India credit card spending growth slows in August as competition intensifies

India’s credit card spending growth slowed in August, with HSBC and Jefferies flagging muted momentum and profitability pressures. Card additions rose 10.3 per cent year-on-year, while UPI continued to dominate digital payments amid changes to the merchant discount rate framework

New Delhi: India’s credit card industry’s spending growth eased in the month of August, even as card additions remained relatively steady rising 10.3 per cent year‑on‑year, up slightly from 10.1 per cent in July.

HSBC and Jefferies flagged muted spending momentum, intensifying competition and pressure on profitability as key challenges for the sector, according to reports.

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Net additions stood at around 1.2 million for the month, slightly lower than the 1.3 million added in July, while smaller issuers gained market share, as larger issuers lost ground.

Spending growth remained subdued, with HSBC estimating credit‑card spending up 5.9 per cent year‑on‑year in August and Jefferies putting growth at 5.5 per cent, down from 7.1 per cent in July.

Total spending across merchant networks, including cards and UPI P2M transactions, rose around 19 per cent YoY to Rs 11.3 trillion, signalling sustained dominance of UPI in digital payments.

The upcoming UPI Merchant Discount Rate framework could cut the cost gap between UPI and cards from October 15 but both brokerages remain cautious on the credit card segment.

As 0.4 per cent MDR applicable to eligible UPI P2M transactions above Rs 2,000 is far lower than roughly 1-3 per cent for credit cards, the move only offers limited competitive relief for the latter.

The transactions undertaken by small merchants receiving up to Rs 1 lakh per month through UPI QR codes will also not attract any MDR charges.

RuPay debit card transactions will similarly remain exempt from MDR. The standard rate has been set at 0.4 per cent, with a maximum cap of Rs 300 on transactions of Rs 75,000 and above.

As nearly 96 per cent of UPI merchant transactions are below Rs 2,000, most users and merchants are expected to remain unaffected by the new framework.