India’s Credit card issuance falls 28% in Q2 FY25 as Consumer credit slows

India’s credit card issuance is witnessing a pronounced slowdown, with fresh card additions declining sharply amid cautious consumer sentiment and tighter lending strategies, according to a recent report by JM Financial Institutional Securities.

The report said new credit card issuance remained volatile during FY25, reflecting a broader slowdown in unsecured consumer credit. About 4.4 million new credit cards were issued in the first quarter of FY25 (Q1FY25), followed by a pickup to around 6.1 million cards in the second quarter (Q2FY25) . However, issuance in Q2FY25 still marked a 28 per cent year-on-year decline compared with the same period last year. As a result, growth in cards in circulation stayed muted at 6 per cent , underscoring a broader moderation in consumer credit expansion amid cautious borrowing behaviour.

Analysts attribute the slowdown not only to stricter underwriting norms adopted by lenders but also to a shift in consumer spending behaviour . With elevated interest rates, rising living costs and growing awareness of debt servicing risks, consumers appear to be prioritising savings-based spending and debit-led transactions over discretionary credit usage. This cautious approach has reduced demand for new credit cards, particularly among first-time borrowers.

The moderation was also reflected in outstanding credit card balances , which grew by just 9 per cent year-on-year in 2QFY25, sharply lower than the 20 per cent growth recorded in FY25. JM Financial said the deceleration was largely driven by weaker card issuance and subdued spending growth.

Despite the overall slowdown, private sector banks continued to consolidate their dominance. Nearly 78 per cent of all new credit cards issued during the quarter came from private lenders, while NBFCs and smaller players continued to lose ground. The report noted that private banks’ market share in new card issuance rose by about 730 basis points compared with FY25 levels.

Asset quality indicators presented a mixed picture. Late-stage delinquencies (PAR 90+) , which had surged to 15 per cent in FY25, moderated to 8.9 per cent by 2QFY25. Early-stage delinquencies improved, although mid-stage delinquencies for private banks edged up, indicating pockets of emerging stress.

On the spending front, leading issuers continued to gain traction. Citing RBI data, the report said SBI Cards and HDFC Bank gained 172 basis points and 96 basis points, respectively, in credit card spends during FY25 year-to-date. In contrast, ICICI Bank, Kotak Mahindra Bank, RBL Bank and IndusInd Bank ceded market share.

The report also highlighted a broader shift in retail lending trends. Public sector banks (PSBs) are steadily gaining ground from private lenders across key loan segments such as personal, home and auto loans.

JM Financial noted that PSBs have improved their disbursement market share across both secured and unsecured segments, supported by higher average ticket sizes, improving asset quality and a gradual recovery in loan growth during the first half and second quarter of FY25.