This Is Why People Are Not Using Credit Cards Anymore

This article examines the continued slowdown in credit-card lending in India, why banks and financial institutions are becoming more cautious, how this slowdown sits alongside continued high credit-card spends, and what the trends mean for consumers and lenders. 

It explores the slowdown in new card originations, moderation in portfolio growth, rising delinquencies, and the broader context of unsecured retail credit performance.

Credit Card Boom Meets Slowing Loans

Credit cards have become a central part of India’s consumer credit ecosystem. In recent years, the number of credit cards in circulation has ballooned, from about 2 crore in FY13 to over 10 crore by late 2024, reflecting explosive adoption supported by digital payments, e-commerce growth and rising incomes. Outstanding credit-card balances too expanded rapidly, rising at double-digit rates in earlier years.

However, in the September 2025 quarter, banks have slowed credit-card lending significantly even as retail credit demand generally stabilised. TransUnion CIBIL’s data show that new credit card originations fell roughly 15% year-on-year, making cards the only major retail credit segment in contraction while most others (housing, vehicle, personal loans) grew or stabilised.

This divergence between continued credit card usage and slowing loan growth creates a transition point in consumer finance, where surging consumer spending on cards is now being matched by rising caution from lenders.

Why Credit-Card Loans Are Slowing?

Cautious Lending After Rapid Unsecured Growth

Unlike secured loans (housing, gold), credit-card credit is unsecured — the bank extends credit without collateral, relying on future repayment ability. When unsecured credit grew rapidly in the prior two years, lenders enjoyed expanding balances and fee income. But that boom also revealed stress points:

• Delinquencies have crept up, especially in unsecured segments. CRIF High Mark data shows PAR 90+ delinquencies rising towards 15% in recent years, indicating growing overdue amounts despite stable early-stage stress.
• Gross NPAs in the credit-card segment have increased as borrowers struggle to pay dues in full. RBI data from earlier in 2025 showed gross NPAs rising to ~₹6,700 crore, up sharply from ~₹5,250 crore in 2023, signalling rising defaults.
• According to some analyses, credit card dues overdue for more than 90 days climbed sharply year-on-year, with ₹33,886 crore overdue in certain ranges.

These early warning signals have made lenders more conservative, tightening credit approval frameworks and being selective about new credit card issuance.

Slowdown In New Originations and Portfolios

In the latest quarter, TransUnion CIBIL observed that while overall retail credit quality remains stable, growth in credit-card loans slowed meaningfully:

• New credit card originations dropped about 15% YoY.
• This slowdown occurred even as other loan categories (housing, auto, personal) saw relative growth or stabilisation.
• Lenders’ caution reflects past experience where rapid unsecured growth was followed by elevated delinquencies, pushing banks to focus on “premiumisation” — prioritising prime, credit-tested borrowers and larger ticket sizes over volume.

In simple terms, banks want to grow credit cards more selectively, issuing to borrowers with strong credit histories, rather than across the board, to protect portfolio quality.

Credit Card Trends: Outstanding Balances and Growth

To understand the environment better, here is a table showing how credit-card balances and growth have evolved:

Credit Card Lending & Spending Snapshot

Outstanding balances represent the total amount consumers owe on their cards at a point in time, while spending figures reflect how much consumers charged over a period, both are important in assessing loan dynamics.
 

While outstanding balances have slowed and credit card loan growth moderated, active cards and spending remain high. This underscores a key trend: consumers are using cards actively for transactions, but banks are slowing growth in loan balances and new credit issuance to manage risk.

This gap, between transaction activity and loan growth, signals both consumer demand and lender caution.

Why This Matters: Rising Delinquencies and Risk Management?

Even as spending remains robust, lenders are reacting to rising arrears and risk signals:

• RBI and credit bureaus are closely monitoring delinquencies in unsecured credit, and banks have tightened underwriting to reduce exposure.
• Broader retail credit growth has been moderating. RBI data show overall retail credit growth decelerating in 2025, with credit card outstanding growth particularly weak compared with housing or gold loans.
• Elsewhere in the unsecured credit landscape, personal loans, auto loans and consumer durables are also slowing, indicating a broad repricing of risk and increased caution by lenders.

Portfolio quality metrics also matter: early-stage stress remained relatively stable even as longer-term stress edged up, suggesting that while many borrowers still pay on time, a meaningful cohort is pushing balances into overdue categories.

How Banks Are Responding?

Focus on Quality Over Quantity

Instead of chasing rapid growth, banks are:

• Screening credit card applicants more stringently.
• Prioritising existing creditworthy customers for limit increases or new cards.
• Adjusting rewards and product features to balance profitability and risk (for example, reducing unprofitable reward redemptions).

Premiumisation Strategy

Banks are leaning into premium customers, those with higher income, stable credit histories, and larger ticket spends, to maintain profitability even with slower loan growth. Cards targeting these segments are priced with annual fees and enhanced benefits that improve risk–reward profiles.

Conclusion

The slowdown in credit-card loan growth in India highlights a recalibration in the unsecured credit ecosystem. While consumer spending via cards continues at high levels, banks and lenders are pulling back on new loans and limits as they respond to rising delinquencies and risk concerns. TransUnion CIBIL’s data showing a contraction in new card originations and slower outstanding balance growth reflect this shift.

For consumers, this means easier spending does not necessarily translate into easier credit. Borrowers with weak credit histories or volatile incomes are likely to face stricter approval criteria. For banks, the cautious approach aims to pre-empt asset quality deterioration before it becomes systemic.

In essence: healthier card usage combined with prudent credit growth may lay the foundation for a more sustainable credit-card market, but the transition may require disciplined repayment behaviour from consumers and thoughtful risk management from lenders alike.

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LoansJagat Team

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