Smaller private and small finance banks, including Federal Bank and Utkarsh SFB, saw rapid credit card portfolio growth in FY26 through fintech collaborations. By targeting new-to-credit customers, these lenders have increased their collective market share to 58%, while some larger players have seen a decline.
Detailed Coverage
A new trend is emerging in the Indian credit card market as smaller private and small finance banks aggressively expand their footprint. By partnering with fintech companies, these lenders are tapping into a segment of new-to-credit customers who were previously using only UPI or debit cards for their transactions. According to Reserve Bank of India data for fiscal year 2026, banks like Federal Bank, IDFC First Bank, Utkarsh Small Finance Bank, Unity Small Finance Bank, and CSB Bank have significantly boosted their credit card issuance numbers.
Strategic Partnerships Drive Expansion
The business model relies on co-branded card products where fintech firms handle the customer acquisition and marketing, while the banks manage the regulatory and lending side. Notable collaborations include Federal Bank’s work with OneCard and Scapia, as well as Utkarsh Small Finance Bank’s partnerships with super.money and PhonePe. These alliances have allowed smaller banks to reach a wider audience without the high cost of building traditional branch networks for distribution.
Impact on Market Share and Competition
Data from the credit bureau Equifax shows a shift in the competitive environment. In FY26, private sector banks collectively increased their credit card market share to 58 percent, up from 46 percent in FY24. This 12 percentage point gain comes as larger established entities like SBI Cards and BOB Cards experienced a corresponding reduction in their market share. While major lenders like HDFC Bank, ICICI Bank, and Axis Bank remain the largest in terms of total cards issued, the rapid rise of smaller banks indicates that the market is becoming more fragmented.
Federal Bank recorded an 88 percent growth in its credit card portfolio in FY26, adding over one million cards, with nearly 70 percent of these issuances coming through its fintech partners. Similarly, Utkarsh Small Finance Bank grew its portfolio by nearly 200 percent, issuing close to 200,000 new cards. Unity Small Finance Bank also entered the credit card space in FY26, issuing over 200,000 cards through its link with BharatPe.
Investor Considerations for Fintech-Led Lending
While this growth strategy helps smaller banks acquire customers quickly, it also introduces specific business risks. Investors may track whether these new-to-credit customers maintain good repayment habits, as credit quality for this segment is often less tested compared to traditional salaried borrowers. Furthermore, relying heavily on fintech partners for customer acquisition means banks must manage these relationships carefully to ensure consistent profitability and regulatory compliance. As the total number of credit cards in India reached 119 million by March 2026, the key monitorable for shareholders will be how these banks manage their asset quality and profit margins as their portfolios mature.