Credit card lending boom

This is followed by $287 billion in loans & bonds rated below investment grade raised by European companies, since the beginning of 2007. With PE firms and hedge funds pumping truck loads of money into debt ridden & virtually moribund companies, investors are gambling on their life. Asia too has an unusual spending story to tell. Never before in the history of Asia, people have witness such huge credit card lending boom and never before Asians have used credit cards to purchase houses. Bank for International Settlement (BIS) in it’s June Bulletin, anticipates a credit card bubble for the Asian economies, which till now has been individually experienced by Hong Kong in 2002, Korea (15% indebtness in 2003) & Taiwan (9% indebtness in 2005). According to BIS, the total credit card usage volume, increased by 200-500% in many Asian markets between 1998 and 2005. By 2005, credit card receivables in these markets ranged between 3-15% of total household lending. At a time when profits are raining, it is difficult to ring alarm bells, but prudential measures should be put in place.

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Source : IIPM Editorial, 2007

An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative