Business Environment

Business Environment CASE STUDY (20 Marks) In 2003, Britain accumulated a lot of credit. According to a Bank of England report, credit card lending formed 7.16% of the total lending to individuals of the UK for the month of September Along with the increase in credit card lending, credit card debts also increased. The Bank of England revised its interest rate to keep a check on the increasing amounts of debt and inflation. The credit card lenders are dealing aggressively with their customers by going to the courts and also engaging bailiffs. They are also selling the debts to the debt collection agencies.

Answer the following question. Q1. Discuss how the problem of accumulating credit card debt is contributing to the increase in the nonperforming assets of banks and creating a vicious cycle in the economy Q2. Explain what steps the Bank of England can take to deal with the problem