Credit expansion: Banks, fintechs bet on fixed deposit-backed cards; low-limit offers gain traction

Banks in partnership with fintechs are increasingly rolling out secured credit cards backed by fixed deposits, targeting customers who are otherwise excluded from the formal credit system.

According to ET, these cards come with limits as low as Rs 90, compared with the usual entry-level range of Rs 25,000–50,000.

Of the 1–1.1 million credit cards issued each month, nearly 100,000 are such deposit-backed cards, including SBM India Step Up Card and Supercard.

Paisabazaar’s Step Up Credit Card, co-branded with SBM Bank India, requires a fixed deposit of Rs 2,000 and offers a credit limit of up to 90 per cent of that value.

Similarly, the Flipkart-backed Super.money venture, with Utkarsh Small Finance Bank, issues Supercards secured against 90 per cent of FD amounts, with a minimum limit of Rs 90.

Industry executives as quoted by ET said that the products allow banks to expand credit penetration while containing risks. With RuPay credit cards enabled for UPI payments, users can now transact at local merchants and online platforms.

“A secured credit card could be offered to 30 to 40 crore users at least — that is the market being targeted,” said Rohit Chhibbar, chief business officer, credit cards at Paisabazaar.

Super.money founder Prakash Sikaria noted that secured cards are evolving. “From the older version, which was to make your bank account better, it has now morphed because of RuPay and UPI, into an interest-bearing wallet,” he said, adding that his company has already captured 15 per cent of the market share in this segment.

Beyond enabling transactions, secured cards are also being positioned as a tool to build or repair credit scores.

Manish Shara, cofounder of fintech Zet, said many customers who faced financial disruption during the pandemic are using these cards to restore their scores. However, as per ET, fewer than 20 per cent of secured card holders transition to unsecured cards, given the wide gap in credit limits.

For lenders, the appeal lies in customer acquisition. Executives said secured cards are cheaper to issue, with acquisition costs of about Rs 700–800, compared with Rs 1,500–2,000 for unsecured cards.

A fintech founder cited by ET said that while secured cards don’t directly generate significant revenue, they help attract first-time borrowers and add deposits to the banking system.

Industry experts said the shift comes amid rising NPAs and tighter norms in unsecured lending, making secured credit cards a safer growth avenue for banks and fintechs.