Credit card debt has slowed—but what’s worrying regulators?

About two years ago, the Reserve Bank of India (RBI) cracked down on two loan categories whose numbers had surged post-pandemic: unsecured personal loans, including credit cards, and bank loans to non-bank companies, or “shadow" banks. Since then, growth in these loans has slowed sharply. As of August 2025, credit card balance outstanding grew around 4% year-on-year, down from roughly 20% in August 2024. Still, risks linger.

Tempering growth

According to the RBI, there are about 112 million credit cards in circulation, a quarter of which are issued by public sector banks. Monthly data for the current decade shows that growth in credit card balance outstanding started rising sharply in early 2022. Over the next 18 months, year-on-year growth hovered between 25% and 32% per month. One factor: the pandemic had suppressed consumer spending, and higher-income households were eager to make up for lost consumption.

But as the pace of spending stayed high, nervousness crept in, especially as growth in unsecured personal loans and loans against gold jewellery also accelerated.

Together, they signalled a rise in household debt at a time when employment growth was subdued. In response, the RBI tightened regulations on unsecured personal loans. In late 2023, the RBI increased the 'risk weight' on consumer credit, which mandated banks to set aside more capital for such loans. This increased the cost of funds, effectively making it more expensive for banks.

Top-end action

Cards with a credit limit of between ₹25,000 and ₹2 lakh accounted for over 56% of card accounts outstanding as of June 2025, the latest month for which such data was available. In this credit limit bracket, average outstanding amount per card rose from a little below ₹23,000 per month in June 2023 to around ₹24,500 in June 2025. This may not seem much, but the key metric is how this compares to a cardholder’s monthly income.

While the criteria for credit limit varies, a rough benchmark is twice a cardholder’s monthly income. Thus, if one assumes an average monthly take-home income within this credit limit bracket of ₹80,000, the average card outstanding would amount to around 30% of monthly income.

Interestingly, it is within higher credit limit brackets that monthly outstandings have fallen most sharply. In the ₹2-5 lakh credit limit bracket, an assumption of average monthly income of around ₹2 lakh yields an average credit card outstanding of about 25%.

Rollover dilemma

Not all credit card outstanding is problematic. For banks and credit card issuers, the biggest earners are cardholders who don’t pay off their entire balance when it becomes due, but instead roll it over or even switch to an EMI plan to repay. Data from SBI Cards and Payment Services—a listed company whose only business is credit cards and which has a 20% market share—suggests that such customers account for around 60% of its total receivables (overall amount outstanding) in a quarter. This is has remained relatively stable.

For the June quarter of 2025, SBI Cards had ₹56,607 crore of receivables, split into three categories. The first is customers who pay off their outstanding balance in full and on time, yielding no interest revenues to it. This category accounts for 40% of SBI’s receivables. The other two categories are rolling over or taking an EMI plan. They account for 60% of receivables, and are the money spinners for card issuers. They are also the set that regulators track.

Rising delinquencies

Growth in credit card spend has moderated considerably in the last few months. But alongside, problems from the spending binge are coming to the fore. So-called ‘delinquencies’ across the finance industry, as measured by the extent to which repayments are overdue by 90 days or more, do not seem particularly high. But there are two categories where it has ticked up: credit cards and two-wheeler loans.

Common to both categories is the fact that the pace of loan growth has slowed considerably over the past year. Delinquencies are measured as a proportion of the outstanding balance on a given date.

The combined effect of slower growth in these balances (a slowdown in loan growth), and a rise in delinquencies in absolute terms at a faster rate, can cause the overall number to rise. This is what is happening in these two types of loans, and could well happen in other categories, as their pace of loan growth slows as well.

Gold sheen

The reason why uncontrolled credit card spending worries policymakers is that it could be an early indicator of financial distress among households. Credit card interest rates are the highest of all loan categories, and unpaid balances compound at a rapid rate.

The other category of loans that policymakers often worry about is loans against gold jewellery.

On the face of it, such loans are not risky for banks, as they are collateral-backed. Currently, given the surge in gold prices, they are not risky. While banks always factor in a hefty margin on such loans (for example, if the value of jewellery is ₹100, a bank may cap the loan amount at ₹50), what it means is that both banks and households are making a one-way bet on gold prices rising. The price run up has led to the outstanding value of gold loans effectively doubling over the past year.

A crash in gold prices could have far-reaching effects on the finance industry and on households as well.

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