Indian Credit Card Spends Hit 6% Low While Overall Bank Lending Races at 14%

India’s credit market is splitting into two. While the nation’s factories and homebuyers continue to borrow at a rapid clip, the credit card segment is showing signs of slowdown. According to recent RBI data, overall non-food bank credit grew by 14.4% year-on-year as of early 2026. However, credit card spending growth has slumped to just 6%. Hence, cooling from the 12-15% levels seen just a year ago.

The paradox is that banks are still issuing cards at record rates, adding 1.05 million in February 2026 alone, but those cards are increasingly staying in wallets. "Consumer behaviour has undergone a change recently, with a larger population signing up for credit cards, yet a decline in average spending," says Piyush Jhunjhunvala, Founder & CEO of Stockify. “This could indicate that consumer behaviour is exhibiting 'card exhaustion'; however, the increase in cards being issued due to attractive reward/cashback offers... combined with continued inflation and increasing living costs, means that consumers need to be cautious with their actual level of expenditures.”

While card spending per user dropped by 3%, secured segments like housing and vehicle loans have sustained robust momentum, indicating that while consumers are wary of short-term high-interest debt, their appetite for long-term assets remains intact.

One of the primary reasons credit card growth is lagging behind the broader credit market is the "UPI-fication" of the Indian wallet. RuPay-linked UPI credit now accounts for nearly 40% of all transaction volumes, effectively moving credit away from the high-value swipes that banks traditionally rely on.

"The emergence of UPI credit linked to RuPay is changing the way consumers use credit," Jhunjhunvala explains. “High-value 'lifestyle' expenditures like travel, electronics, and dining usually drive the banks' margins up. However, since customers have begun to divide their expenditures into many smaller UPI transactions, the overall growth of expenditure value has been affected and is only projected to reach 6 per cent as a result of this trend.”

The "Supply-Side Throttle"

While banks are eager to lend for infrastructure (up 13.3%) and small businesses, they are intentionally cooling their jets on unsecured retail credit following RBI warnings.

Hitesh Agrawal, Founder & Managing Director, Them Consulting, notes that supply-side dynamics are playing a major role. "With the RBI tightening norms on unsecured lending and macro pressures such as currency depreciation, banks are understandably becoming more cautious. This could manifest in tighter credit limits, more selective underwriting, and a sharper focus on risk-adjusted growth rather than volume-led expansion."

Jhunjhunvala adds that this caution is a “conscious attempt on the part of banks not to force any specific amount of credit growth to occur through the aggressive use of credit but to try to ensure that there are no future defaults by borrowers.”

As the Rupee hovers near 94.29 and inflation remains a shadow, the era of aspiration-led swiping appears to be giving way to utility-led credit.

"What’s important here is that we are not seeing a collapse in demand, but a recalibration of how credit is being used," says Agrawal. "Consumers are still transacting, but with greater control, smaller ticket sizes, and higher sensitivity to repayment cycles."

For the banking sector, the muted growth in cards relative to the broader 14% credit expansion suggests that the next phase of growth will require a redesign. 

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