India's credit card boom is experiencing a fundamental transformation as customers increasingly use cards for payments rather than borrowing. According to The Economic Times, industry estimates show interest-bearing card balances have fallen to about 11% of annual card spending from roughly 21% several years ago, even as card spending grew at a compound annual rate of nearly 27% between 2021-22 and 2025-26. This shift represents a structural disruption in the traditional revolver-led credit card model, where customers maintained outstanding rolling debt that generated disproportionate profits for issuers. As Pranav Gundlapalle, senior research analyst at Bernstein, noted in a recent report, "The revolver-led credit card model is undergoing a structural disruption. The fall in interest-earning assets (revolvers and EMI loans) as a percentage of spends" is compressing margins, with cheaper and more seamless alternatives reducing demand for revolving balances.
The structural shift is compressing profit margins significantly across the industry. As reported by Bernstein, the ratio of revolver balances to card spending had fallen to about 2.8% in the June quarter from roughly 7% in 2019, signifying a sharp decline in profit generated for every rupee spent on cards. Bernstein estimated that profit generated per unit of card spending fell to about 0.50% in 2025-26 from 0.84% in 2016-17, with expectations of further decline to about 0.43% by 2028-29. According to Axis Bank, the moderation in revolving credit is partly structural, as consumers have become more conscious of making timely repayments, while digital platforms and payment reminders have reduced instances of customers inadvertently carrying balances. As Arnika Dixit, group head — cards, payments and wealth management at Axis Bank, noted, "Revolvers have been coming down for roughly five years."
The profit compression is particularly visible at large banks, with HDFC Bank's overall portfolio yield declining by about 50-60 basis points due to reduced interest-bearing credit card advances. According to The Economic Times, HDFC Bank's credit card advances-to-spends ratio has fallen to about 17% from around 27% in 2018-19, driven by lower revolver and EMI balances. The decline has made credit cards a significant contributor to the lender's weaker yield trajectory relative to peers and the broader banking system. Alongside the HDFC Ltd merger, the Reserve Bank of India's temporary embargo on fresh card issuance and recent industry-wide moderation in card spending has reduced credit cards' share of HDFC Bank's total loan book to about 4% from around 6% in 2018-19.
SBI Cards, the country's largest standalone credit-card issuer, reported mixed results in the June quarter. As reported by The Economic Times, retail spending increased 14% year-on-year to ₹94,033 crore while receivables grew just 3% to ₹58,269 crore. Interest-earning assets accounted for about 55% of receivables, while revolvers stood at 22%, with interest income declining about 3% year-on-year to ₹2,421 crore. However, management expects revolving balances to stabilise, indicating that the downward bias may have bottomed out. Revolvers accounted for about 40% of SBI Cards' receivables in March 2020, compared with 22% currently, while interest-earning receivables have declined to 55% from 60% a year earlier, even as card usage continues to expand.
The trend toward payment-focused card usage rather than borrowing continues to impact major lenders, with Axis Bank emphasizing that the moderation in revolving balances does not necessarily mean weaker growth in the overall credit card book. According to Axis Bank, point-of-sale transactions converted into equated monthly instalments (EMIs) can continue to generate revenue-accretive spending and support growth in card receivables. As Dixit explained, "Newly acquired customers also take time to contribute meaningfully to the book. Typically, it takes six to 12 months for a new cardholder to build meaningful spending on the card, providing banks with a pipeline for future receivables growth." The company is also seeking to expand EMI conversions to improve the share of interest-earning assets. Axis Bank recently launched a co-branded credit card with Scapia to target younger, travel-oriented customers, offering up to 10% rewards on everyday spends and 20% rewards on travel bookings across multiple platforms.
