Rapid Increase in Non-Performing Loans: High Rates in Personal Credit Card Debt and Consumer Loans

November 11, 2024 BTT

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High interest rates and reduced purchasing power in Turkey are leading to a significant rise in non-performing loans, especially in personal credit card debt. According to the Banking Regulation and Supervision Agency (BDDK), non-performing loan ratios for individual credit cards and consumer loans have reached critical levels.

1. Personal Credit Cards and Consumer Loans

In the first 10 months of 2024, non-performing loans in personal credit cards increased by 200%, while individual loan defaults rose by 111%. The total amount of non-performing personal credit card debt reached 46.1 billion TL by November, up from 16 billion TL at the beginning of the year. This surge means that 65.2% of all defaulted personal credit card debt accumulated within this 10-month period. Consumer loans also saw a rise, with defaults for the period reaching 38%.

2. Corporate Credit Cards and Consumer Loans

Corporate credit cards experienced a significant increase in defaults as well. Non-performing loans for corporate credit cards stood at 3.6 billion TL in January but rose by 49.9% to 7.3 billion TL by November. Auto, housing, and personal needs loans also saw higher default rates, reaching 37.5%, 26.9%, and 38.2%, respectively.

3. Lowest Default Rate in Commercial Loans

Commercial loans had the lowest default rate at 18.9%. Non-performing commercial loans increased from 145.9 billion TL in January to 179.9 billion TL by November. SME loan defaults also rose, reaching 78 billion TL in November from 57.1 billion TL at the beginning of the year. Sector-wide, the ratio of non-performing loans to total loans is currently at 1.71%.

Overall Situation and Implications

This rapid deterioration in individual credit card and consumer loans over the past 10 months indicates that the Turkish economy is struggling under high interest rates and weakened purchasing power. The high default rate in personal credit card debt raises concerns for economic stability.