UPI and Personal Loans Are Replacing Credit Cards in Indians’ Wallets, Says CIBIL Report

Credit Card Penetration Remains Low in India

According to Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL, India currently has approximately 5.2 crore credit cardholders, representing only about 25% of the country’s 25 crore credit-active consumers.

The report compares India’s penetration with several global markets:

The comparison highlights the significant growth potential that still exists for India’s credit card industry.

UPI and Personal Loans Are Reshaping Consumer Preferences

The report notes that consumers are increasingly choosing digital payment platforms and personal loans over traditional credit cards.

While credit cards continue to offer benefits such as reward points, cashback, and loyalty programmes, they also involve merchant discount rates (MDR) of up to 2%, making alternative payment methods increasingly attractive.

UPI has emerged as a preferred payment option because of its convenience and widespread acceptance. However, the report points out that currently only RuPay credit cards can be linked to UPI applications, while Visa and Mastercard credit cards remain outside the UPI ecosystem.

Credit Cards Are No Longer the First Choice for New Borrowers

Another notable trend highlighted in the report is the declining role of credit cards as an entry point into the formal credit system.

Only 8% of newly issued credit cards were provided to first-time borrowers, compared with 26% a year earlier.

This suggests that many individuals are now establishing their credit history through products such as personal loans before applying for credit cards.

India’s Credit Card Market Has Expanded Significantly

Despite changing consumer preferences, the Indian credit card industry has witnessed substantial growth over the past decade.

Key developments include:

• Outstanding credit card balances increased 8.3 times to approximately ₹3.1 lakh crore.
• The number of credit cardholders expanded 3.6 times, reaching 5.2 crore.
• Total credit cards in circulation rose 5.1 times to approximately 10.7 crore.
• The proportion of consumers holding three or more credit cards increased from 12% to 22%.
• The share of active credit cards within overall consumption loans declined from 56% to 38%, indicating diversification in borrowing patterns.

Credit Card Usage Expanding Beyond Major Cities

The report also highlights changing demographic trends in credit card adoption.

Younger consumers continue to drive demand for credit cards, while ownership is steadily expanding beyond metropolitan regions into semi-urban and rural areas.

The broader geographical reach reflects increasing access to formal financial services and improved financial inclusion across the country.

Conclusion

India’s credit card market has grown steadily over the past decade, yet overall penetration remains relatively low compared with many global markets. At the same time, the widespread adoption of UPI and increasing preference for personal loans are transforming the country’s payment and borrowing landscape. As digital finance continues to evolve, financial institutions may need to adapt their offerings to align with changing consumer preferences while addressing the significant untapped potential in the credit card segment.

Summary

A recent white paper released by TransUnion CIBIL indicates that credit cards are gradually losing their position as the preferred unsecured credit product for many Indian consumers. The rapid adoption of Unified Payments Interface (UPI) and the growing popularity of personal loans are reshaping payment habits and borrowing preferences across the country.

Although the number of credit card users has increased significantly over the past decade, India’s overall credit card penetration remains considerably lower than that of several developed and emerging economies.