India's banking sector continues to witness a robust expansion in credit card circulation, with banks adding over 9.2 lakh new cards in August 2024, according to the latest RBI data. This growth represents a significant jump from the 7.55 lakh cards added in July, bringing the total number of credit cards in circulation to 10.55 crore. The year-on-year (YoY) growth in new credit card additions stands at 15.6%, with a sequential month-on-month (MoM) increase of 0.9%.

Top Banks Driving Growth in the Credit Card Market

Leading the charge in new card additions is HDFC Bank, which issued 2.41 lakh new credit cards in August 2024, bringing its total to a staggering 2.19 crore cards in circulation. Although this number represents a slight decline from the nearly 4 lakh cards the bank added in July, HDFC Bank remains the largest issuer in the Indian credit card market.

ICICI Bank followed closely, adding 1.45 lakh new cards in August, raising its total base to over 1.75 crore. Axis Bank also performed strongly, with 1.27 lakh new cards, while SBI Cards issued 1.1 lakh cards, reflecting continued confidence in the demand for credit card services.

Despite this overall growth, not all banks shared in the success. Kotak Mahindra Bank, under an RBI-imposed ban due to technology-related issues, saw a decrease of 61,191 cards in August, bringing its total number of active credit cards down to 54.13 lakh. The bank has been prohibited from onboarding new customers and issuing new cards due to gaps in its IT systems since April, impacting its market position.

Credit Card Spending and Transaction Volume Trends

While the growth in new credit card issuances remained strong, the transaction volume growth showed signs of slowdown. The total credit card transaction volume grew by a modest 1.6% in August 2024. Moreover, total credit card spending fell by 2.6% MoM, reaching US$ 20.21 billion (Rs. 1.69 lakh crore), down from US$ 20.68 billion (Rs. 1.73 lakh crore) in July. This decline in spending raises concerns about consumer sentiment and potential shifts in credit card usage patterns.

RBI's Caution on Unsecured Loans and Consumption-Driven Credit

The Reserve Bank of India (RBI) has been closely monitoring the growth of unsecured loans, particularly in the credit card segment. Analysts, including Bunty Chawla from IDBI Capital, have noted a cautious approach from lenders, with the net new cards issued rising by 22.3% MoM in August but experiencing a 34.3% decline YoY. The central bank has advised lenders to exercise caution in extending personal loans for consumption purposes, citing the higher risk associated with unsecured credit.

The RBI’s risk-weight norms for unsecured loans, including credit cards, have prompted banks to adopt a more measured approach. As personal loans and credit card debt remain unsecured, these segments carry higher risk, especially during periods of economic uncertainty. The slowdown in credit card spending growth and the RBI’s cautionary stance suggest that lenders may begin to tighten credit standards, impacting future credit card issuance and consumer spending behavior.

The growth in credit card additions reflects India's evolving consumer landscape, where digital payments and credit accessibility are becoming increasingly integrated into everyday financial transactions. However, as credit card spending begins to decelerate, and unsecured loan risks come under scrutiny, the trajectory of India’s credit market will be closely watched in the coming months.

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As India’s banking sector continues to evolve, the credit card segment remains a crucial part of consumer finance, with both growth opportunities and potential challenges ahead.