Credit card spends have increased by 10.8 per cent YoY to Rs 1.84 trillion in January 2025, latest data released by the Reserve Bank of India (RBI) showed. The data, as summarised by Kotak Institutional Equities (KIE), showed the following trends: (1) The net growth in addition to credit cards has slowed (<10 per cent YoY). While limit growth is slowing, it is still healthy at around 20 per cent YoY. The limit utilization of credit stands comfortably at around 20 per cent. (2) A slowdown in growth is visible in metro regions (80 per cent of loans). (3) A slowdown across card ticket sizes, including large limit cards, suggesting some impact of the recent circular. (4) The western and southern regions dominate the credit card book for banks, but the southern region has slowed sharply. (5) More transactions witnessed online than offline.
Per Kotak Institutional Equities, there has been a sharper slowdown being witnessed in online spends as compared with offline spends. “Two-thirds of the spends through credit cards is for online transactions, while one-third is for debit cards. In the online transaction market, 85 per cent is through credit cards, while in offline card transactions, it is 65 per cent. The data broadly suggests that the impact of UPI appears to be a lot stronger in hurting the growth of debit card transactions over credit cards at this point,” it said.
According to a KIE analysis report, positive effects of the tightening of credit filters for the past two years are starting to show in the overall numbers as well. “It began with the recent cohorts doing well, but as earlier and weaker cohorts slip into NPL (Non-Performing Loan) or some form of impaired loans (SMA 0-2), the stock of these borrowers will eventually decline, leading to much lower credit costs. We have seen this in the recent results of SBI Cards and Payments, where net slippages have started to decline. We still need another quarter, at best, to confirm this thesis,” Kotak Institutional Equities stated.
Unlike the corporate NPL cycle, which tends to be fairly lumpy and volatile, retail businesses, including unsecured loans, tend to be relatively predictable. Revenue growth, the report stated, is likely to be lower in FY26, as the incremental portfolio is likely to have a lower share of customers, who are likely to revolve as the focus was largely to reduce the riskiness of the portfolio.
Further, Kotak stated that there was slowdown witnessed in nearly all ticket sizes. “Note that the industry was witnessing a combination of higher credit cards issued and an increase in higher ticket sizes. Of the receivables outstanding, 50 per cent is from 20 per cent of the total cards issued, which gives a perspective to this point. The other way to highlight this point is that ~20 per cent of the cards issued in the lowest ticket size (<Rs 25,000) contribute to <5 per cent of the total receivables for the sector,” the report maintained
After Covid, Kotak said, higher ticket sizes saw the fastest recovery and the lower ticket size loans witnessed slowest growth. However, it added, “We saw a catch-up in the lower ticket size credit cards in FY2022. There appears to be a slowdown in overall growth from peak levels today in nearly all ticket sizes. The growth in utilization in smaller ticket size credit cards probably indicates that lenders may have cut limits in a few segments.”
Slowdown witnessed in South; West holding up relatively well
Credit cards are quite dominant in western and southern India. The western region is closer to 65 per cent of the total cards issued and ~50 per cent of the loans outstanding. “We are not too sure what is causing this skewness, given that the representation should have perhaps been much better distributed than what it is currently. We saw a strong recovery in growth in the western region of India and it was the first to recover immediately after Covid. The other geographies started to recover a few quarters later,” it said.