Cautious consumers, post-festive slowdown drag down India’s credit card spending, drops 2% in January

India’s credit card spending fell to Rs 1,841 billion in January, marking a 2% decline from December, according to stock market firm Asit C Mehta Investment Intermediates (ACMIIL). The dip follows the usual surge in festive and year-end spending but remains 14% higher than January 2023, reported ANI.

The 430 million credit card transactions recorded in January reflected a 1% month-on-month decline but a 31% year-on-year increase. Despite this annual growth, it was the weakest year-on-year rise since March 2024, indicating a gradual deceleration in the sector.

The drop in spending is largely attributed to seasonal effects post-festivities. Additionally, rising delinquencies suggest growing consumer caution, influencing overall transaction trends, according to ACMIIL.

Credit card usage 

Outstanding credit cards in circulation fell by 1.2 million in January, bringing the total to 109 million.
Average spending per card declined 1% month-on-month to Rs 16,911 but remained slightly up on a yearly basis.
The average spend per transaction also saw a 1% decline, reflecting shifting consumer behavior in response to economic conditions.

While the industry faced a general slowdown in new card issuances, spending, and transactions per card, leading banks HDFC and SBI expanded their market presence.

"Although the credit card data saw a moderation at an industry level, HDFC and SBI increased card dispatches, leading to market share gains," ANI quoted Akshay Tiwari, AVP of Equity Research at ACMIIL, as saying.

HDFC Bank’s market share rose from 20.2% to 21.5% over the year, while State Bank of India (SBI) increased its share to 18.8% after issuing 240,000 new cards in January.
Despite fewer overall credit card dispatches, these banks bolstered their positions through aggressive customer acquisition strategies.

India’s credit card sector is experiencing a slowdown in disbursement growth, reaching a four-year low. The declining monthly spending and transaction growth hint at market saturation and cautious consumer sentiment.

The top five banks still dominate 75% of the credit card market, but further expansion may require innovative products and targeted incentives to sustain momentum. As the sector navigates these challenges, banks may need to rethink their offerings to reignite growth in an evolving financial landscape.