by signing a receipt with a record of the card
details and indicating the amount to be paid or by entering a Personal identification

number (PIN). Also, many merchants now accept verbal authorizations via telephone and
electronic authorization using the Internet, known as a Card not present (CNP)
transaction.
Electronic verification systems allow merchants to verify that the card is valid and the
credit card customer has sufficient credit to cover the purchase in a few seconds,
allowing the verification to happen at time of purchase. The verification is performed
using a credit card payment terminal or Point of Sale (POS) system with a
communications link to the merchant's acquiring bank. Data from the card is obtained
from a magnetic stripe or chip on the card; the latter system is in the United Kingdom
commonly known as Chip and PIN, but is more technically an EMV card.
Other variations of verification systems are used by ecommerce merchants to determine
if the user's account is valid and able to accept the charge. These will typically involve
the cardholder providing additional information, such as the security code printed on the
back of the card, or the address of the cardholder.
Each month, the credit card user is sent a statement indicating the purchases undertaken
with the card, any outstanding fees, and the total amount owed. After receiving the
statement, the cardholder may dispute any charges that he or she thinks are incorrect (see
Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must
pay a defined minimum proportion of the bill by a due date, or may choose to pay a
higher amount up to the entire amount owed. The credit provider charges interest on the
amount owed (typically at a much higher rate than most other forms of debt). Some
financial institutions can arrange for automatic payments to be deducted from the user's
bank accounts.
Credit card issuers usually waive interest charges if the balance is paid in full each
month, but typically will charge full interest on the entire outstanding balance from the
date of each purchase if the total balance is not paid.
For example, if a user had a $1,000 outstanding balance and pays it in full, there would
be no interest charged. If, however, even $1.00 of the total balance remained unpaid,
interest would be charged on the $1,000 from the date of purchase until the payment is
received. The precise manner in which interest is charged is usually detailed in a

cardholder agreement which may be summarized on the back of the monthly statement.
The general calculation formula most financial institutions use to determine the amount
of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the
Annual percentage rate (APR) and divide by 100 then multiply to the amount of the
average daily balance divided by 365 and then take this total and multiply by the total
number of days the amount revolved before payment was made on the account.
Financial institutions refer to interest charged back to the original time of the transaction
and up to the time a payment was made, if not in full, as RRFC or residual retail finance
charge. Thus after an amount has revolved and a payment has been made that the user of
the card will still receive interest charges on their statement after paying the next
statement in full (in fact the statement may only have a charge for interest that collected
up until the date the full balance was paid...i.e. when the balance stopped revolving).
The credit card may simply serve as a form of revolving credit, or it may become a
complicated financial instrument with multiple balance segments each at a different
interest rate, possibly with a single umbrella credit limit, or with separate credit limits
applicable to the various balance segments. Usually this compartmentalization is the
result of special incentive offers from the issuing bank, either to encourage balance
transfers from cards of other issuers, or to encourage more spending on the part of the
customer. In the event that several interest rates apply to various balance segments,
payment allocation is generally at the discretion of the issuing bank, and payments will
therefore usually be allocated towards the lowest rate balances until paid in full before
any money is paid towards higher rate balances.
Interest rates can vary considerably from card to card, and the interest rate on a particular
card may jump dramatically if the card user is late with a payment on that card or any
other credit instrument, or even if the issuing bank decides to raise its revenue. As the
rates and terms vary, services have been set up allowing users to calculate savings
available by switching cards, which can be considerable if there is a large outstanding
balance (see external links for some on-line services.
Because of intense competition in the credit card industry, credit providers often offer
incentives such as frequent flier points, gift certificates, or cash back (typically up to 1
percent based on total purchases) to try to attract customers to their program.

Low interest credit cards or even 0% interest credit cards are available. The only
downside to consumers is that the period of low interest credit cards is limited to a fixed
term, usually between 6 and 12 months after which a higher rate is charged. However,
services are available which alert credit card holders when their low interest period is due
to expire. Most such services charge a monthly or annual fee.

Grace period
A credit card's grace period is the time the customer has to pay the balance before interest
is charged to the balance. Grace periods vary, but usually range from 20 to 30 days
depending on the type of credit card and the issuing bank. Some policies allow for
reinstatement after certain conditions are met. Usually, if a customer is late paying the
balance, finance charges will be calculated and the grace period does not apply. Finance
charge(s) incurred depends on the grace period and balance, with most credit cards there
is no grace period if there's any outstanding balance from the previous billing cycle or
statement (i.e. interest is applied on both the previous balance and new transactions).
However, there are some credit cards that will only apply finance charge on the previous
or old balance, excluding new transactions.

The merchant's side

An example of street markets accepting credit cards

For merchants, a credit card transaction is often more secure than other forms of
payment, such as checks, because the issuing bank commits to pay the merchant the
moment the transaction is authorized, regardless of whether the consumer defaults on
their credit card payment (except for legitimate disputes, which are discussed below, and
can result in charge backs to the merchant). In most cases, cards are even more secure
than cash, because they discourage theft by the merchant's employees.
For each purchase, the bank charges a commission (discount fee), to the merchant for
this service and there may be a certain delay before the agreed payment is received by
the merchant. The commission is often a percentage of the transaction amount, plus a
fixed fee. In addition, a merchant may be penalized or have their ability to receive
payment using that credit card restricted if there are too many cancellations or reversals
of charges as a result of disputes. Some small merchants require credit purchases to have
a minimum amount (usually between $5 and $10) to compensate for the transaction
costs, though this is not always allowed by the credit card consortium.
In some countries, like the Nordic countries, banks guarantee payment on stolen cards
only if an ID card is checked and the ID card number/civic registration number is written
down on the receipt together with the signature. In these countries merchants therefore
usually ask for ID. Non-Nordic citizens, who are unlikely to possess a Nordic ID card or
driving license, will instead have to show their passport, and the passport number will be
written down on the receipt, sometimes together with other information. Some shops use
the card's PIN code for identification, and in that case showing an ID card is not
necessary.

Parties involved

Cardholder: The owner of the card used to make a purchase; the consumer.

Card-issuing bank: The financial institution or other organization that issued the credit
card to the cardholder. This bank bills the consumer for repayment and bears the risk that
the card is used fraudulently. American Express and Discover were previously the only
card-issuing banks for their respective brands, but as of 2007, this is no longer the case.

Merchant: The individual or business accepting credit card payments for products or
services sold to the cardholder

Acquiring bank: The financial institution accepting payment for the products or
services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services of the

acquiring bank.

Merchant account provider: This could refer to the acquiring bank or the independent
sales organization, but in general is the organization that the merchant deals with.

Credit Card association: An association of card-issuing banks such as Visa, MasterCard,

Discover, American Express, etc. that set transaction terms for merchants, card-issuing
banks, and acquiring banks.

Transaction network: The system that implements the mechanics of the electronic
transactions. May be operated by an independent company, and one company may
operate multiple networks. Transaction processing networks include: Cardnet, Nabanco,
Omaha, Paymentech, NDC Atlanta, Nova, Vital, Concord EFSnet, and VisaNet.

Affinity partner: Some institutions lend their name to an issuer to attract customers that
have a strong relationship with that institution, and get paid a fee or a percentage of the

balance for each card issued using their name. Examples of typical affinity partners are
sports teams, universities and charities.
The flow of information and money between these parties always through the card
associations is known as the interchange, and it consists of a few steps.

Transaction steps
Authorization: In the event of a chargeback (when there's an error in processing the

transaction or the cardholder disputes the transaction), the issuer returns the transaction
to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant,
who must either accept the chargeback or contest it.

Secured credit cards

A secured credit card is a type of credit card secured by a deposit account owned by the
cardholder. Typically, the cardholder must deposit between 100% and 200% of the total
amount of credit desired. Thus if the cardholder puts down $1000, he or she will be given
credit in the range of $500$1000. In some cases, credit card issuers will offer incentives
even on their secured card portfolios. In these cases, the deposit required may be
significantly less than the required credit limit, and can be as low as 10% of the desired
credit limit. This deposit is held in a special savings account. Credit card issuers offer
this as they have noticed that delinquencies were notably reduced when the customer
perceives he has something to lose if he doesn't repay his balance.
The cardholder of a secured credit card is still expected to make regular payments, as he
or she would with a regular credit card, but should he or she default on a payment, the
card issuer has the option of recovering the cost of the purchases paid to the merchants
out of the deposit. The advantage of the secured card for an individual with negative or
no credit history is that most companies report regularly to the major credit bureaus. This
allows for rebuilding of positive credit history.
Although the deposit is in the hands of the credit card issuer as security in the event of
default by the consumer, the deposit will not be debited simply for missing one or two
payments. Usually the deposit is only used as an offset when the account is closed, either

at the request of the customer or due to severe delinquency (150 to 180 days). This
means that an account which is less than 150 days delinquent will continue to accrue
interest and fees, and could result in a balance which is much higher than the actual
credit limit on the card. In these cases the total debt may far exceed the original deposit
and the cardholder not only forfeits their deposit but is left with an additional debt.
Most of these conditions are usually described in a cardholder agreement which the
cardholder signs when their account is opened.
Secured credit cards are an option to allow a person with a poor credit history or no
credit history to have a credit card which might not otherwise be available. They are
often offered as a means of rebuilding one's credit. Secured credit cards are available
with both Visa and MasterCard logos on them. Fees and service charges for secured
credit cards often exceed those charged for ordinary non-secured credit cards, however,
for people in certain situations, (for example, after charging off on other credit cards, or
people with a long history of delinquency on various forms of debt), secured cards can
often be less expensive in total cost than unsecured credit cards, even including the
security deposit.
Sometimes a credit card will be secured by the equity in the borrower's home. This is
called a home equity line of credit (HELOC).

Prepaid credit cards

A prepaid credit card is not really a credit card, as no credit is offered by the card issuer:
the card-holder spends money which has been "stored" via a prior deposit by the cardholder or someone else, such as a parent or employer. However, it carries a credit-card
brand (Visa or MasterCard) and can be used in similar ways. As more consumers require
a suitable solution to rebuilding credit, recent changes have allowed some credit card
companies to offer pre-paid credit cards to help rebuild credit. They are hard to find and
have higher APR fees and higher interest costs.
After purchasing the card, the cardholder loads it with any amount of money and then
uses the card to spend the money. Prepaid cards can be issued to minors since there is no
credit line involved.

The main advantage over secured credit cards is that you are not required to come up
with $500 or more to open an account. Also most secured credit cards still charge you
interest even though you are not actually "borrowing" any money. With prepaid credit
cards you are not charged any interest but you are often charged monthly fees after an
arbitrary time period. Many other fees also usually apply to a prepaid card.
Prepaid credit cards are often marketed to teenagers for shopping online without having
their parents complete the transaction.
Because of the many fees that apply to obtaining and using credit-card-branded prepaid
cards, the Financial Consumer Agency of Canada describes them as "an expensive way
to spend your own money". The agency publishes a booklet, "Pre-paid cards", which
explains the advantages and disadvantages of this type of prepaid card.

Features
As well as convenient, accessible credit, credit cards offer consumers an easy way to
track expenses, which is necessary for both monitoring personal expenditures and the
tracking of work-related expenses for taxation and reimbursement purposes. Credit cards
are accepted worldwide, and are available with a large variety of credit limits, repayment
arrangement, and other perks (such as rewards schemes in which points earned by
purchasing goods with the card can be redeemed for further goods and services or credit
card cashback).
Some countries, such as the United States, the United Kingdom, and France, limit the
amount for which a consumer can be held liable due to fraudulent transactions as a result
of a consumer's credit card being lost or stolen.

Security

A smart card, combining credit card and debit card properties. The 3 by 5 mm security chip
embedded in the card is shown enlarged in the inset. The gold contact pads on the card enable
electronic access to the chip.

The low security of the credit card system presents countless opportunities for fraud.
This opportunity has created a huge black market in stolen credit card numbers, which
are generally used quickly before the cards are reported stolen.
The goal of the credit card companies is not to eliminate fraud, but to "reduce it to
manageable levels", such that the total cost of both fraud and fraud prevention is
minimized. This implies that high-cost low-return fraud prevention measures will not be
used if their cost exceeds the potential gains from fraud reduction.
Most internet fraud is done through the use of stolen credit card information which is
obtained in many ways, the simplest being copying information from retailers, either
online or offline. Despite efforts to improve security for remote purchases using credit
cards, systems with security holes are usually the result of poor implementations of card
acquisition by merchants. For example, a website that uses SSL to encrypt card numbers
from a client may simply email the number from the web server to someone who
manually processes the card details at a card terminal.
Naturally, anywhere card details become human-readable before being processed at the
acquiring bank, a security risk is created. However, many banks offer systems such as
Clear Commerce, where encrypted card details captured on a merchant's web server can
be sent directly to the payment processor.

Controlled Payment Numbers are another option for protecting one's credit card number:
they are "alias" numbers linked to one's actual card number, generated as needed, valid
for a relatively short time, with a very low limit, and typically only valid with a single
merchant.
The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible
for prosecuting criminals who engage in credit card fraud in the United States, but they
do not have the resources to pursue all criminals. In general, federal officials only
prosecute cases exceeding US $5000 in value. Three improvements to card security have
been introduced to the more common credit card networks but none has proven to help
reduce credit card fraud so far. First, the on-line verification system used by merchants is
being enhanced to require a 4 digit Personal Identification Number (PIN) known only to
the card holder. Second, the cards themselves are being replaced with similar-looking
tamper-resistant smart cards which are intended to make forgery more difficult. The
majority of smartcard (IC card) based credit cards comply with the EMV (Europay
MasterCard Visa) standard. Third, an additional 3 or 4 digit code is now present on the
back of most cards, for use in "card not present" transactions. See CVV2 for more
information.
The way credit card owners pay off their balances has a tremendous effect on their credit
history. All the information is collected by credit bureaus. The credit information stays on
the credit report, depending on the jurisdiction and the situation, for 1, 2, 5, 7 or even 10
years after the debt is repaid.

Profits and losses

In recent times, credit card portfolios have been very profitable for banks, largely due to
the booming economy of the late nineties. However, in the case of credit cards, such high
returns go hand in hand with risk, since the business is essentially one of making
unsecured (uncollateralized) loans, and thus dependent on borrowers not to default in
large numbers.

Costs
Credit card issuers (banks) have several types of costs:

Interest expenses
Banks generally borrow the money they then lend to their customers. As they receive
very low-interest loans from other firms, they may borrow as much as their customers
require, while lending their capital to other borrowers at higher rates. If the card issuer
charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and
the balance sits with the cardholder for a year, the issuer earns 10% on the loan. This 5%
difference is the "interest expense" and the 10% is the "net interest margin".

Operating costs
This is the cost of running the credit card portfolio, including everything from paying the
executives who run the company to printing the plastics, to mailing the statements, to
running the computers that keep track of every cardholder's balance, to taking the many
phone calls which cardholders place to their issuer, to protecting the customers from
fraud rings. Depending on the issuer, marketing programs are also a significant portion of
expenses.

Charge offs
When a consumer becomes severely delinquent on a debt (often at the point of six
months without payment), the creditor may declare the debt to be a charge-off. It will
then be listed as such on the debtor's credit bureau reports (Equifax, for instance, lists
"R9" in the "status" column to denote a charge-off.) It is one of the worst possible items
to have on your file. The item will include relevant dates, and the amount of the bad debt.
A charge-off is considered to be "written off as uncollectable." To banks, bad debts and
even fraud are simply part of the cost of doing business.
However, the debt is still legally valid, and the creditor can attempt to collect the full
amount. This includes contacts from internal collections staff, or more likely, an outside
collection agency. If the amount is large (generally over $1500 - $2000), there is the
possibility of a lawsuit or arbitration.

In the US, as the charge off number climbs or becomes erratic, officials from the Federal
Reserve take a close look at the finances of the bank and may impose various operating
strictures on the bank, and in the most extreme cases, may close the bank entirely.

Rewards
Qantas Frequent Flyer co-branded credit cards
Many credit card customers receive rewards, such as frequent flier points, gift
certificates, or cash back as an incentive to use the card. Rewards are generally tied to
purchasing an item or service on the card, which may or may not include balance
transfers, cash advances, or other special uses. Depending on the type of card, rewards
will generally cost the issuer between 0.25% and 2.0% of the spend. Networks like Visa
or MasterCard have increased their fees to allow issuers to fund their rewards system.
However, most rewards points are accrued as a liability on a company's balance sheet
and expensed at the time of reward redemption. As a result, some issuers discourage
redemption by forcing the cardholder to call customer service for rewards.
On their servicing website, redeeming awards is usually a feature that is very well hidden
by the issuers. Others encourage redemption for lower cost merchandise; instead of an
airline ticket, which is very expensive to an issuer, the cardholder may be encouraged to
redeem for a gift certificate instead. With a fractured and competitive environment,
rewards points cut dramatically into an issuer's bottom line, and rewards points and
related incentives must be carefully managed to ensure a profitable portfolio. There is a
case to be made that rewards not redeemed should follow the same path as gift cards that
are not used: in certain states the gift card breakage goes to the state's treasury. The same
could happen to the value of points or cash not redeemed.

Fraud
Where a card is stolen, or an unauthorized duplicate made, most card issuers will refund
some or all of the charges that the customer has received for things they did not buy.
These refunds will, in some cases, be at the expense of the merchant, especially in mail
order cases where the merchant cannot claim sight of the card. In several countries,
merchants will lose the money if no ID card was asked for, therefore merchants usually
require ID card in these countries.

The cost of fraud is high; in the UK in 2004 it was over 500 million. Credit card
companies generally guarantee the merchant will be paid on legitimate transactions
regardless of whether the consumer pays their credit card bill.
"Soft fraud" is fraud committed by the customer himself: getting a card and using it with
no intention ever to repay the balance. Such customers are called "diabolicals" by the
credit card companies that try to avoid them at all cost.

Security
An additional feature to secure the credit card transaction and prohibit the use of a lost
credit card is the MobiClear solution. Each transaction is authenticated through a call to
the user mobile phone. The transaction is released once the transaction has been
confirmed by the cardholder pushing his/her pin code during the call.

Revenues
Offsetting costs are the following revenues:

Interchange fees
Interchange fees are charged by the merchant's acquirer to a card-accepting merchant as
component of the so-called merchant discount rate (also referred to as "merchant service
fee"). The merchant pays a merchant discount fee that is typically 2 to 3 percent (this is
negotiated, but will vary not only from merchant to merchant, but also from card to card,
with business cards and rewards cards generally costing the merchants more to process),
which is why some merchants prefer cash, debit cards, or even cheques. The majority of
this fee, called the interchange fee, goes to the issuing bank, but parts of it go to the
processing network, the card association (American Express, Visa, MasterCard, etc.), and
the merchant's acquirer. With a corporate card, the interchange is also often shared by the
Company in whose name the card is issued as an incentive to use that issuer's card
instead of someone else's.

The interchange fee that applies to a particular merchant is a function of many variables
including the type of merchant, the merchant's average transaction amount, whether the
cards are physically present, if the card's magnetic stripe is read or if the transaction is
hand-keyed or entered on a website, the specific type of card, when the transaction is
settled, the authorized and settled transaction amounts, etc. For a typical credit card
issuer, interchange fee revenues may represent about fifteen percent of total revenues, but
this will vary greatly with the type of customers represented in their portfolio. Customers
who carry high balances may generate low interchange revenue due to credit line
limitations, while customers who use their cards for business and spend hundreds of
thousands of dollars a year on their cards while paying off balances every month will
have very healthy interchange revenues.

Industry jargon for customer categories

Customers who do not pay in full the amount owed on their monthly statement (the
"balance") by the due date (that is, at the end of the "grace period") and are not in a
promotional period owe interest ("finance charges") are known in the industry as
"revolvers." Those who pay in full (pay the entire balance) are known in the industry as
"transactors," or "convenience users". Those that shift usage of their credit cards or
transfer balances frequently are known in the industry as "rate surfers", "rate tarts" or
"gamers."

Interest on outstanding balances

Interest charges vary widely from card issuer to card issuer. Often, there are "teaser"
rates in effect for initial periods of time (as low as zero percent for, say, six months),
whereas regular rates can be as high as 40 percent. In the U.S. there's no federal limit on
the interest or late fees credit card issuers can charge; the interest rates are set by the
states, with some states, like South Dakota, having no ceiling on interest rates and fees,
inviting some banks to establish their credit card operations there. Other states, like
Delaware, have very weak usury laws. The teaser rate no longer applies if the customer
doesn't pay his bills on time, and is replaced by a penalty interest rate (for example,
24.99%) that applies retroactively. So customers should be wary of these offers that
usually contain some traps. Cash withdrawals will never carry the teaser rate, for
example.

Note that for some banks, even if you had paid it off an outstanding balance along with
interest fees, for the next two months, they will also charge you interest rates for
anything you had purchased.

Fees charged to customers

The major fees are for:

Late payments
Charges that result in exceeding the credit limit on the card (whether done deliberately
or by mistake), called over limit fees

Returned cheque fees or payment processing fees (e.g. phone payment fee)

Cash advances and convenience cheques (often 3% of the amount). Transactions in a

foreign currency (as much as 3% of the amount). A few financial institutions do not
charge a fee for this.

Membership fees (annual or monthly), sometimes a percentage of the credit limit.

Issuers love monthly fees as it allows them to charge substantial amounts without the
customer realizing how expensive the charge really is (a monthly amount is perceived as
half the price of the equivalent annual fee)

Foreign Exchange Premium

Advantages vs. Disadvantages

A credit card from VISA, MasterCard, or any other network allows you to pay for
purchases or services by borrowing from the credit card company. You then repay by
making monthly payments towards the amount borrowed. That is, you do not have to
repay the whole borrowed amount in full at one go.
Then there are charge cards, such as the American Express card, that require full
payment of the borrowed amount each month.
Either way, the credit card is a very convenient alternative to paying by cash.
Essentially a credit card allows you to:

Purchase products or services whenever and wherever you want, without ready cash

and paying for them at a later date.

Have the option of paying only a part of the total expenses. The balance amount can

be carried forward, with an interest charged.

Withdraw cash whenever, wherever you are, through ATMs and other withdrawal

centres.
Enjoy a revolving credit limit without any charges for a limited period (mostly 20 to

50 days)
Transact money of more than one currency, from one country to another.
Other facilities afforded on a credit card include reward points on card usage,
insurance cover against air and road accidents, loss of baggage, and so on. All credit
cards have built-in safety features like signatures and personal identification numbers.
International credit cards you financial flexibility when you travel abroad.

Advantages:

They allow you to make purchases on credit without carrying around a lot of cash.

This allows you a lot of flexibility.

They allow accurate record-keeping by consolidating purchases into a single

statement.
They allow convenient remote purchasing - ordering/shopping online or by phone.

They allow you to pay for large purchases in small, monthly instalments.
Under certain circumstances, they allow you to withhold payment for merchandise

which proves defective.

They are cheaper for short-term borrowing - interest is only paid on the remaining

debt, not the full loan amount.

Many cards offer additional benefits such as additional insurance cover on purchases,
cash back, air miles and discounts on holidays.

Disadvantages:

You may become an impulsive buyer and tend to overspend because of the ease of
using credit cards. Cards can encourage the purchasing of goods and services you

cannot really afford.

Credit cards are a relatively expensive way of obtaining credit if you don't use them

carefully, especially because of the high interest rates and other costs.
Lost or stolen cards may result in some unwanted expense and inconvenience.
The use of a large number of credit cards can get you even further into debt.

Using a credit card, especially remotely, introduces an element of risk as the card
details may fall into the wrong hands resulting in fraudulent purchases on the card.
Fraudulent or unauthorized charges may take months to dispute, investigate, and
resolve.

CHAPTER 4

CURRENT SCENARIO
Banking scenario
The industry is currently in a transition phase. On the one hand, the PSBs, which are the
mainstay of the Indian Banking system, are in the process of shedding their flab in terms
of excessive manpower, excessive non Performing Assets (Npas) and excessive
governmental equity, while on the other hand the private sector banks are consolidating
themselves through mergers and acquisitions.
PSBs, which currently account for more than 78 percent of total banking industry assets
are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from
traditional sources, lack of modern technology and a massive workforce while the new
private sector banks are forging ahead and rewriting the traditional banking business
model by way of their sheer innovation and service. The PSBs are of course currently
working out challenging strategies even as 20 percent of their massive employee strength
has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS)
schemes.
The private players however cannot match the PSBs great reach, great size and access to
low cost deposits. Therefore one of the means for them to combat the PSBs has been
through the merger and acquisition (M& A) route. Over the last two years, the industry
has witnessed several such instances. For instance, Hdfc Banks merger with Times
Bank, Icici Banks acquisition of ITC Classic, Anagram Finance and Bank of Madura.
Centurion Bank, Indusind Bank, Bank of Punjab, Vysya Bank are said to be on the
lookout. The UTI bank- Global Trust Bank merger however opened a pandoras box and
brought about the realization that all was not well in the functioning of many of the
private sector banks.
Private sector Banks have pioneered internet banking, phone banking, anywhere
banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined
various other services and integrated them into the mainstream banking arena, while the

PSBs are still grappling with disgruntled employees in the aftermath of successful VRS
schemes.

Also, following Indias commitment to the W To agreement in respect of the services

sector, foreign banks, including both new and the existing ones, have been permitted to
open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation
of 8 branches. Talks of government diluting their equity from 51 percent to 33 percent in
November 2000 have also opened up a new opportunity for the takeover of even the
PSBs. The FDI rules being more rationalized in Q1FY02 may also pave the way for
foreign banks taking the M& A route to acquire willing Indian partners.
Meanwhile the economic and corporate sector slowdown has led to an increasing number
of banks focusing on the retail segment. Many of them are also entering the new vistas of
Insurance. Banks with their phenomenal reach and a regular interface with the retail
investor are the best placed to enter into the insurance sector. Banks in India have been
allowed to provide fee-based insurance services without risk participation invest in an
insurance company for providing infrastructure and services support and set up of a
separate joint-venture insurance company with risk participation
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks
(that is with the Government of India holding a stake), 29 private banks (these do not
have government stake; they may be publicly listed and traded on stock exchanges) and
31 foreign banks. They have a combined network of over 53,000 branches and 17,000
ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks
hold over 75 percent of total assets of the banking industry, with the private and foreign
banks holding 18.2% and 6.5% respectively.
The Indian banking industry is currently termed as strong, having weathered the global
economic slowdown and showing good numbers with strong support flowing in from the
Reserve Bank of India (RBI) measures. Furthermore, a report "Opportunities in Indian
Banking Sector", by market research company, RNCOS, forecasts that the Indian
banking sector will grow at a healthy compound annual growth rate (CAGR) of around
23.3 per cent till 2011. Banking, financial services and insurance (BFSI), together
account for 38 per cent of India's outsourcing industry (worth US$ 47.8 billion in 2007).

According to a report by McKinsey and NASSCOM, India has the potential to process
30 per cent of the banking transactions in the US by the year 2010. Outsourcing by the
BFSI to India is expected to grow at an annual rate of 3035 per cent.
According to a study by Dun & Bradstreet (an international research body)"India's Top
Banks 2008"there has been a significant growth in the banking infrastructure. Taking
into account all banks in India, there are overall 56,640 branches or offices, 893,356
employees and 27,088 ATMs. Public sector banks made up a large chunk of the
infrastructure, with 87.7 per cent of all offices, 82 per cent of staff and 60.3 per cent of
all ATMs.
According to the RBI, Indian financial markets have generally remained orderly during
2008-09. In view of the tight liquidity conditions in the domestic money markets in
September 2008, the Reserve Bank announced a series of measures beginning September
16, 2008. Thus, the average call rate which was at 10.52 per cent declined to 7.57 per
cent in November 2008 under the impact of these measures.
Measures aimed at expanding the rupee liquidity, included significant reduction in the
cash reserve ratio (CRR), reduction of the statutory liquidity ratio (SLR), opening a
special repo window under the liquidity adjustment facility (LAF) for banks for onlending to the non-banking financial companies (NBFCs), housing finance companies
(HFCs) and mutual funds (MFs), and extending a special refinance facility, which banks
could access without any collateral.
Banking capital (net) amounted to US$ 4.8 billion in April-September 2008 as compared
with US$ 5.7 billion in April-September 2007. Among the components of banking
capital, non-resident Indian (NRI) deposits witnessed a net inflow of US$ 1.1 billion in
April-September 2008, a turnaround from net outflow of US$ 78 million in AprilSeptember 2007.
The reserve money lying with the RBI as on November 21, 2008 as per the January 2009
bulletin, is a total amount of US$ 179.28 billion and RBIs credit to the commercial
sector stood at US$ 3.65 billion. Further, banks in India put up strong growth and profit
numbers in the October-end-December 2008 period owing to high credit growth and

easing of yield on government bonds. Top Indian banks have increased their earnings by
almost 40 per cent year-on-year for the same period. According to latest Reserve Bank of
India (RBI) data, bank credit grew by 24.6 per cent year-on-year as of December 19,
2008. The resulting credit growth was even better at 41 per cent during the April-endDecember 2008 period. Deposits grew by 20.6 per cent as of December 19, 2008.
The growth in advances reflects that the net interest income (NIM) too would indicate
higher growth rate. RBI has taken a number of steps to lower the cost of credit in this
quarter like cutting cash reserve ratio (CRR), the amount of funds banks have to keep on
deposit with it, repo and reverse repo rate. The CRR rate, which had been reduced in
December 2008, to 5.50 per cent, repo rate to 6.50 and reverse repo rate to 5.00, were
further reduced CRR to 5 per cent, (its lending rate) repo rate to 5.5 per cent and
reverse repo, at which it absorbs cash from the banking system, to 4 per cent in January
2009.

Indian Banking Sector

An analysis of Indian Banking sector including the Growth in advances and deposits,
Market share, NPAs, CAR, Exposure norms, Retail Banking Initiatives and Major
Players.

The Reserve Bank of India (RBI), as the central bank of the country, closely monitors

developments in the whole financial sector.

The banking sector is dominated by Scheduled Commercial Banks (SCBs). As at endMarch 2002, there were 296 Commercial banks operating in India. This included 27
Public Sector Banks (PSBs), 31 Private, 42 Foreign and 196 Regional Rural Banks. Also,
there were 67 scheduled co-operative banks consisting of 51 scheduled urban co-

operative banks and 16 scheduled state co-operative banks.

Scheduled commercial banks touched, on the deposit front, a growth of 14% as against
18% registered in the previous year. And on advances, the growth was 14.5%against 17.3

% of the earlier year.

State Bank of India is still the largest bank in India with the market share of 20%. Icici
and its two subsidiaries merged with Icici Bank, leading creating the second largest bank
in India with a balance sheet size of Rs1040bn.

Higher provisioning norms, tighter asset classification norms, dispensing with the
concept of past due for recognition of NPAs, lowering of ceiling on exposure to a single
borrower and group exposure etc., are among the important measures in order to improve

the banking Sector.

A minimum stipulated Capital Adequacy Ratio (CAR) was introduced to strengthen the
ability of banks to absorb losses and the ratio has subsequently been raised from 8% to
9%. It is proposed to hike the CAR to 12% by 2004 based on the Basle Committee

recommendations.
Retail Banking is the new mantra in the banking sector. The home loans alone account
for nearly two-third of the total retail portfolio of the bank. According to one estimate,
the retail segment is expected to grow at 30-40% in the coming years.

Net banking, phone banking, mobile banking, ATMs and bill payments are the new buzz

words that banks are using to lure customers.

With a view to provide an institutional mechanism for sharing of information on
borrowers/ potential borrowers by banks and Financial Institutions, the Credit
Information Bureau (India) Ltd. (Cibil) was set up in August 2000. The Bureau provides
a framework for collecting, processing and sharing credit information on borrowers of

credit institutions. SBI and Hdfc are the promoters of the Cibil.
The RBI is now planning to transfer of its stakes in the SBI, NHB and National Bank for
Agricultural and Rural Development to the private players. Also, the Government has
sought to lower its holding in PSBs to a minimum of 33 per cent of total capital by

allowing them to raise capital from the market.

Banks are free to acquire shares, convertible debentures of corporates and units of
equity-oriented mutual funds, subject to a ceiling of 5% of the total outstanding advances

(including Commercial Paper) as on March 31 of the previous year.

The finance ministry spelt out structure of the government-sponsored ARC called the
Asset Reconstruction Company (India) Limited (Arcil), this pilot project of the ministry
would pave way for smoother functioning of the credit market in the country. The
Government will hold 49% stake and private players will hold the rest 51% - the
majority being held by ICICI Bank (24.5%).

Growth of Banks

HDFC Bank and Axis Bank continue to remain as leaders of the private sector banks.
Both the banks have maintained the advances growth and NIM. SBI, Punjab National
Bank, Bank of India and Union Bank are expected to lead among PSU Banks.
The State Bank of India is planning to open 1,000 new branches across the country to
cover 100,000 villages in the coming FY 2009-10, according to the bank Chairman, Mr
O P Bhatt. The bank had decided to rope in 300 new customers every year for each
branch using initiatives. According to Mr Bhatt, the bank could get a record US$ 5.54
billion during December 2008, the highest amount collected by any bank in the country.
Further, public sector banks (PSBs) on January 12, 2009 also decided to lower interest
rates on bulk deposits and to offer a maximum rate of 7.5 per cent for one-year maturity.
Earlier, on January 1, banks had lowered the interest rates on bulk deposits from 9.5 per
cent to 8.5 per cent. According to the latest RBI data, growth in broad money (M3), yearon-year (y-o-y), was 19.6 per cent (US$ 151.04 billion) on January 2, 2009 lower than
22.6 per cent (US$ 141.82 billion) a year ago. Aggregate deposits of banks, year-on-year,
expanded 20.2 per cent (US$ 133.08 billion) on January 2, 2009 as compared with 24.0
per cent (US$ 127.49 billion) a year ago.
The growth in bank credit continued to remain high. Non-food credit by scheduled
commercial banks (SCBs) was 23.9 per cent (US$ 102.78 billion), year-on-year, as on
January 2, 2009 from 22.0 per cent (US$ 77.79 billion) a year ago. Scheduled
commercial banks credit to the commercial sector expanded by 27.0 per cent (year-onyear) as on November 21, 2008, as compared with 23.1 per cent a year ago. Non-food
credit of scheduled commercial banks expanded by 26.9 per cent, year-on-year, as on
November 21, 2008, higher than 23.7 per cent a year ago.
According to earlier RBI data, for the third quarter (September 26-December 27, 2008),
total bank credit was up US$ 21.91 billion compared with a growth of US$ 22.91 billion
in the same period a year ago. In the preceding quarter, credit had risen by US$ 26.50
billion.
RBI data for deposits shows that for the Oct-end December 31, 2008 period, although
deposit growth has slowed to US$ 25.99 billion against US$ 33.18 billion in the April-

end to September, 2008 period, it was still stronger in the December 31 quarter period,
2008, as compared to the year-ago quarter when absolute growth was US$ 16.37 billion.
Net banking capital amounted to US$ 4.8 billion in April-September 2008 as compared
with US$ 5.7 billion in April-September 2007. Accounting for a part of banking capital,
non-resident Indian (NRI) deposits showed a net inflow of US $ 1.1 billion in AprilSeptember 2008, increasing from net outflow of US$ 78 million in April-September
2007.
Lending by banks also rose more than 76 per cent to Rs 2,80,000 crore (US$ 57.26
billion) during April-November 2008-09 from the same period a year ago, according to
data available with the Reserve Bank of India (RBI). The Reserve Bank of India on
January 21, 2009 fixed the Reference rate for the US currency at Rs 48.93 per dollar and
the single European unit at Rs 63.70 per euro from Rs 49.12 per dollar and Rs 63.61 per
euro, respectively.

Credit card market in India

Market Share
ICICI Bank emerged as the leader in the credit card issuance category for the year,
with its continued aggressive strategy, registering a 62 percent growth rate. ICICI
Bank crossed the 36 lakh mark in terms of credit cards, galloping ahead (within
four years of its launch) of pioneer Citibank (27 lakh cards), the global leader in
credit cards.
ICICI Bank holds 27% market share followed by Citibank with 19% market share.
SBI-GE occupies the third slot with 14 % market share.
Estimates for the year 2005-06 indicate a similar surge and aggressiveness. The
credit card numbers are expected to cross 208 lakh by March 2006.
For the year 2004-05, no new bank forayed in credit card market. However some
of the key banks like UTI Bank, J&K Bank, Union Bank of India, PNB etc.
announced their decision to launch their cards in the year 2005-06.

Industry Spend
With over 141 lakh credit cards in use in India, the pattern of usage is also undergoing a
sea change. The total spends in the payment industry for the year 2004-05 crossed Rs.
33,000 crores at the POS. This reflects a growth of 53% over the previous year. ICICI
Bank is the leader in capturing maximum spends with 32% market share, followed by
Citibank at 20% market share. The combined share in terms of spends of the MNC
Banks is about 43%.
ICICI Bank saw its spends shoot up since 2004 end, pointing out that a combination of
factors are responsible for the jump - the high spending festival season and three
simultaneous promotional programmes.
India currently has over 141 lakh credit cardholders, who make purchases totalling Rs.
33,000 crores per annum. Compared to the Asian market, the card market in India is at a
nascent stage. Total card spending in India is only at around 1.22% of Asian spending.

Market for credit cards in India is made up of 18 major banks and

financial institutions providing credit card products and services. There
are 11 major types of credit cards available in India.
Major Credit Card Providers in India
Following are major credit card providers in India:

ABN Amro

HDFC

American Express

ICICI Bank

Axis Bank

SBI

Bank of Baroda

Canara Bank

Citibank

Visa

HSBC

MasterCard

Deutsche Bank

Amex

Barclays Bank

Diners Club

Standard Chartered

Kotak Mahindra

Various types of credit card schemes offered by different banks

ABN Amro Credit Cards
ABN Amro is issuing nine credit cards in India. They may be mentioned as below:

ABN AMRO Freedom Credit Card

ABN AMRO One Credit Card

ABN AMRO Smart Gold Credit Card

ABN AMRO Titanium One Credit Card

ABN AMRO Wellness Credit Card

ABN AMRO MakeMyTrip Go Credit Card

ABN AMRO Barista Credit Card

ABN AMRO Platinum Credit Card

ABN AMRO Adlabs Credit Card

AMEX Credit Cards
AMEX is issuing eleven credit cards in India. They may be mentioned as below:

American Express Kingfisher First Credit Card

American Express Credit Card

American Express Platinum Credit Card

American Express India Today Group Credit Card

American Express Indian Airlines Credit Card

American Express Indian Airlines Gold Charge Card

American Express HPCL Credit Card

American Express Indian Airlines Green Charge Card

American Express Gold Credit Card

American Express Gold Charge Card

American Express E Credit Card

Axis Bank (UTI) Credit Cards

Axis Bank (UTI) is offering nine credit cards in India. They may be enumerated as below:

Axis Bank Gold Plus Credit Card

Axis Bank Corporate Credit Card

Axis Bank Gold Credit Card

Axis Bank Secured Credit Card

Axis Bank Visa Platinum Credit Card

Axis Bank Shriram Credit Card

Axis Bank Silver Plus Credit Card

Axis Bank Travel Currency Card

Axis Bank Silver Credit Card

Bank of Baroda (BOB) Credit Cards

Bank of Baroda (BOB) is issuing eight credit cards in India. They may be enumerated as
below:

BOBCARD Corporate Global Credit Card

BOBCARD Exclusive Woman credit card

NEXTGEN BOBCARD Gold Credit Card

BOBACRD Exclusive Youth Credit Card

BOBACRD Gold Visa Credit Card

BOBACARD Silver Credit Card

BOBACRD Gold MasterCard Credit Card

BOBACARD Exclusive Credit Card

Citibank
Citibank is issuing 26 credit cards in India. They may be named as below:

Citibank Platinum Credit Card

Citibank Choice Credit Card

First Citizen Citibank Credit Card

Reliance Gold Credit Card

Citibank Cash Back Credit Card

Reliance Silver Credit Card

Jet Airways Citibank Gold Credit Card

Vodafone Citibank Credit Card

Jet Airways Citibank Platinum Credit Card

MTV Citibank Credit Card

Jet Airways CitiBusiness Credit Card

International Times Credit Card

Jet Airways Citibank Silver Credit Card

CRY Citibank Credit Card

Diners Club British Airways Credit Card

WWF Citibank Credit Card

IndianOil Citibank Gold Credit Card

Citibank Womans Credit Card

IndianOil Citibank Credit Card

Citibank Womans Visa Mini Credit Card

Maruti Suzuki Auto Credit Card

Diners Club International Credit Card

Citibank Gold Credit Card

Taj Epicure Diners Club Credit Card

Citibank Silver Credit Card

Delhi Metro Citibank Credit Card

HDFC Bank is bringing out eleven credit card products in India. These cards
offer a wide range of benefits and rewards for cardholders.

HDFC Bank Silver Credit Card

Following are some features of HDFC Bank Silver Credit Card:

Cardholders can earn 1 reward point for every INR 150 they spend with the card.

Regular interest rate is 2.95% per month.

There are zero liabilities in case of lost cards.

Cash advance fee is 2.5%. Minimum cash advance fee is INR 300.

Joining fee is INR 300.

Issuer is MasterCard.

Renewal fee is INR 700.

HDFC Bank Gold Credit Card

Following are some facts about HDFC Bank Gold Credit Card:

Cardholders receive a maximum of 5% cash back. This offer is applicable for train
And air tickets.

Renewal fee is INR 2,000.

Cardholders receive discounts on products and services of HSBC Bank.

Regular interest rate is 2.95% per month.

Credit limit is higher than most cards.

Cash advance fee is 2.5% per month. Minimum cash advance fee is INR 300.

Cardholders earn 2 reward points in case of every INR 150 spent with the card.

Issuer is VISA.

Joining fee is INR 500.

HDFC Bank Titanium Credit Card

Following are salient features of HDFC Bank Titanium Credit Card:

Cardholders receive exclusive concierge services.

Fees for joining and renewal vary.

Cardholders receive rebates at hotels and clubs.

Regular interest rate is 2.65% per month.

Rate of interest is low.

Cash advance fee is 2.5% per month. Minimum cash advance fee is INR 300.

There is an accelerated reward program that is based on expenses made with the card.

Issuer is MasterCard.

There are balance transfer and 0% fuel surcharge facilities.

HDFC Womans Gold Credit Card

Following are some features of HDFC Womans Gold Credit Card:

Cardholders receive a maximum of 5% cash back on buys.

Renewal fee is INR 2,000.

There is an accelerated rewards program.

Regular interest rate is 2.65% per month.

There are a number of options to redeem points.

Cash advance fee is 2.5% per month. Minimum cash advance fee is INR 250.

Joining fee is INR 500.

Card issuer is VISA.

HDFC Bank Platinum plus Credit Card

Following are some salient features of HDFC Bank Platinum Plus Credit Card:

Cardholders receive rebates at hotels.

Joining fee is INR 1,000.

There is a maximum of 5% cash back in case of air tickets.

Renewal fee is INR 3,999.

There are concierge services.

Regular interest rate and cash advance fee are both 2.5% per month each. Minimum
cash advance fee is INR 300.

There are 0% fuel surcharge facilities available at all outlets.

Issuer is VISA.

Rate of interest is low and there are balance transfer options as well.
Following are some other credit cards provided by HDFC Bank in India:

HDFC Bank Health Plus Credit Card

HDFC Bank Platinum Plus Credit Card

HDFC Bank Corporate Credit Card

HDFC Bank Visa Signature Credit Card

HDFC Bank Gold Business Credit Card

HDFC Bank Value Plus Credit Card

ICICI Bank is issuing 29 separate credit cards in India. These cards cater to a wide
client base including sports lovers and businessmen for example.

ICICI Signature Credit Card

Following are some points on ICICI Signature Credit Card:

Cardholders get 5 points for International Spends worth INR 100.

Joining fee is INR 25,000.

Cardholders receive air accident insurance cover worth INR 3 crores.

Renewal fee is INR 2,500.

Cardholders receive Free Welcome gifts of INR 35,000. Prizes could be Tag Heuer
watches, Travel Points or Travel Vouchers.

Regular interest rate and cash advance fees are 2.75% per month.

Cardholders get 2 points for spending INR 100 with the card for dining purposes.

Issuer is VISA.

Cardholders receive 4 points for spending INR 100 with the card for travel purposes.

There are 0% fuel surcharge facilities at all outlets.

ICICI Bank Platinum Credit Card

Following are some features of ICICI Bank Platinum Credit Card:

Cardholders get access to airport lounges on a priority basis.

Renewal fee is INR 2,500.

Cardholders receive air accident insurance covers worth INR 1crore.

Regular interest rate is 1.99% per month.

Cash and credit limits are high.

Cash advance fee is 3.15% per month.

Cards are only offered via invitation.

Issuer is VISA.

Joining fee is INR 25,000.

There are 0% fuel surcharge facilities.

ICICI Bank Platinum Premiere Credit Card

Cardholders receive personalized concierge services.

Regular interest rate is 2.95% per month.

Cardholders receive air accident insurance covers worth INR 40 lakhs.

Cash advance fee is 3.15% per month.

Cash and credit limits are high.

Issuer is VISA.

Joining and renewal are free.

There are 0% fuel surcharge facilities at all outlets.

Following are other credit cards issued by ICICI Bank in India:

ICICI Bank Titanium Credit Card

ICICI BPL AMWAY Credit Card

ICICI Bank Solid Gold (Visa) Credit Card

ICICI Bank Big Bazaar Silver Credit Card

ICICI Bank Solid Gold (MasterCard) Credit Card

ICICI Bank Big Bazaar Gold Credit Card

ICICI Bank Gold American Express Credit Card

ICICI Bank Trinethra Credit Card

ICICI Bank Travel Smart Credit Card

ICICI Bank Orchid An Ecotel Credit Card

ICICI Bank Golf Credit Card

ICICI Bank Mohun Bagan Credit Card

ICICI Megamart Credit Card

ICICI Bank Ebony Credit Card

ICICI XBOX 360 Credit Card

ICICI Bank Airtel Silver Credit Card

ICICI Sarovar Hotels Credit Card

ICICI Bank Airtel Gold Credit Card

ICICI Bank HPCL Silver Credit Card

ICICI Bank Toyota Credit Card

ICICI Bank HPCL Gold Credit Card

ICICI Bank Thomas Cook Titanium Credit Card

ICICI PRU Life Credit Card

ICICI Bank Ascent American Express Credit Card

ICICI BPL Mobile Credit Card

ICICI Bank Platinum Identity Credit Card

In Indian credit card market there are 12 major types of credit cards being
provided by banks and financial institutions. These cards provide a wide variety of
financial benefits to holders.

Major Indian Credit Card Types

Following are various types of credit cards available in India:

Premium Credit Cards

Cash Back Credit Cards

Gold Credit Cards

Airline Credit Cards

Silver Credit Cards

Business Credit Cards

Balance Transfer Credit Cards

Co-branded Credit Cards

Low Interest Credit Cards

Lifetime Free Credit Cards

Rewards
There are some additional credit cards that are available in India as well. Rewards credit
cards available in India can be subdivided into six categories Points, Hotels and
Travels, Retail, Auto and Fuel.
A number of banks are offering low interest credit cards in India in order to
help the cardholders manage their finances in a better way. These cards are
highly availed by Indian consumers on account of their low interest rates.

ICICI Bank Platinum Credit Card

Following are some salient features of ICICI Bank Platinum Credit Card:

Cardholders receive priority access facilities to airport lounges.

Regular interest rate is 1.99% per month.

Cardholders receive air accident insurance coverage worth INR 1 crore.

Cash advance fee is 3.15% per month.

Cardholders have higher cash limits and credit limits.

Card issuer is VISA.

The card is offered via invitation only.

Issuing bank is ICICI Bank.

Joining fee is INR 25,000.

There are 0% fuel surcharge facilities.

Renewal fee is INR 2,500.

American Express Indian Airlines Credit Card

American Express Indian Airlines Credit Card has the following salient features:

The cardholders receive 10% discounts on business class flights and 15% discounts
on economy flights.

Renewal fee is INR 3750.

There is a 5% discount on super saver fares.

Regular interest rate is 1.9%.

Cardholders receive business class upgrades for free.

Cash advance fee is 1.9%.

Cardholders receive complimentary tickets.

Credit card issuer is AMEX.

Joining fee is INR 3750.

There are 0% fuel surcharge facilities that can only be availed at HPCL outlets.

HDFC Bank Titanium Credit Card

Following are the salient features of HDFC Bank Titanium Credit Card:

Cardholders receive exclusive concierge services.

Regular interest rate is 2.65% per month.

Cardholders receive rebates at hotels and clubs.

Cash advance fee is 2.5% per month. The minimum cash advance fee is INR 300.

There are accelerated rewards programs that are provided on the basis of expenditure
with the card.

Issuer is MasterCard.

Cardholders receive 0% fuel surcharge and balance transfer facilities.

Issuing bank is HDFC Bank.

Joining fees and renewal fees are variable.

Following are some other low interest credit cards that are available in India:

HDFC Bank Visa Signature Credit Card

BOBCARD Exclusive Woman credit card

HDFC Bank Platinum Plus Credit Card

BOBACRD Exclusive Youth Credit Card

HDFC Bank Corporate Credit Card

BOBACARD Silver Credit Card

Hero Honda SBI Credit Card

BOBACARD Exclusive Credit Card

BOBCARD Corporate Global Credit Card

Axis Bank Secured Credit Card

NEXTGEN BOBCARD Gold Credit Card

HSBC Platinum Credit Card

BOBACRD Gold Visa Credit Card

Yatra Barclaycard Platinum Credit Card

BOBACRD Gold MasterCard Credit Card

ABN AMRO Platinum Credit Card

CREDIT CARD FRAUDS

There is an international racket of cyber criminals. Credit card information in India is
sold to cyber criminals in other countries. The information is misused for carrying out
major financial frauds. . Due to lack of awareness, people submit personal details and
credit card information to fraudulent emails. Sometimes, fraudsters steal credit card
information. Some fraudsters go through trash to find discarded receipts or carbon for
obtaining information and then use the account number illegally.
There were underground carder forums where credit card numbers are bought and
sold. These forums bring together people who steal the numbers and those who use them.
An individual researcher in cyber crime and cyber laws, Patil said economic offences
using credit cards have increased in India and countries like US. An FBI report indicated
that credit cards were largely responsible for the $ 315 billion loss the US endured from
financial fraud in 2005. A study in Europe revealed that over 22 million customers fell
victim to credit card fraud in 2006. The numbers are increasing.
The frauds are increasing because of problem faced in extradition of cyber criminals
from other countries. Even during the panel discussion on cyber terrorism at the hackers
convention, cyber law expert Rohas Nagpal said India was so far not associated with any
extradition treaty with a foreign country due which the cyber criminals in could not be
held. US expert Chris Goggans said even US is facing difficulties in extradition of
criminals.
Today plastic is the convenient, easy and fashionable alternative to wads of paper. With
one swipe, credit cards have changed the way we live. Unfortunately, along with the
convenience has come related crime. Credit card fraud involves withdrawal of funds and
obtaining of goods and services by using an unauthorized account. Otherwise

inaccessible personal information stored on computers is stolen in order to use a card.

Due to the virtual explosion of credit card business throughout the world, security has
become critical in the entire process. There were about 60 million credit card holders in
the sixties and according to an estimate, the number has gone up to more than a trillion
now.
In India, credit card companies make a provision in their contract with the client that
they, the company, would not be liable for the fraudulent transaction unless the client
loses his/her card and reports the loss immediately. Sometimes the banks and credit card
companies try to save their skin by inserting a clause in the relevant contract. This is
purported to absolve the company in case a fraud occurs on the stolen card and the client
fails to notify the loss in time. This unilateral provision however has not stood the test of
legal scrutiny. The courts have placed the burden of loss on the issuers.
In India, the Mail Order Telephone Order (MOTO) type account for the bulk of credit
card frauds. This occurs when the card is not actually presented, but the details are given
on the application form to buy goods or services or when the transaction is done on the
telephone.
Fraud through fake cards is not as rampant in India as in the USA. Techniques have been
developed whereby the number and other information on the magnetic strip is erased and
a new number is embossed. When the card does not work on the swiping machine, the
merchant manually processes the details of the card to complete the sale.
This procedure is called skimming of the cards. In the USA, identity theft is also quite
prevalent and is supposed to be one of the fastest growing offences in America. The
fraudsters adopt another persons identity to gain access to their monetary sources. In the
case of online transactions, site cloning is resorted to where the site clone created is
made to look like the original site in order to obtain the credit card details of
unsuspecting customers. Similarly, false merchant sites are also created where cheap
goods lure customers into giving their card details.

Scared by the ever increasing cases of credit card fraud, the affected companies and
banks have taken various steps to minimize it. Manual reviews of the transactions on the
card are undertaken, but this requires a high level of human intervention and increases
costs. In the USA, Address Verification System (AVS) has been developed for use in the
card not present scenario
The system is designed to check whether the address given by the buyer matches with
the one on record. Visa has devised a Payer Authentication System based on PIN similar
to the system used on ATM cards. This is a channel between the bank and the customer
used to authorize online transactions. With the increase in cross border ecommerce the
issuers in India will have to update their arsenal to combat the forgers on the same lines
as their Western counterparts.
The Information Technology Act and Rules, passed in 2000, provide penalties for the
tampering of computer source documents and hacking of computer systems. No specific
mention has, however, been made of Credit cards or financial transactions. The RBI has
formed the Credit Information Bureau of India (CIBIL) in collaboration with Dun and
Bradstreet who will maintain the records of all individuals who want to avail of finance
from banks and credit card companies in India.

Fantastic Example of Credit Card Fraud

Amit Tiwari had many names, bank accounts and clients. None of them were for real.
With a plan that was both ingenious and nave, the 21-year-old engineering student from
Pune tried to defraud a Mumbai-based credit card processing company, CC Avenue, of
nearly Rs 900,000.He was arrested by the Mumbai Police on August 21, 2003 after
nearly an year of hide and seek with CC Avenue. He's been charged for cheating under
Section 420. Amit will remain in custody till Friday, August 29.

Protect yourself from credit Card fraud by following the simple suggestions given below:
Do's

If you lose your credit card, please report the loss immediately.

When you dispose of a card at the time of renewal/up gradation, please make sure
to cut it diagonally before disposal.

Please keep your card in a safe place. Treat it as carefully as you would treat your
cash.

Please ensure the card is swiped in your presence.

Please make sure you conduct any ATM transaction in complete privacy.

If your card is held back by the ATM, please inform the concerned Call
Center/Branch personnel immediately.

Before you use an ATM, please ensure that there are no strange objects in the
insertion panel of the ATM.

Please remember to take your Debit/Credit Card back after completing your ATM
transaction.

If you spot any suspicious looking people at or around any ATM, please inform the
security guard immediately.

Please change your ATM PIN once every 3 months.

When you make any transactions, please make sure that the charge slip is complete
before signing.

Please pay attention to your billing cycles. Please follow up with Banks Credit
Cards Customer Care if your bills don't arrive on time. A missing credit card bill
could mean an identity thief has taken over your account and changed your billing
address to cover his tracks.

Please be wary of promotional scams. Identity thieves may use phony offers to get
you to give them your personal information.

Please secure all personal information in your home, especially if you have
roommates, employ outside help or are having service work done in your home.

Please sign your credit cards as soon as you get them.

Please check your cards periodically to make sure none are missing.

Please destroy and dispose of copies of receipts, airline tickets, travel itineraries
and anything else that displays your card numbers.

Please keep items with personal information in a safe place. Please keep a list of all
credit cards, account numbers, expiry dates, and the customer service phone
numbers in a secure place so that you can quickly contact Banks Credit Cards
Customer Care in case your cards are lost or stolen.

Donts

Please do not disclose your Credit Card Number/ATM PIN to anyone.

Please do not hand over the card to anyone, even if he/she claims to represent the
Bank.

Never get carried away by strangers who try to help you use the ATM machine.

Please do not write the ATM PIN on the card or on a paper which you carry along
with the card.

Do's and don'ts for online transactions:

Always Bank's Netsafe feature for making online transactions. It is safe and secure.
If you have not registered for it, please visit the Netsafe page.

Preferably transact on sites which mandate validation of CVC2 value (the last 3
digits after the card number, mentioned on the signature panel at the back of the
card) or at websites that are certified by Verified-by-Visa or MasterCard Secure
Code.

Please be careful when providing personal information online. Never give out your
personal or account information to anyone you do not trust. Please make sure that
you verify a business's legitimacy by visiting its web site, calling a phone number
obtained from a trusted source, and/or checking with a reliable resource.

Please keep your passwords secret. Some online stores may require you to register
with them via a username and password before buying. Online passwords should
be kept secret from outside parties the same way you protect your ATM PIN.

Please look for signs of security. Identify security clues such as a lock image at the
bottom of your browser, or a URL that begins with https://. These signs indicate
that only you and the merchant can view your payment information.

Never send payment information via email. Information that travels over the
Internet (such as email) is not fully protected from being read by outside parties.
Most reputed merchant sites use encryption technologies that will protect your
private data from being accessed by others as you conduct an online transaction.

Please keep a record of your transactions. Just as you save store receipts, you
should keep records of your online purchases. Back up your transaction by saving
and/or printing the order confirmation.

Please review your monthly account statement thoroughly. Immediately investigate

suspicious activity to prevent any possible additional fraud before it occurs.
Promptly notify your financial institution of any suspicious email activities.

Please be wary of promotional scams. Identity thieves may use phony offers to get
you to give them your personal information.

In case you use your Credit Card for online transactions in Internet cafes or publicuse computers, please ensure that you erase the history of websites
visited/accessed.

Please open and respond only to emails that pass some basic tests, such as:Is the email from somebody you know?
Have you received emails from this sender before?
Are you expecting email with an attachment from this sender?
Does email from this sender with the contents described in the subject line and the
name of the attachment make sense?

CHAPTER 5

INDUSTRY ANALYSIS
Porters FIVE FORCE analysis for Indian Credit Card Industry
BARGAINING POWER OF
SUPPLIERS
-low supplier bargaining
power
- few alternatives available
-subject to RBI rules &

THREAT OF NEW
ENTRANT
-LOW BARRIERS TO
ENTRY

INDUSTRY
RIVALRY

- Govt. policies are

supportive

Intense
competition

-Globalization and
liberalization policy

BARGAINING POWER OF
CUSTOMERS
-High bargaining power
- Low switching cost
- Large no. of alternatives
-Homogenous services by banks

THREAT OF
SUBSTITUTES
High threat from
substitutes

KEY POINTS:
Supply:
Credit policies are decided by banks in consultation with the Reserve Bank of India(RBI).
Demand:
India is a growing economy and demand for household credit is high though it could be
cyclical.
Barriers to entry:
Licensing requirement, investment in technology and branch network.
Bargaining power of suppliers:
Few suppliers available such as Mastercard, Visa, Amex etc.
Bargaining power of customers:
For good creditworthy borrowers bargaining power is high due to the availability of large
number of banks and credit card providers.
Competition- High
There are public sector banks, private sector and foreign banks competing in similar business
lines.

RIVALRY AMONG THE INDUSTRY

Rivalry among the industry is very high. There are so many private, public and foreign banks
operating in the industry. They are fighting for same customers. Due to government
liberalization and globalization policy, banking sector became open for everybody. So, newer
and newer private & foreign firms are opening their branches in India. This has intensified
the competition. The numbers of factors that have contributed to the increase rivalry are as
follows:
1. A large no. of Banks providing credit card facility:
There are so many banks and non-financial institutions fighting for same-pie, which has
intensified competition.
2. High market growth rate:
India is seen as one of the biggest market place and growth rate in Indian credit card industry
is also very high. This has ignited the competition.
3. Low switching cost:
Customer switching cost is very low. They can easily switch from one credit card to another
credit card and very little loyalty exists.
4. In differentiate services:
Almost every credit card provides similar services. No differentiation exists. Every bank tries
to copy each others services and technology, which increases the level of competition.
5. High Fixed cost:
6. High exit barrier:
High exit barriers humiliate banks and credit card providers to earn profit and retain
customers by providing world-class services.

7. Low government regulations:

There are low regulation exist to start a new business due LPG policy adopted by India. So,
sector is open for everybody.

BARGAINING POWER OF SUPPLIERS

Suppliers of credit cards are credit card companies along the banks. In credit card industry
suppliers have low bargaining powers. Following are the reasons for low bargaining power of
suppliers.
1. Nature of suppliers
Suppliers are the credit card companies like MasterCard, Visa, Amex etc. they have tie ups
with various banks from whom they get ready clientele. In such situations suppliers hold less
bargaining power compared to clients.
2. Few alternatives
Suppliers i.e. Credit Card companies and banks have no alternatives than to tie up with each
other. Both have their own reasons. Credit Card companies are looking for ready clientele and
banks want to provide financial services to their clients.
3. RBI Rules and Regulations
Banks credit policies are subject to RBI rules and regulations. Banks have to behave in the
way that RBI wants. So, RBI takes all decisions relating to interest rates, transaction charges
etc. This reduces suppliers bargaining power.
4. Suppliers are not concentrated
Banking industrys suppliers are not concentrated. There are numerous suppliers with
negligible portion to offer. So, this reduces their bargaining power. If they were concentrated
then they can bargain with banks or can collectively invest in other no-risky projects.

BARGAINING POWER OF CUSTOMERS

Customers of the banks and credit card companies are those who are in need of credit, loans,
advances and use services of banks. Customers have high bargaining power. Following are
the reasons for high bargaining power of customers.
1. Large No. of alternatives
Customers have very large no. of alternatives. There are so many banks, which fight for same
pie. There are foreign banks, private banks. These all increase preferences for customers.
2. Low switching cost
Cost of switching from one card to another card is low. Banks have entered into fierce
competition by providing variety of cards with lots extra facilities. They are free to select any
banks service. Switching costs are becoming lower with internet banking gaining momentum
and as a result consumers loyalties are harder to retain.
3. Undifferentiated Service
Banks provide merely similar services. There is no much difference in services provided by
different banks. So, bargaining power of customer increases. They cannot be charged for
differentiation.
4. Full information about the market
Customers have full information about the market globalization and digitization consumers
have become advanced and sophisticated. They are aware with each market conditions. So,
banks have to be more competitive and customer friendly to serve them.

THREAT OF NEW ENTRANT

Barriers to an entry in banking industry no longer exist. So, lots of private and foreign bank
are entering in the market. Competitors can come from any industry to Disintermediate
banks. Product differentiation is very difficult for banks and exit is difficult. So, every bank
strives to survive in highly competitive market. So, we see intense competition and mergers
and acquisitions.
Government policies are very favourable to customers and day by day it is becoming hard for
credit card companies to satisfy needs of customers. There are less statutory requirements
needed to start a new venture. Every bank tries to achieve economies of scale through use of
technology and selecting and training man power.
Threat of substitutes
Competition from the non banking financial sector is increasing rapidly. Sony & software
giants such as microsoft are attempting to replace the banks as intermediaries. The threat of
substitute products is very high. These new products include credit union and investment
houses. One feature of using an investment house is that the fees that the investment house
charges are tax deductible, whereas a bank it is considered personal expenses, which are not
tax deductible. The rate of return with using investment houses is greater than a bank. There
are other substitutes as well for banks like mutual fund, Stocks(shares), Government
securities, debentures, gold, real estate etc. So, There is a high threat for substitute.
Conclusion
Indian credit card sector is one of the highly competitive sectors where high growth rate and
high degree of competition exist. Low entry barriers and high exit barriers ignites competition
in this industry. Every bank and credit card industry strives to survive in the shadow of these
barriers. There are so many substitutes available with customers and they have high
bargaining power whereas suppliers i.e. credit card companies have low power in their hands.

CHAPTER 6

ANALYSIS AND INTERPRETATION

Which type of credit card do you use?
Visa
MasterCard
Classic
Gold & Diners
Platinum

The pie chart drawn above suggests that MasterCard leads the competition in the Ahmedabad
city. 38% of the respondents use the MasterCard. It is followed by visa which is being used
by 30% of the respondents. The two are followed by classic, gold & diners and platinum
respectively.

Which is the issuing bank of credit card?

SBI
HDFC
ICICI
HSBC
Others

Majority i.e. 28% of the respondents have credit card facility from the SBI. There is stiff
competition between HDFC and ICICI for the second position, where HDFC has slight edge
over ICICI. HDFC is being used by 22% of the respondents whereas ICICI is being used by
21% of the respondents. HSBC is being used by 16% of the respondents and the rest 13%
percent used credit card from various other banks such as Standard Chartered, American
Express, Citibank etc.
Since how long you have been using the credit card?
< 2 years
2 4 years
4- 6 years
Above 6 years

Above pie chart suggests that 59% of the respondents has been using the credit card for more
than 4 years but less than 6 years. 26% of the respondents fall in the category of 2 4 years,
13% percent of them have been using the card for more than 6 years. Only 2% of the
respondents are such who have used credit card for less than 2 years.
How much satisfied you are with your existing credit card?
Highly satisfied
Satisfied
Neutral
Dissatisfied
Highly dissatisfied

Majority of the respondents had not much to comment on how satisfied they are. It can be
seen from the pie chart above. 43% of the respondents are neither satisfied nor dissatisfied
with the card that they are using i.e. they are neutral. 36% of the respondents says that are

satisfied with their credit card facility. Only 11% says they are highly satisfied and 9% says
that they are dissatisfied with the facility that they have. 1% of the respondents are highly
dissatisfied with the credit card facility.
What percentage of income do you save monthly?
< 10%
10% - 20%
20% - 30%
Above 30%

Saving level of the respondents has turn out to be largely in the range of 20% - 30%. 63% of
the respondents claims that they save 20% - 30% of their monthly income. 24% of them
saves between 10% - 20% and 13% of them saves above 30% of their monthly income. None
of them saves less than 10%.

What are the major purposes for which you use credit card?
Shopping
Hotels
Health
Petrol Pump
Travel and others

The main use of credit card if for refueling vehicles and for shopping. 32% of the card usage
is at petrol pumps and for shopping. For hotels and restaurants bill payments the card usage is
15%, for travelling and others its 11% and for health related payments card usage is merely
10%.
Occupation:
Self Employed
Business
Private Sector
Professional
Govt. Sector

From the sample surveyed , 37% of the respondents were from the private sector, 21% were
professionals, and 14% each from govt.sector, business and self employed. It shows people
working in the private sector are the major target audience of the credit card companies.
Sex:
Male
Female

The chart shows that more than 2/3 rd of the respondents were male. The major reason for this
could be that male have regular source of income. 76 % of the respondents were male
compared to just 24% of the female respondents. This Many of the housewives who uses the
credit card are those which are been issued as free card along with existing card.

TEST OF HYPOTHESIS
ISSUING BANK AND THE SEX OF THE CARD HOLDER
GENDER
FEMALE

MALE

SBI

17

HDFC

20

ICICI

18

HSBC

13

OTHERS

24

76

The above table shows the relationship between the credit card issued by different bank such
as SBI, HDFC, ICICI, HSBC and Others and the sex of the card holders.
Null Hypothesis: There is no significant association between the issuing bank and the sex of
the cardholder.
More than 75 % of the cardholders are male because they stable source of income. Most of
the females, who are housewives, use the additional cards which are issued at concessional
fee for family members. 71% of the cardholders use SBI, HDFC and ICICI.
Conclusion: The Null hypothesis is accepted as the calculated value = 3.159 and the table
value is 9.488.

ISSUING BANK AND AGE OF CARD HOLDER

AGE
ABOVE 60
< 18 YEARS

18 - 25 YEARS

25 - 40 YEARS

40 - 60 YEARS

YEARS

SBI

HDFC

15

ICICI

10

HSBC

OTHERS

The table and the graph have been drawn to show if the issuing bank varies among the card
holders of different age group. It is clear from the table that nearly 52% cardholders belong to
the age group of 18 40 years. This category consists of students who are using add on cards
or youngsters who are yet to settle in life; these people have a greater need for credit cards.
On the other hand, the number of cardholders in the age group of above 40 years is low
comparatively. These people are settled in life, they have the propensity to save more than
spend.
Null Hypothesis: There is no significant association between the issuing bank and age of the
cardholder.
Calculated Value = 15.243, Table Value = 21.026

Conclusion: Since the calculated value of chi-square is less than the table value, the
hypothesis that the credit card chosen by the cardholder does not depend on the age is
accepted.

ISSUING BANK AND OCCUPATION OF CARD HOLDER

OCCUPATION
SELF

CC_BANK

PRIVATE

EMPLOYED

BUSINESS

SECTOR

PROFESSIONAL GOVT. SECTOR

SBI

HDFC

15

ICICI

HSBC

OTHERS

From the table it can be seen that more than 50 % of the cardholders belong to the salaried
class i.e. the private and government sector employees, as they have a limited source of
income whereas the other 49% cardholders belong to the self employed and professional
group. The credit card helps the cardholders to meet sudden expenses in case of nonavailability of cash.
Null Hypothesis: There is no relationship between the issuing bank and the occupation of the
card holder.

Conclusion: Calculated Value = 31.779 Table Value = 26.296. Therefore the null hypothesis
that there is no relation between issuing bank and the occupation of the cardholder is rejected.

ISSUING BANK AND INCOME OF CARD HOLDER

INCOME
RS. 10000 - RS. RS. 15000 - RS.

CC_BANK

< RS. 10000

15000

20000

ABOVE 20000

SBI

14

HDFC

22

ICICI

11

HSBC

OTHERS

10

The above table and graph has been drawn to determine the relationship between the different
banks issuing credit cards and the monthly income of the card holders. Most of the people
who have taken credit cards are those whose income is greater than 10000 pm. Those with
higher income are more willing to avail the type of services offered by banks. Also banks take
all precautions in selecting the cardholders; they generally do not issue cards to a person
unless they are satisfied about the credit worthiness of the applicants.

Null Hypothesis: There is no association between the issuing bank and the monthly income
of the card holders.
Calculated Value =

ISSUING BANK AND SAVINGS OF CARD HOLDER

Table

15.507

SAVINGS

CC_BANK

11.987,

< 10%

10% - 20%

20% - 30%

ABOVE 30%

SBI

13

Conclusion:

HDFC

18

Chi-square value is

ICICI

16

less than the table

HSBC

value.

OTHERS

Hypothesis that there

The

The

is no association between the credit card selected and monthly income of the card holder is
true.

The table shows the relationship between bank issuing credit cards and savings of the
cardholders. Savings is shown as a percentage of the monthly income. Approximately, the
tendency of the people is to above something in between 20% - 30% of their monthly
income. Credit cards not only help the cardholders to acquire purchasing power, but also help
in rotation of funds.
GENDER

Null
The

MALE

YES

11

19

NO

13

57

issuing

monthly savings
cardholder

are

Hypothesis:

FEMALE

bank

and

of

the

independent of

each other.
Calculated Value: 14.696, Table Value = 15.507
Conclusion: The calculated value of chi-square is less than the table value, hence it can be
inferred that the basis on which the cardholders selects the issuing bank doesnt depend on
their monthly income.

CHANGE IN BUYING BEHAVIOUR AND SEX OF CARD HOLDER

This table is drawn to show if the change in buying behaviour of a credit card holder is
INCOME
RS. 10000 - RS.

RS. 15000 - RS.

15000

20000

ABOVE 20000

< 5000

5000 - 10000

15000 - 25000

18

20

ABOVE 25000

41

associated with sex. Respondents were asked to tick either Yes or No to show if credit
cards have brought a change in their buying pattern and the data collected was tabulated.
About 30% of them feel that credit cards have changed their buying behaviour significantly.
They go for instant purchases or meet sudden cash shortage with the help of cards.
Comparatively, 84% of females feel that there is a change in their buying behaviour.
Null Hypothesis: The change in buying behaviour is not related to the sex of the card holder.
Calculated Value = 3.770, Table Value = 3.841
Conclusion: Since the calculated value is less than the table value, the hypothesis that
changes in buying behaviour are not related to the sex of the card holder is accepted.

SPENDING LIMIT ON CREDIT CARD AND INCOME OF CARD

HOLDER

The above table and graph would help us draw an inference about the relationship between
the average monthly spending limit using credit cards and the monthly income. The figure
says that those with income level above 20000 pm have been availed spending limit above
25000 to large extent. Therefore the distribution for this would be skewed, in the sense that
those who have higher income would have higher spending limit.
Null Hypothesis: The monthly spending limit of the cardholder is not related to the monthly
income. Calculated value = 33.609, Table Value = 12.592
Conclusion: The Calculated value is greater than the table value which means that the
hypothesis that monthly spending limit of the cardholder is not related to the monthly income
is rejected.

PURPOSE OF CREDIT CARD AND AGE OF CARD HOLDER

AGE
ABOVE 60
18 - 25 YEARS

25 - 40 YEARS

40 - 60 YEARS

YEARS

SHOPPING

11

10

HOTELS

22

18

HEALTH
PETROL PUMP
TRAVEL & OTHERS

The table and the graph above determines the relationship between purpose for which the
credit card is used and the age of the card holder. The early nester-first time user, 18 45
years of age, just married, new to his career, has greater need for consumer finance to buy
durables, clothes etc. The cardholders above 40 years are more prudent and cautious when
they purchase as they dont want to get in heavy debts.
Null Hypothesis: The purpose of credit card usage doesnot depend upon the age of the card
holder.
Calculated Value: 10.966, Table Value = 21.026
Conclusion: The value of chi-sqaure is less than the table value, the hypoyhesis that there is
no association between the age of the cardholders and the purpose for which cards are used
holds good.

PURPOSE OF CREDIT CARD AND INCOME OF CARD

HOLDER
INCOME
RS. 10000 - RS. RS. 15000 - RS.
15000

20000

ABOVE 20000

SHOPPING

16

HOTELS

35

HEALTH
PETROL PUMP
TRAVEL & OTHERS

The above table determines the relationship between the purpose for which the credit card is
used and the income of the cardholders. If a person wants to make purchase, he needs money;
OCCUPATION
SELF

PRIVATE

PROFESSION

GOVT.

EMPLOYED

BUSINESS

SECTOR

AL

SECTOR

< 2 YEARS

2 - 4 YEARS

14

4 - 6 YEARS

10

22

12

ABOVE 6 YEARS

otherwise he has to postpone the purchase. But credit cards help him to purchase whatever he
wants and pay later.
Null Hypothesis: The purpose for which the credit card is used is independent of the card
holders income.
Calculated value = 12.239, Table Value = 15.507
Conclusion: The value of chi-square is less than the table value, hence the hypothesis is
accepted.

MEMBERSHIP DURATION AND OCCUPATION OF THE CARD HOLDERS

The above table shows the relationship between the duration of the membership and the
occupation of the cardholder. Nearly 60% of them have been using the credit card for the
period greater than 4 years and less than 6 years.
Null Hypothesis: There is no significant difference between membership duration and
occupation Value: 28.739, Table Value: 21.026
Conclusion: The calculated value is greater than the table value hence the null hypothesis is
rejected. This means that there is significant relation between membership duration and the
occupation of the cardholders.

CORRELATION ANALYSIS
GENDER * SPD_LIMIT Cross tabulation
Count
SPD_LIMIT
< 5000
GENDER

Total

5000 - 10000

15000 - 25000

ABOVE 25000

Total

FEMALE

10

24

MALE

37

35

76

44

45

100

From the above we can infer that 76% of the respondents are male which more
than 2/3 rd of the sample size. 41% of the females have credit limit above 25,000
whereas 46% of the males have credit limit above 25,000. This is obvious as
males have stable source of income and again all the females using credit card
are not working women. Many housewives uses credit card which are issued at
concessional fees along with card hold by the male. Overall figures reveal that
majority of the cardholders have the credit above 15,000.

INCOME * SPD_LIMIT Cross tabulation

Count
SPD_LIMIT
< 5000
INCOME

5000 - 10000

15000 - 25000

ABOVE 25000

Total

RS. 10000 - RS. 15000

10

RS. 15000 - RS. 20000

18

27

ABOVE 20000

20

41

63

44

45

100

Total

The above table and graph clearly shows that their direct correlation between the
income of the card holder and the spending limit allowed to the card holder. As
the income of the card holder increases the spending limit on the card also
increases. This is obvious as bank cannot grand higher credit limit to those who
doesnt have repayment capacity and doing so increases the chances of default.
From the figures can derive that more than 90% of the credit card holders have
credit limit above 15,000 and almost 90% of them have income above 15,000 per
month.

OCCUPATION * SPD_LIMIT Cross tabulation

Count
SPD_LIMIT
< 5000
OCCUPATION

5000 - 10000

15000 - 25000

ABOVE 25000

Total

SELF EMPLOYED

14

BUSINESS

14

PRIVATE SECTOR

22

10

37

PROFESSIONAL

16

21

GOVT. SECTOR

14

44

45

100

Total

The figure gives clear indication that more than 50% of the cardholders are
salaried class people and this category is scattered over all the categories of
spending limit i.e. depending on the salary of the person the credit is granted.
Whereas on the other hand the figures of the professionals and business class
people show that they have credit limit above 15,000. This is so because banks
generally issues credit cards to those professionals and business people who are
well established.

CONSUMER SPENDING BEHAVIOUR ACCORDING OCCUPATION

TRAVEL
&
OTHERS

TOTAL

SHOPPING

HOTELS

HEALTH

PETROL
PUMP

11

27

11

31

26

11

25

10

81

17

15

47

32

SELF
EMPLOYED
BUSINESS
PRIVATE
SECTOR
PROFESSIONAL
GOVT. SECTOR

The statistics shows that private sector employees makes the most use of the
credit card. They use the card to cover up the cash shortage at the month end.
The two main purpose for which the credit card is used are for fuel and
shopping. Almost 63% of the private sector people use credit card these two
purpose. These two purpose dominate the credit card usage in all categories.

CONSUMER SPENDING BEHAVIOUR ACCORDING INCOME

SHOPPING

HOTELS

HEALTH

PETROL
PUMP

TRAVEL
&
OTHERS

TOTAL

RS.
10000 RS.
15000

18

RS.
15000 RS.
20000

23

19

61

ABOVE
20000

43

21

16

43

16

139

The respondents having income of above 20000 are the highest user of the credit
card. In all the categories these people dominate the credit card usage. This is so
because they have higher capacity to repay the credit and also they have higher
credit limit. Income group of 15000 to 20000 mostly use the credit card for
shopping and fuel.

CONSUMER BUYING PATTERN AND AGE OF THE CARD HOLDER

SHOPPING

HOTELS

HEALTH

PETROL
PUMP

TRAVEL
&
OTHERS

TOTAL

18 - 25
YEARS

20

25 - 40
YEARS

34

11

31

12

96

40 - 60
YEARS

25

16

25

80

ABOVE
60
YEARS

22

This correlation table shows that people falling in the age group of 25 60 are
the major user of the credit card holders. This class constitute of those who are
settling in the life, who have spend for the domestic needs, for education of the
children. In short we can say that this group have higher obligation. Again in this
usage pattern the is widely used for shopping and fuel refilling. The usage of the
people within 25 to 60 years accounts for more than 80% of the card usage.

AGE * SPD_LIMIT Cross tabulation

Count
SPD_LIMIT
< 5000
AGE

Total

5000 - 10000

15000 - 25000

ABOVE 25000

Total

18 - 25 YEARS

10

25 - 40 YEARS

24

16

43

40 - 60 YEARS

25

37

ABOVE 60 YEARS

10

44

45

100

The picture which emerges from the above chart is that age group of 25 40
years mostly have credit limit of 15,000 to 20,000 whereas age group of 40 -60
years have credit limit of above 20,000. The major reason for this can be the age
group of 25 40 years is still not yet settle or not as well settled as age group of

40 -60 years. Hence banks are more liberal on granting credit limit to age group
of 40 60 years than to 25 40 years of age group.

AGE * SAVINGS Cross tabulation

Count
SAVINGS
10% - 20%
AGE

Total

20% - 30%

ABOVE 30%

Total

18 - 25 YEARS

10

25 - 40 YEARS

13

30

43

40 - 60 YEARS

24

11

37

ABOVE 60 YEARS

10

24

63

13

100

The above table show the relationship between the age group and the percentage
savings of the respondents. The trend is very clear. More than 63% of the

respondents are saving between 20 to 30 % of their monthly income. Another

trend which can be observed is that people in the age group of 40 60 years
saves more than other age groups. This is again obvious as the burden on their
shoulder is more than any other. None of the respondents in the age group of 18
40 years of age are able to save more than 30%. The reason again might be that
they may not be well settled and need to spend extra bit on the necessities. Also
this group spends more freely than other age groups.

CHAPTER 7

FINDINGS AND
RECOMMENDATIONS
Findings of the Study
The following are the major findings with regard to the study on the usage pattern of the
credit card holders.
1. Most of the respondents are male cardholders, because they are employed and have a
good source of income. (76%)
2. Most of the respondents are in the age group 25 40 years. The tendency and need to
purchase is more at this age. (43%)
3. Majority of the cardholders belong to the salaried class of the Government and Private
Sector, when their salary is exhausted at the end of the month, the credit card helps
them to overcome a temporary cash crisis. (51%)
4. Respondents with higher salary utilize the cards to the maximum whereas those with
lower salary are more cautious.
5. Lower the savings, higher is the requirement for the use of cards. Purchases can be
made through cards and can be paid from next months salary because the limit is 45
days for settling the dues.
6. Male respondents feel that there is a definite change in their consumption behaviour.
Credit cards can be used for both personal and business purpose. There is no need for
postponement of purchases due to cash shortage.
7. Credit cardholders with higher income feel that credit cards have changed their
consumption pattern. The credit card purchase is not always a rational buy; some part
of it is also impulse buying.

8. Consumers are catching on the convenience of plastic. The number of card holders
has increased in the recent as it is evident from the rise in the number of members in
two years.
9. Salesmen of the banks are the main source of awareness to the cardholders.
10. Master and visa cards are two of the leading card brands in India. One of the main
reasons for MasterCards dominance is its advertising which is appropriately
Indianized.
11. HDFC bank cards are more popular and widely accepted. On the main reasons for
HDFC dominance is its advertising. The bank has done really good job by attracting
the number of customers through personal contacts and advertisements. HDFC
provide a lot of additional benefits like phone banking, bonus points and internet
banking etc to meet the needs of the different class of people.
12. In recent years, the number of member establishments accepting credit cards has
increased which induces the customer to avail the credit facility and increase their
purchasing power.
It is seen from the finding of the study that credit cards are mostly used by cardholders for
purchase. Hence credit cards help the conscious consumers of the largest group of salary
class to enhance their purchasing power.

SUGGESTIONS
With the multiplying volumes and the contest for efficiency, marketers vie with each
other out to the existing and potential card holders. A shakeout is inevitable in this field of
marketing. The card issuers face many difficulties and the credit card service market also
suffers from certain bottle necks which can be outlined below.
1. The banks must reduce the service charge which is to be paid by the card holders
for ticket booking, petrol fills and certain establishments that charge 2 to 3% on
the total price.
2. Women should be induced to use credit cards by creating awareness on the
benefits derived from them. New schemes should be introduced to cater to their
specific needs.
3. The methods should be adopted to bring degree of popularization through mass
media channels like Television, Radio, Airports Centres, Star Hotels, Railway
Centres, and Super Markets etc.
4. Customer education is needed for increased awareness, facility derived and ways
to make the best use of the card.
5. The credit card holder should sincerely and honestly repay the balances in time
and facilitate the system to work out smoothly.
6. The credit cardholders should plan their economic affairs i.e. they should not buy
unnecessary or unwanted things simply because they have credits which does not
require immediate payment. They should always think about the future
commitments and arrange funds for in time.
7. The Admission fees and renewal fees should be reduced so that it can attract more
customers.
8. The interest charged by the credit card agencies is much higher than the normal
lending rates by the bankers and it should be reduced.
9. The only way banks are going to survive in the credit card business is by
improving their overall functioning and infrastructural systems. This especially
true of some nationalized banks that delay billings due to a lack of adequate
informational systems and trained persons.

CHAPTER 8

CONCLUSION
The liberalization of the economy, boost to exports and the increased business
travelling and spending in India favour the credit card industry. The present
environment needs to be matched by increased awareness about credit cards
among retailers and should be fool proof for preventing misuse. Credit cards are
catching up with the middle class despite its late entry in the Indian market.
They are no longer a status symbol as it is only a mode of convenience and
integral part of the busy life style of the people, matching with the pace of
development. Credit cards all set to make a definite impact on the buying
behaviour of people. In present days, the credit card is mostly used by urban
people but it is not easily available to rural people. Hence, all commercial banks
should take necessary steps to provide credit cards to rural people. It leads to
increasing the personal income, business development of bank as well as
economic development.
From the analysis of the individual questions we can come to the conclusion that
most preferred bank by the credit card holders is HDFC bank followed by ICICI
bank. MasterCard is the widely preferred card company. Majority of the
respondents approached were using credit card for the period of 4 6 years.
Almost 80% of the respondents are in the range of neutral to satisfied level with
their credit card service. Credit cards are widely used by respondents for mainly
two purposes viz. Fuel and shopping. Savings as percentage of monthly income
is largely in the 20% to 30%.

From the analysis of the individual questions we can come to the conclusion that
most preferred bank by the credit card holders is HDFC bank followed by ICICI
bank. MasterCard is the widely preferred card company. Majority of the
respondents approached were using credit card for the period of 4 6 years.
Almost 80% of the respondents are in the range of neutral to satisfied level with
their credit card service. Credit cards are widely used by respondents for mainly

two purposes viz. Fuel and shopping. Saving as percentage of monthly income is
largely in the range of 20
Majority of the null hypothesis has been accepted except relationship between
occupation of the cardholder and monthly spending limit and monthly income of
the cardholder. This clearly means that there is no explicit relationship between
other variables other than occupation and monthly income and spending limit
monthly income of the card holders. This is obvious as banks do consider the
occupation and the income level of the card holders while granting the spending
limit for each card holder.
Correlation analysis reveals that the correlation exists between spending limit
and the gender and also with the income level of the respondents. Also the usage
pattern and the occupation of the card holders are correlated as private are more
in need of the credit at the end of the month.

BIBLIOGRAPHY
1. Ausubel l (1991), The failure of competition in the credit card
m a r k e t s , A m e r i c a n E c o n o m i c R e v i e w , Vol . 8 1 , N o . 1 p p . 5 0 - 8 1
2 . B r i t o D L a n d H a r t l e yp ( 1 9 9 5 ) C o n s u m e r r a t i o n a l i t y a n d C r e d i t
c a r d s , J o u r n a l o f p o l i t i c a l e c o n o m y, Vol . 1 0 3 , p p . 4 0 0 - 4 3 3
3. Calem P S and Mester L J (1995) Consumer behavior and
stickiness of credit card interest rates,

American Economic

R e v i e w , Vol 8 5 , N o . 5 , P P. 1 3 2 7 - 1 3 3 6
4. Berlin M and Mester J (2004), credit card rates and consumer
s e a r c h , R e v i e w o f f i n a n c i a l E c o n o m i c s Vol . 1 3 , p p . 1 7 9 - 1 9 8

Journals
ICFAI journal of service marketing. Vol 6 no 1 2008
ICFAI journal of service marketing. Vol 4 2008
Indian journal of finance April 2009

Websites
www.RupeeTalk.in
www.creditbhai.com
w w w.a n s w e r s . c o m
w w w.h s b c . c o . i n / 1 / 2 / p e r s o n a l / c r e d i t - c a r d s
w w w.i c i c i b a n k . c o m / p f s u s e r / c a r d s / c r e d i t c a r d / c c _ h o m e . h t m
w w w.c yb e r c e l l m u m b a i . c o m / c y b e r - c r i m e s / c r e d i t - c a r d - f r a u d
www.hdfc.com

ANNEXURE
Note:
We, the students of N. R. Institute of Business Management, have undertaken the
project to study the usage pattern of credit card holders of Ahmedabad city.
The details provided in this questionnaire would be kept confidential and would
be used purely for the academic purpose.

Do you use credit card?

Yes
No

Name: ______________________________________________
Sex:
Male
Female

Age:
< 18 years
18 25 years
25 40 years
40 60 years
Above 60 years

Occupation:
Self Employed
Business
Private Sector
Professional
Govt. Sector

1. Which credit card do you use?

Visa

MasterCard
amex
OTHERS

2. Which type of credit card do you use?

Silver

Gold
Platinum
Others
3. Which is the issuing bank of credit card?
SBI
HDFC
ICICI
HSBC
Others

Specify: _____________________

4. Since how long you have been using the credit card?
< 2 years
2 4 years
4- 6 years
Above 6 years

5. How much satisfied you are with your existing credit card?
Highly satisfied
Satisfied
Neutral
Dissatisfied
Highly dissatisfied

6. From where did you have the information about the credit
card?

Print Media
Sales Person
Friends
Internet
Television

7. What is your monthly income?

< 10,000
10,000 15,000
15,000 20,000
Above 20,000

8. What percentage of income do you save monthly?

< 10%
10% - 20%
20% - 30%
Above 30%

9. What is the spending limit of your credit card?

< 5000
5000 15,000
15,000 25,000
Above 25,000

10.

Has credit card brought any changes in your monthly

spending?
Yes
No

11. What are the major purposes for which you use credit card?
Shopping
Hotels
Health
Petrol Pump
Travel and others

HYPOTHESIS OUTPUT FROM SPSS SOFTWARE

Custom Tables

Output Created

20-Mar-2010 21:56:30

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

100

Syntax

CTABLES
/VLABELS VARIABLES=CC_BANK
GENDER DISPLAY=LABEL
/TABLE CC_BANK [COUNT F40.0] BY
GENDER
/CATEGORIES VARIABLES=CC_BANK
GENDER ORDER=A KEY=VALUE
EMPTY=INCLUDE
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.016

Elapsed Time

0:00:00.012

GENDER

CC_BANK

FEMALE

MALE

Count

Count

SBI

17

HDFC

20

ICICI

18

HSBC

13

OTHERS

Pearson Chi-Square Tests

GENDER
CC_BANK

Chi-square
df
Sig.

3.159
4
.532a

Results are based on nonempty rows and

columns in each innermost sub table.

Notes
Output Created

20-Mar-2010 22:00:19

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=CC_BANK
OCCUPATION DISPLAY=LABEL
/TABLE CC_BANK [C][COUNT F40.0] BY
OCCUPATION [C]
/CATEGORIES VARIABLES=CC_BANK
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES
VARIABLES=OCCUPATION ORDER=A
KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.000

Elapsed Time

0:00:00.018

OCCUPATION
GOVT.
SELF EMPLOYED

BUSINESS

PRIVATE SECTOR

PROFESSIONAL

SECTOR

Total

Count

Count

Count

Count

Count

Count

CC_BAN SBI
K

22

HDFC

15

28

ICICI

21

HSBC

16

OTHER

13

Pearson Chi-Square Tests

OCCUPATION
CC_BANK

Chi-square

31.779

df
Sig.

16
.011*,a

Results are based on nonempty rows and columns

in each innermost sub table.
*. The Chi-square statistic is significant at the 0.05
level.

Notes
Output Created

20-Mar-2010 22:01:54

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=CC_BANK
INCOME DISPLAY=LABEL
/TABLE CC_BANK [C][COUNT F40.0] BY
INCOME
/CATEGORIES VARIABLES=CC_BANK
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=INCOME
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.031

Elapsed Time

0:00:00.024

INCOME

CC_BANK

RS. 10000 - RS.

RS. 15000 - RS.

< RS. 10000

15000

20000

ABOVE 20000

Total

Count

Count

Count

Count

Count

SBI

13

22

HDFC

22

28

ICICI

10

21

HSBC

16

OTHERS

10

13

Pearson Chi-Square Tests

INCOME
CC_BANK

Chi-square

12.808

df
Sig.
Results are based on nonempty rows and
columns in each innermost sub table.

8
.119a

Notes
Output Created

20-Mar-2010 22:03:02

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=CC_BANK
SAVINGS DISPLAY=LABEL
/TABLE CC_BANK [C][COUNT F40.0] BY
SAVINGS
/CATEGORIES VARIABLES=CC_BANK
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=SAVINGS
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.016

Elapsed Time

0:00:00.019

SAVINGS

CC_BANK

< 10%

10% - 20%

20% - 30%

ABOVE 30%

Total

Count

Count

Count

Count

Count

SBI

13

22

HDFC

18

28

ICICI

16

21

HSBC

16

OTHERS

13

Pearson Chi-Square Tests

SAVINGS
CC_BANK

Chi-square

14.696

df
Sig.
Results are based on nonempty rows and
columns in each innermost sub table.

8
.065a

Notes
Output Created

20-Mar-2010 22:04:24

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=CHANGE
GENDER DISPLAY=LABEL
/TABLE CHANGE [COUNT F40.0] BY
GENDER
/CATEGORIES VARIABLES=CHANGE
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=GENDER
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.016

Elapsed Time

0:00:00.015

GENDER

CHANGE

FEMALE

MALE

Total

Count

Count

Count

YES

11

19

30

NO

13

57

70

Pearson Chi-Square Tests

GENDER
CHANGE

Chi-square

3.770

df
Sig.
Results are based on nonempty rows and
columns in each innermost sub table.

1
.052

Notes
Output Created

20-Mar-2010 22:06:04

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=SPD_LIMIT
INCOME DISPLAY=LABEL
/TABLE SPD_LIMIT [COUNT F40.0] BY
INCOME
/CATEGORIES VARIABLES=SPD_LIMIT
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=INCOME
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.016

Elapsed Time

0:00:00.027

INCOME

SPD_LIMIT

RS. 10000 - RS.

RS. 15000 - RS.

< RS. 10000

15000

20000

ABOVE 20000

Total

Count

Count

Count

Count

Count

< 5000

5000 - 10000

15000 - 25000

18

20

44

ABOVE 25000

41

45

Pearson Chi-Square Tests

INCOME
SPD_LIMIT

Chi-square

33.609

df
Sig.

6
.000*,alb

Results are based on nonempty rows and

columns in each innermost sub table.
*. The Chi-square statistic is significant at the
0.05 level.
Notes
Output Created

20-Mar-2010 22:10:26

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=PURPOSE1 AGE
DISPLAY=LABEL
/TABLE PURPOSE1 [COUNT F40.0] BY
AGE
/CATEGORIES VARIABLES=PURPOSE1
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=AGE
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.031

Elapsed Time

0:00:00.036

18 - 25 YEARS

25 - 40 YEARS

40 - 60 YEARS

ABOVE 60 YEARS

Total

Count

Count

Count

Count

Count

PURPOS SHOPPING
E1

11

10

26

HOTELS

19

HEALTH

PETROL PUMP

22

18

46

TRAVEL &

OTHERS

AGE

Pearson Chi-Square Tests

AGE
PURPOSE1

Chi-square
df
Sig.

Results are based on nonempty rows and

columns in each innermost sub table.

10.966
12
.532a,b

Notes
Output Created

20-Mar-2010 22:12:04

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=PURPOSE1
INCOME DISPLAY=LABEL
/TABLE PURPOSE1 [COUNT F40.0] BY
INCOME
/CATEGORIES VARIABLES=PURPOSE1
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES VARIABLES=INCOME
ORDER=A KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.031

Elapsed Time

0:00:00.031

[DataSet1] C:\Users\compaq\Desktop\GRANDPROJECT.sav

Table 1

INCOME

PURPOSE1

RS. 10000 - RS.

RS. 15000 - RS.

15000

20000

ABOVE 20000

Total

Count

Count

Count

Count

SHOPPING

16

26

HOTELS

19

HEALTH

PETROL PUMP

35

46

TRAVEL & OTHERS

Pearson Chi-Square Tests

INCOME
PURPOSE1

Chi-square
df
Sig.

12.239
8
.141a,b

Results are based on nonempty rows and

columns in each innermost sub table.

Notes
Output Created

20-Mar-2010 22:13:39

Comments
Input

Data

C:\Users\compaq\Desktop\GRANDPROJEC
T.sav

Active Dataset

DataSet1

Filter

<none>

Weight

<none>

Split File

<none>

N of Rows in Working Data File

Syntax

100
CTABLES
/VLABELS VARIABLES=CC_DURA
OCCUPATION DISPLAY=LABEL
/TABLE CC_DURA [COUNT F40.0] BY
OCCUPATION
/CATEGORIES VARIABLES=CC_DURA
ORDER=A KEY=VALUE EMPTY=INCLUDE
/CATEGORIES
VARIABLES=OCCUPATION ORDER=A
KEY=VALUE EMPTY=INCLUDE
TOTAL=YES POSITION=AFTER
/SIGTEST TYPE=CHISQUARE
ALPHA=0.05 INCLUDEMRSETS=YES
CATEGORIES=ALLVISIBLE.

Resources

Processor Time

0:00:00.016

Elapsed Time

0:00:00.017

OCCUPATION
PRIVATE
SELF EMPLOYED

BUSINESS

SECTOR

PROFESSIONAL

GOVT. SECTOR

Total

Count

Count

Count

Count

Count

Count

CC_DU < 2 YEARS

RA

2 - 4 YEARS

14

26

4 - 6 YEARS

10

22

12

59

ABOVE 6

13

YEARS

Pearson Chi-Square Tests

OCCUPATION
CC_DURA

Chi-square

28.789

df
Sig.

12
.004*,a,b

Results are based on nonempty rows and

columns in each innermost subtable.
*. The Chi-square statistic is significant at the
0.05 level.