Credit Card Growth Slows, Disbursement At 4-Year Low

Indian credit card spending has remained sluggish, with January 2025 showing the lowest levels of disbursement in the last four years, a report by Asit C. Mehta Investment Intermediates Ltd (ACMIIL) has found. The report, drawn from Reserve Bank of India (RBI) data, shows a decline in both spending and transaction volume, as evidence of prudent lending practices and changing consumer behaviour.

Credit Card Spending and Transactions Decline

In January 2025, total spending on credit cards stood at Rs 1.8 trillion, lower by 2 per cent compared to December 2024. On a YoY (Year-over-Year) basis, however, the spending was 14 per cent higher. The decline in MoM (Month-over-Month) spending is because of the high base effect in December when spending was up due to festive and year-end expenses. Moreover, the number of transactions had dropped 1 per cent MoM to 430 million, while increased by 31 per cent YoY.

Average spending per credit card fell by a marginal 1 per cent MoM to Rs 16,911, while average spend per transaction was Rs 4,282, almost 15 per cent down YoY. This indicates a change in consumer consumption behaviour towards spending, possibly due to economic conditions as well as the higher interest rate.

Credit Card Issuance Growth at Record Low

The report says that there was a sharp decline in the issuance of new credit cards, and the outstanding number of cards dropped to 109 million by January from 110 million in December. There was a net withdrawal of 1.2 million cards from circulation. The credit card issuing growth rate is at 9.4 per cent, the lowest ever in recent years. This is due to tighter credit policies and subdued demand in the market.

Trends in the Market Share of Top Banks

The major banks also went on announcing themselves to be better players in the market amid the slowdown. HDFC Bank still remained at number one with increases in market shares from 20.2 per cent in January 2024 to 21.5 per cent in January 2025. SBI, having declined earlier to a market share of 18.1 per cent in September 2024, climbed back to 18.8 per cent by getting 2.4 lakh new credit cards in January. ICICI Bank also showed improvement, with its market share rising from 16.3 per cent to 16.6 per cent during the year.

Midcap Banks Face Challenges

In the midcap section, the market share of Yes Bank was flat at 2.2 per cent from September 2024 due to a defensive strategy in issuing new cards. IDFC First Bank alone was the exception to the trend as it raised its market share from 2.4 per cent to 3.1 per cent in the last year by aggressively growing its credit card business.

Re-entry of Kotak Mahindra Bank into Credit Card Business

One of the key events in February 2025 was the Reserve Bank of India (RBI) lifting its 10-month prohibition on Kotak Mahindra Bank's credit card issuance. The prohibition had burdened Kotak's market share, which fell to 4.6 per cent in the past year. The bank's comeback is expected to alter competitive forces in the credit card industry over the next several months.