Credit Card Defaults on the Rise: RBI Data Reveals 500% Spike in NPAs Over Four Years
The rapid growth of credit card usage in India has been accompanied by a concerning increase in non-performing assets (NPAs). According to data from the Reserve Bank of India (RBI), credit card NPAs have surged by 28.42% to ₹6,742 crore in the 12 months ended December 2024. This represents a significant jump from ₹5,250 crore in December 2023, a rise of around ₹1,500 crore.
The RBI data, as reported by Livemint, reveals that gross NPAs in the credit card segment have increased to 2.3% of the gross loan outstanding of ₹2.92 lakh crore in December 2024, up from 2.06% of ₹2.53 lakh crore in the previous year. This trend is particularly alarming, as it suggests that a growing number of credit card holders are struggling to repay their debts.
A closer examination of the data reveals that credit card NPAs have increased by over 500% from ₹1,108 crore as of December 2020, according to an RTI request filed by The Indian Express. This rapid escalation in NPAs has been driven by a combination of factors, including economic challenges, aggressive lending practices, and low financial literacy.
Kundan Shahi, Founder of Zavo, a loan repayment platform, attributes the rise in credit card debt to economic instability, particularly among gig workers and MSMEs. "India’s credit card debt is escalating rapidly due to economic challenges, aggressive lending practices, and low financial literacy," Shahi says, as quoted in Livemint. "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."
The aggressive issuance of credit cards by banks has also contributed to the rise in NPAs. According to Livemint, banks issued over 102 million new credit cards in FY24, often targeting low-income or first-time borrowers without robust credit checks. This easy access to credit has fueled impulsive spending, leaving many vulnerable to debt traps.
Furthermore, a lack of financial literacy has made 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," Shahi notes, as reported by Livemint. "The integration of UPI with RuPay credit cards has made transactions seamless but has also reduced spending oversight."
The unbridled growth in credit card usage 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 fueled by rising defaults and economic strain. As Livemint notes, it is essential to promote financial literacy and responsible lending practices to mitigate these risks.
In conclusion, the rapid growth of credit card usage in India has been accompanied by a concerning increase in NPAs. The RBI data, as reported by Livemint, highlights the need for greater financial literacy and responsible lending practices to prevent a deeper debt crisis. By understanding the causes of this trend and taking corrective action, we can ensure that credit card usage remains a safe and convenient payment option for consumers.
Source: Livemint
