Credit weighs less on cards with RBI tightening norms

Synopsis

Credit card outstandings, despite fewer delinquencies, fell to 4.7% of total retail loans in October 2025, from 5% a year earlier, Reserve Bank of India (RBI) data showed. Growth in outstanding credit card balances within total retail loans slowed sharply to 7.7% in October 2025, from 16.9% a year earlier.

Mumbai: Outstanding credit card loans in the total pool of retail credit fell in October, reflecting what analysts described as both prudential lending in light of tighter regulatory norms and a higher share for lower-risk mortgages.

Credit card outstandings, despite fewer delinquencies, fell to 4.7% of total retail loans in October 2025, from 5% a year earlier, Reserve Bank of India (RBI) data showed. Growth in outstanding credit card balances within total retail loans slowed sharply to 7.7% in October 2025, from 16.9% a year earlier.

Total outstanding credit card balances stood at ₹3.03 lakh crore as of October 2025, compared with ₹2.81 lakh crore in October 2024.

"This is attributable to the RBI's tighter norms on unsecured lending, higher risk weights, and issuance curbs, which slowed new credit extensions," said Saurabh Bhalerao, associate director-BFSI research, CARE Ratings. "Also, growth in personal and housing loans has diluted the weight of the credit card portfolio as banks have favoured lower-risk assets. Outstanding balances are increasingly shifting toward mid- and high-limit credit cards, signalling a structural deepening of the credit card market."

Analysts say growth in the credit card segment has also moderated as banks sharpened their focus on higher-quality customers, curbing mass issuances amid rising delinquencies in parts of the unsecured lending space.

Lenders have taken steps such as tighter underwriting, pruning of riskier cohorts and closer monitoring, leading to improvement in asset quality.

"Over the past few quarters, credit cards saw a slowdown in new originations alongside an uptick in delinquencies, driven by both macro pressures and portfolio-level risks," said Bhavesh Jain, MD, TransUnion Cibil. "However, corrective actions have begun to show results, with asset quality improving in recent quarters."

Experts add that private sector banks have consciously moderated issuance in low-margin, high-volume segments, leading to slower volume-led growth even as they continue to dominate the premium card segment and fee-based income streams.

According to analysis by CARE Ratings, as of September 2025, cards with limits between ₹25,000 and ₹5 lakh account for about 76% of total outstanding balances, while the ₹5 lakh-₹25 lakh segment has expanded steadily to ₹57,443 crore. This trend underscores deeper credit usage among established customers and supports balance growth even as average spends have normalised post-GST and amid a steady expansion in the card base.

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