The credit card sector in India is witnessing a slowdown, with disbursement growth falling to a four-year low, according to a report by ACMIIL, a stock market firm.
The report, which provides insights into the credit card segment for January 2025, highlights a decline in total spending and a drop in the number of credit cards in circulation.
Aggregate credit card expenditure in January stood at ₹1,84,000 crore, marking a month-on-month (m-o-m) decline from ₹1,88,000 crore in December 2024.
Despite this drop, spending was up 14 per cent on a year-on-year (y-o-y) basis. The m-o-m decline was primarily due to a high base in December, when spending typically rises due to year-end festivities and New Year celebrations.
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The report also added that the transaction volumes followed a similar trend, falling 1 per cent m-o-m to 430 million transactions. However, y-o-y transaction growth remained strong at 31 per cent.
Despite this, the report pointed out that this was the weakest y-o-y growth in transaction volumes since March 2024, indicating a sustained slowdown in the sector.
The report said, “Notably, this represents the weakest y-o-y growth in transaction volumes since March 2024, underscoring a persistent deceleration trend within the sector”.
The number of outstanding credit cards declined by 1.2 million in January, bringing the total to 109 million from 110 million in December. The average spends per card also saw a slight dip, declining to ₹16,911 from ₹17,093 in the previous month.
Meanwhile, the top five banks continued to dominate the credit card market, maintaining a 75% share in terms of outstanding cards.
The report highlighted that while credit card usage continues to grow on an annual basis, the pace of expansion is slowing. The declining monthly growth in spending and transaction volumes suggests cautious consumer sentiment and possible saturation in the market.
As the sector moves forward, banks and financial institutions may need to introduce innovative offerings and targeted incentives to drive usage and maintain growth in the highly competitive credit card market.