Credit Card Growth Loses Steam as Issuance Slumps and Banks Turn Cautious

India’s credit card boom is showing visible signs of fatigue.

New credit card issuance fell sharply in the second quarter of FY26, reflecting a broader slowdown in consumer credit growth, according to a report by JM Financial Institutional Securities. While private sector banks continue to dominate the market, overall momentum has weakened as lenders turn more selective amid rising risk concerns.

During 2QFY26, banks issued 4.4 million new credit cards, a steep 28% year-on-year decline from 6.1 million cards issued in the same period last year. As a result, growth in cards in circulation slowed to 6% YoY, signalling a clear cooling after the aggressive expansion seen in FY24 and FY25.

The slowdown is also evident in outstanding balances. Growth in credit card receivables moderated to 9% YoY in 2QFY26, less than half the 20% growth recorded in FY25. The primary reason: fewer new cards entering the system, combined with tighter underwriting standards.

Private banks tighten grip even as growth slows

Despite the deceleration, private sector banks have strengthened their dominance. Nearly 78% of all new credit cards issued during the quarter came from private lenders, with their market share in new issuance rising by around 730 basis points compared with FY25.

NBFCs and smaller issuers continued to lose relevance, squeezed by higher funding costs and stricter risk controls. The industry, in effect, is consolidating around large private banks with scale, data depth, and stronger balance sheets.

On asset quality, the picture is mixed but improving. Late-stage delinquencies (PAR 90+)—which had surged to 15% in FY25—declined to 8.9% by 2QFY26. Early-stage delinquencies also showed signs of moderation.

However, mid-stage delinquencies for private banks edged up, suggesting stress has not fully disappeared. Lenders remain cautious, prioritising portfolio quality over aggressive expansion.

Winners and losers in card spending

Spending trends underline the growing concentration among top issuers.

Citing RBI data, the report notes that SBI Cards and HDFC Bank gained 172 basis points and 96 basis points, respectively, in market share of credit card spends in FY26 year-to-date. In contrast, ICICI Bank, Kotak Mahindra Bank, RBL Bank and IndusInd Bank lost share, highlighting uneven competitive dynamics.

Interestingly, while private banks dominate cards, public sector banks (PSBs) are gaining traction across other retail loan categories. JM Financial points out that PSBs have improved their disbursement market share in personal, home, and auto loans, supported by larger ticket sizes, better asset quality, and a gradual recovery in loan growth during the first half of FY26.

The contrast is telling: private banks lead in unsecured card lending, while PSBs steadily claw back ground in secured and mainstream retail credit.

The decline in card issuance is less about demand collapse and more about discipline returning to consumer credit. After years of rapid expansion, banks are recalibrating risk, tightening filters, and focusing on profitable, high-quality customers.

For the industry, FY26 may not be about how fast the credit card base grows but how well it ages.

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