Indian credit-card issuers are lifting Diwali reward caps and re-pricing zero-cost EMI plans on consumer durables after September’s goods and services tax cuts pulled effective ticket sizes lower on televisions, refrigerators and two-wheelers. HDFC Bank, SBI Card and Axis Bank circulated refreshed merchant offers to large-format retailers this week, according to three payments executives who asked not to be named because the programmes are not yet public.
How GST changed the math
Tax reductions on several household goods shifted the break-even point for no-cost EMI programmes. When list prices fall but interest subsidies stay fixed, issuers either absorb margin compression or shorten tenors. Most banks chose shorter tenors: several large appliance chains now advertise 9- and 10-month plans where 12-month plans were standard last festival season.
Retailers Association of India chief executive Kumar Rajagopalan told industry forums that October footfall is already running ahead of last year’s muted season, with categories such as apparel and electronics leading. Card issuers want to capture that spend without triggering the interchange disputes that followed aggressive cashback wars in 2024.
Reward caps and monitoring
Cashback ceilings on premium cards rose to ₹5,000 per statement cycle on select appliance SKUs, up from ₹3,000 in August, two issuer product heads said. Banks paired the sweeter rewards with tighter velocity checks after the Reserve Bank of India reminded lenders about monitoring merchant-category-code misuse during festival spikes.
What borrowers should verify
Shoppers comparing offers should read the fine print on processing fees and pre-closure penalties, consumer counsellors said. A shorter EMI tenor lowers the issuer’s subsidy cost but raises the monthly outflow, which can stress borrowers who budgeted for last year’s 12-month plans.
With the repo rate steady at 5.50 percent, floating-rate card finance remains sensitive to any future Monetary Policy Committee move. For now, issuers are betting that festival volume will outweigh thinner per-transaction margins—provided delinquencies stay contained once January statements arrive.
Merchant economics
Large-format retailers said interchange on appliance categories runs higher than grocery, which is why issuers negotiate separate MDR deals before festival weeks. When GST cuts lowered ticket sizes, some merchants absorbed part of the subsidy to keep advertised EMIs unchanged; others pushed banks to share the pain.
Payments council data show unified payments interface still dominates low-ticket spends, but cards regain share above ₹25,000 where reward points and extended warranties matter. Issuers hope bundled insurance on TVs and washing machines will keep cards in the wallet even as UPI grows.
Consumer groups asked the RBI ombudsman to publish complaint trends after last year’s festival season, when hidden processing fees spiked. Banks responded by standardising fee disclosure boxes in EMI agreements, though activists say the font size remains too small on mobile screens.
Credit risk
Rating agencies watching unsecured retail books said delinquency curves typically worsen two months after festival EMIs begin, making January collections the real test of issuer optimism. Banks with higher exposure to unsecured cards are offering fewer no-cost plans on high-ticket electronics than peers with stronger deposit franchises.