Whalesbook
The Credit Card Divide
Indian banks are diverging significantly in their approach to credit card issuances, driven by varying strategies and concerns over asset quality. While major players continue aggressive expansion, a segment of large and mid-sized lenders has begun to slow down new card offerings. This shift reflects a growing caution within the financial sector regarding potential stress in the credit card segment.
Widespread Caution Among Lenders
Several prominent banks, including Kotak Mahindra Bank, RBL Bank, and IndusInd Bank, have recently moderated their pace of new credit card issuances. Data from the Reserve Bank of India highlights this cautious stance. In October alone, Kotak Mahindra Bank saw a modest net addition of just 765 cards. The situation was more pronounced for RBL Bank, which experienced a substantial decline of approximately 18,211 cards. IndusInd Bank also reported a contraction, with its card base shrinking by over 1,228 cards.
Aggressive Growth by Major Banks
This slowdown by some lenders stands in stark contrast to the strategies employed by their larger peers. Banks such as HDFC Bank, ICICI Bank, and Axis Bank have continued to expand their credit card portfolios aggressively. In October, HDFC Bank added an estimated 1,44,000 cards to its base. SBI Card also reported significant growth, adding about 1,27,000 cards, while ICICI Bank added approximately 1,04,000 cards. Axis Bank saw its credit card base expand by 79,842 cards during the same period.
Financial and Strategic Rationale
Prakash Agarwal, partner at Gefion Capital, explained that banks are becoming cautious as they focus on "cleaning up their books." He noted that acquiring high-quality customers now requires offering very lucrative deals and incentives, making the process more challenging. This sentiment is echoed in recent data, which shows a calibrated slowdown in acquisition. New credit card originations have fallen by 42% over the past eight quarters, reaching 4.4 million in the second quarter of the 2025-26 fiscal year, down from 7.6 million two years earlier, according to CRIF data.
Asset Quality Concerns Loom
CRIF reports indicate that while new cards issued remain concentrated in metropolitan areas, private banks are consolidating their market share by targeting higher-value customers. However, underlying asset quality pressures persist. The portfolio-at-risk in the 31-180-day bucket currently stands at 4.1%. The stability in the new-to-credit customer share suggests a maturing customer base. The overall trend points to a strategic shift among issuers. They are focusing on driving higher spending from their existing customer base while pursuing measured growth amidst elevated delinquency concerns.
Impact
This divergence in strategy could lead to a reshuffling of market share in the credit card segment. Banks that maintain aggressive growth might capture a larger portion of the market, provided they effectively manage asset quality. Conversely, lenders prioritizing caution may face slower growth but potentially stronger balance sheets. Investors will closely monitor delinquency rates and profitability metrics for both groups of banks. The shift also signals evolving consumer credit dynamics and banks' risk appetite.
Impact Rating: 7/10
Difficult Terms Explained
- Credit Card Issuances: The process by which banks approve and issue new credit cards to customers.
- Asset Quality: Refers to the financial health and creditworthiness of a bank's assets, primarily its loans and advances, indicating the likelihood of repayment.
- Delinquency: When a borrower fails to make scheduled payments on a loan or credit card debt by the due date.
- Portfolio-at-risk: A segment of a bank's assets (like loans or credit card accounts) that are considered to have a higher probability of default or loss.
- New-to-credit: Individuals who are obtaining credit for the first time, often representing a new customer segment for lenders.