Consumer Credit & the Indian Middle Class

WSJ: Consumer credit, whether cards or car loans, is relatively new to India. Fifteen years ago, even home loans were hard to come by. As regulations on lending were relaxed and India's urban middle class swelled with 20-somethings hungry for the latest cellphone model, credit expanded to meet the need.

Banks went too far, analysts say, issuing cards indiscriminately to people in rural areas and lower-income groups without regular salaries. The number of credit cards in India, while still only a fraction of the population, has more than tripled in the past five years, to almost 30 million. In the year ended March 31, Indians charged more than $14 billion on their cards, more than three times the amount charged four years earlier.

The amount of unsecured loans and credit-card receivables more than three months overdue is about 7% to 9% of total loans outstanding this year, and is about to head as high as 15%, according to ratings agency Crisil Ltd. in Mumbai.