Credit card NPAs spiked 500% in past four years, shows RBI data. What is driving defaults?

Credit card usage has undoubtedly risen considerably in the past few years, primarily steered by increased consumer spending and the growing popularity of digital payments. However, non-performing assets (NPAs) in the credit card segment also spiked by 28.42 per cent to ₹6,742 crore during the 12-month period ended December 2024, the latest Reserve Bank of India (RBI) data shows.

The RBI data also reveals that gross NPAs jumped from ₹5,250 crore in December 2023 to the current level, a rise of around ₹1,500 crore. This is around 2.3 per cent of the gross loan outstanding of ₹2.92 lakh crore in the credit card segment of commercial banks in December 2024 vis-a-vis 2.06 per cent of ₹2.53 lakh crore credit card outstanding in the previous year.

NPAs on the rise

Credit card non-performing assets (NPAs) have gone up by over 500 per cent from ₹1,108 crore as of December 2020, according to the reply to an RTI request 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,” says Kundan Shahi, Founder of Zavo, a loan repayment platform.

Too many cards

Banks are aggressively issuing cards, over 102 million new ones in FY24, often targeting low-income or first-time borrowers without robust credit checks. “This easy access fuels impulsive spending but leaves many vulnerable to debt traps,” adds Shahi from Zavo.

Lack of financial literacy also makes the situation worse. Some users do not understand the importance of sticking to the last dates of credit card bill payments. “Younger users are particularly prone to non-essential spending. The integration of UPI with RuPay credit cards has made transactions seamless but has also reduced spending oversight,” says Shahi.

Unbridled growth in this segment could have long-term consequences if financial education and lending norms are not examined. Without intervention, there is a growing risk of a deeper debt crisis fuelled by rising defaults and economic strain.

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