Credit Card NPAs Soar Over 500% In 4 Years — What's Fueling The Rise?

The gross NPAs now represent about 2.3 per cent of the total outstanding credit card loans, which stood at Rs 2.92 lakh crore in December 2024.

The data underscores a rising credit risk in the backdrop of expanding credit card penetration

Source : Freepik

While credit card usage in India has seen significant growth in recent years, driven by higher consumer spending and a surge in digital payments, the latest figures from the Reserve Bank of India (RBI) reveal a concerning trend in asset quality within the segment.

According to RBI data, non-performing assets (NPAs) in the credit card category rose sharply by 28.42 per cent over the 12-month period ending December 2024, reaching Rs 6,742 crore. This marks an increase of approximately Rs 1,500 crore from Rs 5,250 crore reported in December 2023.

The gross NPAs now represent about 2.3 per cent of the total outstanding credit card loans, which stood at Rs 2.92 lakh crore in December 2024. In comparison, NPAs were at 2.06 per cent of Rs 2.53 lakh crore during the same period a year earlier, highlighting a deterioration in repayment behaviour despite the sector's overall growth.

The data underscores a rising credit risk in the backdrop of expanding credit card penetration and could prompt greater scrutiny of lending practices and borrower profiles going forward.

Credit card non-performing assets (NPAs) have surged by more than 500 per cent since December 2020, rising from Rs 1,108 crore to significantly higher levels, according to information revealed in response to a Right to Information (RTI) query filed by The Indian Express.

“India’s credit card debt is escalating rapidly due to economic challenges, aggressive lending practices, and low financial literacy. Irregular incomes, particularly among gig workers and MSMEs, exacerbate the problem. For instance, over 8 million salaried jobs were lost in 2023, with income instability persisting into 2024. This volatility forces many to rely on credit cards for essential expenses,” said Kundan Shahi, Founder of Zavo, a loan repayment platform, according to a Mint report.

New Credit Card Issue

Banks issued over 102 million new credit cards in FY24, ramping up distribution efforts and frequently targeting low-income or first-time borrowers, often without thorough credit assessments. Shahi warns that this kind of easy access encourages impulsive spending but leaves many at risk of falling into debt traps.

A major contributing factor is the widespread lack of financial literacy. Many users are unaware of the critical importance of timely bill payments or the long-term impact of interest charges. As per Shahi, the younger consumers, in particular, tend to indulge in non-essential purchases. The integration of UPI with RuPay credit cards has made spending more convenient, but it has also eroded spending discipline.

Experts caution that the unchecked expansion of this segment could have serious long-term implications.