Credit card additions slowdown in 2024, seen moderating as delinquencies rise

Net additions to credit cards slowed down last year due to stricter norms introduced by the Reserve Bank of India (RBI). Banks became cautious about issuing new cards amid rising delinquencies in their credit card portfolios.

10.1 million new credit cards were added in 2024 on a net basis. However, the monthly rate of card additions slowed to around 820,000 cards in December, 57% lower than the corresponding period a year ago but much higher than the addition of 350,000 net new cards in November and the highest level since August, according to the latest data released by the central bank.

As of the end of December, total cards in force stood at 108 million, up 10.4% from 98 million credit cards outstanding as of December 2023. This increase was largely led by major issuers such as HDFC Bank, State Bank of India, and ICICI Bank.

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The pace of on-year growth in December 2023 was 20.6%. This rose slightly to 20.7% in January and February 2024 before steadily declining throughout the year.

Improving sentiment

“Net new card additions increased in December 2024, indicating an improved sentiment. However, the overall view remains cautious due to rising delinquencies as well as RBI’s risk weight norms,” IDBI Capital Research said in a report earlier this week.

Due to the unprecedented rate of growth in unsecured personal loans and credit cards in the banking system and concerns about rising systemic risks, the central bank hiked the risk weights on some such loans in November 2023.

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In March 2024, RBI tightened norms around co-branded credit cards and later revised norms around tie-ups with card networks, mandating banks to offer cards on multiple networks as per customers’ preference from September 2024.

The year also saw restrictions on co-branded cards issued by Federal Bank and South Indian Bank and curbs on Kotak Mahindra Bank from issuing credit cards due to technology lapses in its systems.

Credit-on-UPI aiding expenditure

As such, card expenditure continued to be steady throughout the year in the range of ₹1.5-2.0 trillion. Expenditure peaked at ₹2.02 trillion in October, led by festival season-led spending, before falling 16.1% to ₹1.7 trillion in November and then recovering by 11.1% to ₹1.9 trillion in December, higher by 14% on year.

“Going forward, we expect card spends to remain range-bound in the coming months. However, net new card additions are expected to moderate in the short term due to rising delinquencies in the credit card receivables,” IDBI Capital said.

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A recent report by the credit-on-UPI (Unified Payment Interface) platform Kiwi attributed the healthy expenditure, despite the slowdown in new card issuances, to UPI-enabled credit cards, which improved the accessibility and usability of credit cards, especially for small-ticket payments.

“UPI-enabled credit card users are making 40 transactions per month on average, eight times higher than traditional credit card users. This number is growing by 20% every month, along with a 5% rise in average monthly spending, now at ₹40,000 per user,” the report said.

The report said the average transaction size for UPI credit cards was ₹1,125, lower than ₹4,000 for traditional credit cards. This reflects the use of such cards for small-ticket payments. The report added that 75% of such transactions occurred at smaller grocery stores and local retailers across UPI’s network of 320 million merchant touchpoints.

UPI integration

RBI allowed the integration of UPI with National Payments Corporation of India’s (NPCI) Rupay credit cards in June 2022. Subsequently, the report said that the market share for Rupay credit cards grew from 3% in 2023 to 12% in 2024.

A whitepaper by Visa’s advisory arm, Visa Consulting & Analytics (VCA), revealed that digital payment transactions in non-metro regions are growing faster than in metros, with card expenditure soaring 175% since 2019.

Visa’s data showed a fourfold increase in tier-III and tier-IV consumers who spend over ₹2 lakh annually on a single card compared with 2019—significantly higher than the 1.4 times increase observed in metro cities.

“The surge in digital payments in non-metro regions is fuelled by rising income levels, the rapid growth of e-commerce, and enhanced digital connectivity, supported by empowering government initiatives like the Pradhan Mantri Jan Dhan Yojna (PMJDY), Digital India Program and Goods & Services Tax (GST),” the study said, adding that the expansion of e-commerce is key to this growth.

The share of online spending in tier-3 and tier-4 cities jumped to 73% from 53%, with notable increases in discretionary spending across categories like apparel and travel. There was also a marked increase in consumption of digital services in non-metro cities, where online gaming expenditure rose 16 times, and spending on digital content increased nine times during the same period.