Credit Card Complaints Jump 20% As Private Banks See Rising Grievances

Credit card complaints saw a sharp rise, up by 20.04 per cent year-on-year (y-o-y), according to the Reserve Bank of India's (RBI's) Ombudsman Annual Report for FY25. They have now become the second-largest category of grievances. 

Complaints against private sector banks comprised 37.53 per cent of all complaints. Small finance banks (SFBs) also saw a jump of 42 per cent in credit card complaints. 

Loan and advance related complaints comprised the major chunk of product-related grievances at 29.25 per cent. Non-banking financial companies (NBFCs) comprised 14.80 per cent of the total complaints, reflecting the deeper role non-bank lenders are playing in credit delivery. 

Lack Of Awareness

According to industry experts, the spike in card-related issues has been due to the rapid expansion and gaps in user understanding, including limited awareness of fees and limits, repayment cycles, and deficiency in issuer controls.

Paramdeep Singh, founder of Long Tail Ventures, formerly part of SBI Card, said the trend resembled an earlier stage of credit card growth witnessed in the late 1990s. 

He said: “The 20 per cent jump in credit card complaints tells that the industry is reliving a pattern we saw in the late 1990s. The rapid adoption always outpaces consumer understanding and issuer controls, and today’s ecosystem is facing a similar maturity gap.”

According to Singh, clearer disclosures, AI-led dispute management, and improved consumer education will lead the way towards greater transparency and awareness.

"The next set of improvements have to focus on transparency and better communication. The next phase has to prioritise transparent billing, sharper disclosures, AI led dispute management and stronger consumer awareness tools so users understand fees, limits and risks before they transact,” he said.

He added that credit cards will also evolve in terms of real-time checks. “Credit cards will increasingly move onto UPI rails with real time risk checks and personalised credit lines,” he added.

Credit Card Issues Emerge As A Key Pressure Point

The report said that increasing credit card complaints also highlight friction points that are on the rise both for new users and experienced users. As more customers use cards across online marketplaces, subscriptions, and in-store purchases, disputes related to billing, interest, fraud, and charge reversals have become very common.

Nitin Sharma, chief operating officer of PayMe, said the trend is closely linked to changes in user profiles. He said: “Complaints relating to credit cards have surged and are now emerging as the second biggest category of grievances under the RBI Ombudsman scheme. This is partly because a significant share of this spike comes from new to credit users adopting credit cards faster than they can fully comprehend product features, charges and repayment cycles.”

Sharma said lenders will have to redesign communication and billing formats. “Lenders need to focus on greater transparency, simpler billing and fee disclosures for faster grievance resolution processes,” he added.

Complaints On Digital Banking Dip

Whereas complaints related to cards rose, those on digital banking declined 12.74 per cent in FY25. This covers issues on mobile banking, Netbanking and electronic fund transfers. The report says that though customers are facing issues with credit products, basic services offered through digital banking have been stabilising.

Rohit Garg, chief executive officer, Olyv, said the wider data painted a picture of a system evolving. 

“The latest Ombudsman data should be read as a sign of a maturing financial ecosystem,” he said.

He added that with increasing numbers of first-time borrowers coming into the system, “a rise in complaint volumes is natural and in many ways healthy.” 

“This shows that the consumers are more aware of their rights and are confident that the regulatory system will protect them,” he added.

Garg also highlighted a decline in digital banking complaints. 

He said, “The 12.74 per cent sequential decline underscores how sustained investments in technology, governance, and customer experience are strengthening the industry's foundations." According to him, expanding AI-driven processes can further enhance transparency, resolution speed, and user experience.

System Wide Impact And Regulatory Context 

The changing complaint patterns come in a year where the financial sector has expanded its digital and credit footprint. More users signed up for instant credit lines, buy now pay later (BNPL) style products, and app-based credit services, adding both volume and complexity to the system. In FY25, the Ombudsman scheme received 180,621 maintainable complaints. Another 109,946 were closed as non-maintainable. Appeals filed against Ombudsman decisions stood at 104 for the year. 

Despite higher complaint volumes, complaint density per 100,000 accounts fell from 8.90 to 7.70 showing that financial inclusion expanded faster than dispute volumes. Experts say the financial system will now have to focus on clearer disclosures, smoother onboarding, and faster dispute resolution.

Singh said the industry has an opportunity to avoid earlier errors if it strengthens consumer protection frameworks. He said, “If the industry builds guardrails at the same pace it has built scale, India can avoid the missteps of earlier credit cycles.”