Indian Credit Card Market Sees Sharp Slowdown in Q2 FY26

India’s credit card industry has experienced a marked slowdown in early FY26, with new card issuance dropping sharply by 28% YoY, according to a JM Financial Institutional Securities report. During the second quarter of FY26, only around 4.4 million new credit cards were issued, down from approximately 6.1 million in the same period last year. This decline is more than a minor fluctuation; it reflects a broader moderation in consumer credit demand and a shift in lending practices, signaling that both banks and borrowers are adopting a more cautious approach toward unsecured credit.

Several factors are driving this deceleration in credit card issuance. Firstly, overall consumer credit growth has slowed. Customers are increasingly reluctant to take on new unsecured debt, reflecting a period of cautious borrowing following years of aggressive expansion in card usage. Rising awareness of financial prudence and potential economic uncertainties has contributed to this moderation in demand. Secondly, banks themselves are tightening lending standards. Risk filters and underwriting protocols have become stricter, ensuring that only higher quality customers meet approval criteria. This disciplined approach is aimed at mitigating defaults and improving asset quality, marking a shift from volume-driven growth toward risk-aware credit management.

Another contributing factor is the moderation in credit card spending and outstanding balances. The growth in total credit card balances expanded by just 9% YoY in Q2 FY26, a sharp deceleration from roughly 20% growth in the previous year. Slower balance growth indicates that consumers are borrowing less through credit cards, further reinforcing the slowdown in new card issuance. This trend suggests a broader restructuring of credit habits, with borrowers prioritizing secured or medium-term loans over revolving unsecured credit.

Market dynamics are also shifting. Private sector banks have increased their dominance in new card issuance, now accounting for approximately 78% of all new credit cards issued, up from earlier years. This consolidation highlights the stronger balance sheets, better risk management, and operational efficiency of private lenders, enabling them to maintain issuance despite an overall market slowdown. In contrast, smaller banks and non-banking financial companies (NBFCs) are retreating from the unsecured card market, indicating a concentration of credit issuance among major players. Meanwhile, public sector banks are gaining traction in other retail credit segments such as personal, home, and auto loans, showing a shift in focus from unsecured credit cards to more secure lending products.

The overall takeaway is that the credit card boom of previous years is giving way to a more disciplined phase, where risk management takes precedence over aggressive expansion. Reduced new card issuance, tighter underwriting standards, slower balance growth, and market consolidation all point toward a maturing credit card sector that prioritizes financial stability and sustainable growth over sheer volume. As banks recalibrate their lending strategies and consumers exercise caution in borrowing, the Indian credit card industry is set to witness a phase of controlled, quality-focused growth rather than rapid proliferation.

In conclusion, the slowdown in credit card issuance in early FY26 reflects an evolving financial landscape in India. Private banks’ growing market share, coupled with disciplined lending practices and moderated consumer demand, is reshaping the sector. While overall growth has slowed, the focus on risk management and consolidation may strengthen the foundation of the credit card industry for sustainable, long-term development.