Future Of Credit Cards Market In India & It's Impact - Kotak Bank

21 NOVEMBER, 2022

The Growth of Credit Card Usage in India and its Future

Traditionally, Indian customers preferred debit over credit cards. Most of India's first credit card users were expatriates familiar with how credit card systems worked. This resulted in a misconception that credit cards are a luxurious foreign consumer product reserved for the extremely wealthy.

However, this idea has significantly changed with increased awareness about credit cards and their ease of access. Now, credit cards have a significant stance in the Indian market. In the past ten years, the credit card market in India witnessed significant growth concerning an increase in the number of credit card transactions and credit cards issued. The sections below further explore this growth trend in the credit card market.

Growth of Credit Card Users and Transactions

The proportion of credit cards issued by private banks fell during the first two quarters of FY 2021. However, the second and third quarters of 2021 showed a sizable increase.

According to reports from the banking system, in 2021, over 1.2 million new credit cards were issued in India, which increased the number of credit card holders to 62 million. Similarly, the second and third fiscal quarters of 2022 also witnessed a significant boost in credit card issuance. Not only this, credit card transactions saw a sizable increase in value in FY 2021 and 2022.

Based on this trend, finance experts predict that by FY 2027, the total value of credit card transactions will reach INR 51.72 trillion, growing at a CAGR of 39.22% between FY 2022 and FY 2027. During the same forecast period, anticipations are that the number of credit card transactions will also increase at a CAGR of 26.43%. These statistics reflect that the role of credit cards in India will likely increase.

Credit Card Users in India

Despite a drastic increase in credit card consumers, the rate of credit card penetration in India remains low. In India, only 3 out of every 100 people have credit cards, which is well below the World Bank's benchmark, which is set at 30%. Psychological factors are the cause of India's lower penetration rate.

Credit cards continue to be generally resented by India's traditional middle class. Therefore, credit card companies must put in extra effort to overcome the history of high fees, interest rates, and a general aversion to using credit unless necessary, to stimulate the growth of credit card users in India.

Growth of Fintech Credit Cards

Numerous Fintech firms have joined banks in the credit card market by leveraging the "Digital India" movement and increasing urban spending in India. Fintech credit card providers establish credit limit with their lending partners, such as banks or NBFCs, and issue prepaid cards backed by those limits. The USP of Fintech credit cards is that these businesses offer enticing discounts, referrals, and cashback for frequently used services, like food delivery, recharge, bill payment, groceries, travel, or even your favourite D2C brands.

These companies use non-traditional datasets to advance lines of credit to those who would not otherwise have access to them. The goal is to quickly expand the Fintech credit market and reach out to a larger group of people to increase credit availability. In addition, a small portion of the market is occupied by NBFCs, which offer credit to consumers through e-commerce and other platforms with alluringly designed no-cost or low-cost EMI options.

Credit EMIs

Due to an increase in urban population, rising consumption income, access to low-interest credit, and disruption by Fintech, a different category of formal credit known as credit EMIs or durable consumer loans is increasing. The processing fee for these credit EMIs is negligible, and the credit card EMI interest rates are reasonable. Besides, there are no down payments or security requirements either.

Therefore, customers are diverting toward this option. As per financial reports, durable consumer loans are expected to grow at a CAGR of 21%, from INR 84 billion in 2020–21 to INR 205 billion in 2026–27. These statistics show India's credit market has a promising future.

Different Ways to Boost Credit Card Growth

There are numerous ways for banks and Fintech companies to promote the use of credit cards, some of which are listed below:

  • 1. Partnerships: Alliances with colleges, universities, and other organizations are necessary for credit card companies and Fintech businesses to expand the number of credit card customers they serve. It addresses two major issues: first, the acquisition cost reduces because a larger audience can be reached simultaneously; and second, recovery concerns decline because clients are strategically chosen by considering their likelihood to make debt repayments.
  • 2. Co-branded cards: Credit card companies can ally with gas stations and other brands to gain customer loyalty through reward points and discounts.
  • 3. Point of Sale: Through the growth of contactless and mobile point-of-sale innovations, in the future, more businesses will accept credit cards and use Point of Sale (PoS) terminals. Consequently, customers will see more benefits in maintaining a credit card.
  • 4. Improved Legal Framework: Apart from traditional push marketing, banks and Fintech organizations can opt for options like credit card management education and e-signatures. Such initiatives will help increase awareness about the credit card system's functioning and help the organization achieve low-cost and low-friction customer onboarding.


Indian customers have always been driven by the debit card system, as the idea of credit cards was perceived as foreign and designed for the wealthy. However, the origination of the digital India initiative and the Fintech industry's growth has significantly changed the perception of Indian customers.

People are now willing to opt for credit cards considering their benefits in terms of easy digital payments, reward points, and ease of access. Although the penetration rate is still low in India; the steady growth gives hope that in the future, credit card usage will increase in the Indian market.

Based on this trend, finance experts predict that by FY 2027, the total value of credit card transactions will reach INR 51.72 trillion, growing at a CAGR of 39.22% between FY 2022 and FY 2027. During the same forecast period, anticipations are that the number of credit card transactions will also increase at a CAGR of 26.43%. These statistics reflect that the role of credit cards in India will likely increase.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.