Credit Card Defaults Skyrocket: 500% Surge Reveals 7 Shocking Truths You Must Know

Credit Saison India has secured $300 million through its first dollar loan in the country, aiming to expand its operations and diversify funding sources. The company plans to grow its ₹17,000 crore loan book by entering new segments like MSME loans and loans against property. Meanwhile, India is witnessing a worrying surge in credit card defaults, which have jumped 28% in a year to ₹6,742 crore by December 2024. Over the last three years, credit card NPAs have increased by over 500%, highlighting rising financial stress among borrowers.

Despite a general decline in overall bank NPAs, the personal loan and credit card segments are showing clear signs of strain. The surge is largely due to growing consumer reliance on unsecured credit and failure to repay dues within interest-free periods, leading to interest rates as high as 46%. The RBI has responded by tightening regulations and increasing risk weights on unsecured loans. However, with credit card usage and spending continuing to rise, the risk of a deeper debt crisis is growing.

Credit Card Defaults Skyrocket: 500% Surge Reveals 7 Shocking Truths You Must Know

Credit Saison India (CS India), a non-banking financial company (NBFC) backed by leading Japanese investors, has secured $300 million (around ₹2,600 crore) through its first dollar-denominated loan in India. This step is part of its strategy to broaden funding options, aligning with other financial institutions in the country that are diversifying their capital sources.

The company’s CEO, Presha Paragash, shared plans to expand its branch network and launch new financial products, including loans tailored for micro, small, and medium enterprises (MSMEs) and loans against property. With an existing loan portfolio of ₹17,000 crore, CS India aims to accelerate growth in India’s competitive lending market.

Rising Credit Card Defaults Spark Worries

While NBFCs like CS India push for expansion, a parallel challenge is emerging: credit card defaults in India are climbing sharply. According to the Reserve Bank of India (RBI), unpaid credit card debt—termed gross non-performing assets (NPAs)—rose by 28% between December 2023 and December 2024, jumping from ₹5,250 crore to ₹6,742 crore. This surge comes amid broader economic headwinds, including slowing growth and rising household financial stress.

Alarmingly, credit card NPAs have exploded by over 500% since December 2020, when defaults were just ₹1,108 crore. This spike coincides with a boom in credit card adoption, driven by India’s digital payment revolution and rising consumer spending. However, the convenience of plastic money has a downside: many users struggle to manage repayments, leading to a debt trap.

High Interest Rates Fuel Debt Spirals

Credit card debt is particularly risky due to its unsecured nature—meaning no collateral is required—and steep interest rates ranging between 42% and 46% annually. If a user fails to clear dues within the interest-free period (typically 45–50 days), the outstanding balance starts accumulating hefty interest charges. Over time, this can snowball into unmanageable debt, damage credit scores, and push borrowers into a cycle of borrowing more to repay existing dues.

Bank officials warn that customers often overlook these risks, lured by rewards, discounts, and premium perks offered by card issuers. “Many users focus on the benefits but ignore the fine print on interest rates. Delayed payments can lead to massive liabilities,” a banking expert cautioned.

RBI Steps In to Curb Risks

To address the growing risk in unsecured lending, the RBI increased the “risk weight” on credit card loans and NBFC borrowings in November 2023. Risk weights—a tool to ensure banks set aside more capital for riskier loans—were raised by 25%, taking the total to 150%. This move aims to discourage reckless lending by making it costlier for banks to extend unsecured credit.

Despite these measures, credit card usage continues to soar. Transaction values tripled from ₹6.3 lakh crore in March 2021 to ₹18.31 lakh crore in March 2024. In January 2025 alone, spending hit ₹1.84 lakh crore, up from ₹64,737 crore in January 2021. The number of active credit cards also surged, from 6.1 crore in early 2021 to 10.88 crore by January 2025, reflecting Indians’ growing reliance on credit for everyday expenses.

A Mixed Picture for Banks

While credit card defaults rise, banks have managed to reduce overall NPAs. Bad loans dropped from ₹5 lakh crore in December 2023 to ₹4.55 lakh crore by December 2024, thanks to improved recovery efforts and tighter lending norms. However, the personal loan and credit card segments remain trouble spots, signaling stress among middle- and upper-income households.

The Road Ahead

The trend highlights a paradox: even as India’s economy expands, financial literacy struggles to keep pace. Customers flock to credit cards for convenience and perks but often lack awareness of repayment pitfalls. For lenders like CS India, balancing growth with responsible lending practices will be critical. Meanwhile, regulators face the challenge of curbing systemic risks without stifling credit access in a rapidly digitizing economy.

As credit card dependence grows, the need for consumer education and stricter safeguards becomes urgent. Without these, the dream of easy credit could turn into a long-term debt nightmare for many households.