According to multiple executives from fintech startups, banks could further tighten their underwriting for credit cards, one of the riskiest consumer lending businesses, amid concerns over the impact of the West Asia war on the economy and potentially on jobs. This could affect co-branded credit card distribution, a sector where fintech startups like Kiwi, Jupiter, OneCard, Uni and Scapia operate.
“Banks have become cautious. There is a fear of risk looming because of the war and the subsequent stock market tanking,” said the founder of a fintech startup offering co-branded credit cards.
According to data from credit bureau Cibil, credit card originations fell 11% in the quarter ended December 2025 from a year earlier. In terms of the outstanding amount on credit cards, growth slowed to 2% from 27%.
Data sourced from credit card distributors show the average spending limit on credit cards also declined 2% in the December quarter compared with a year ago.
The sanctioned amount was Rs 60,000 crore, compared with Rs 70,000 crore in the year-earlier quarter. The trend held in the March quarter, said industry executives.
“Now with the beginning of the new financial year, the industry is expecting tightening in the underwriting standards for banks for the credit card business,” said a top executive at one of the largest fintech platforms for credit card distribution.
The founder of another Bengaluru-based consumer lending startup said the flow of credit is still happening, but the impact of the oil crisis triggered by the West Asia conflict will be felt across all forms of credit operations over the next three to six months.
The Reserve Bank of India has tightened rules for unsecured consumer lending in recent years. It increased the risk weight assets for such lending by 25 percentage points in November 2023, and brought in a higher degree of scrutiny on lenders operating in this sector. Increased risk weight assets mean banks have to set aside more capital against unsecured lending. These measures made banks and large NBFCs wary of pushing up distribution of unsecured loans.
However, industry insiders were of the opinion that after the reduction of GST rates last year and the government’s push towards increasing consumption, banks were eventually expected to relax their underwriting standards.
But the war in West Asia and the subsequent oil crisis have pushed those timelines by at least two quarters, said industry insiders.
“The credit policies were anyway tightened by banks last year, but we were hopeful that some relaxation would be seen this year. But the (Gulf) crisis has delayed this further and the eventual impact will be another three to six months,” said the founder of a co-branded credit card startup.
Data from the central bank show that only a million new credit cards were issued between January 2026 and December 2025, taking the total to 117 million. A year back, the total was 108 million. Total credit card outstanding at the end of February was Rs 2.9 lakh crore.