Bad debts decline even as credit card use increases: BSP

MANILA — Banks in the Philippines have reported fewer bad debts despite an increase in credit card usage over the past year, the Bangko Sentral ng Pilipinas said Monday.

BSP Governor Felipe Medalla noted that “from a peak of 10% non-performing loans (NPLs) in November 2020, the latest data showed that banks’ NPLs had declined to 5.7% at the end of July”.

Medalla said this was a rate close to pre-pandemic levels.

BSP Deputy Governor Chuchi Fonacier noted that NPLs or bad debts have decreased despite an increase in credit card usage.

“Credit card billings increased 41.4% year over year in June 2022, compared to growth of 29.5% in the same period last year,” Fonacier said.

Credit card receivables also rose 23.7% annually, higher than the 2.2% year-on-year contraction recorded a year ago, she added.

Fonacier also praised the way credit card companies are helping borrowers affected by difficult economic circumstances.

“At the end of July 2022, the majority of restructured consumer loans were credit card receivables of 6 billion pesos, representing 56.3% of the shares,” she said.

Credit Card Association of the Philippines executive director Alex Ilagan said credit card companies are doing their part to help struggling borrowers.

“As the effects of the pandemic linger, CCAP and its members will continue to work together to offer more liberal debt restructuring/forbearance programs to allow financially distressed cardholders [to] repay their obligations and regain a good credit rating,” Ilagan said.

Information campaigns to combat online/cyber fraud have also been launched by the organization, he added.

VISA data covering Filipinos and their payment transactions in 2021 showed that the trend towards cashless transactions has been accelerated by the COVID-19 pandemic.

The majority of Filipino respondents actually expect the Philippines to be cashless within the next 7-10 years, with payments being made through credit cards, debit cards, payment apps and QR codes.

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