Major Indian credit card issuers — including State Bank of India (SBI), HDFC Bank and ICICI Bank — have been reworking their reward programmes and perks, scaling back benefits that were once more generous. This isn’t isolated to one bank; it’s an industry-wide trend reflecting deeper economic and business realities.
1. Controlling Costly “Reward Leakages”
Rewards programmes are expensive for banks to run. In recent years, some card users found ways to maximise rewards disproportionately relative to the profit banks earn on transactions. These so-called reward leakages arise when:
- Users earn high reward points without generating comparable fee or interest income
- Premium cards offer generous benefits even on low-margin spends
Banks are tightening rules to cut these inefficiencies and make programmes more sustainable in the long run.
2. Recalibrating Benefits vs Business Economics
Even before 2026, many issuers began adjusting reward structures to ensure profitability:
SBI Cards removed rewards on categories like gaming and government portals and discontinued certain insurance perks, reducing the cost of benefit fulfilment.
HDFC Bank reduced reward rates on high-earning SmartBuy categories (e.g., down from 5X to 3X rewards on its Infinia card), lowering overall return on spend.
ICICI Bank introduced restrictions or fees on utility and large payments and reshaped spend categories for points.
These moves shrink the net value of reward earnings — especially for big spenders or manufactured-spend behaviours that cost banks money without generating revenue.
3. Shifts in Consumer Usage and Merchant Economics
As digital payments become dominant:
- A higher share of transactions occur through low-or-zero MDR channels (e.g., UPI), meaning banks earn less per swipe
- Traditional interchange revenue from cards faces pressure
- People make high-value spends (rent, utilities) that historically earned disproportionate rewards relative to what banks collected in fees
This has pushed issuers to limit or charge for rewards on such categories, balancing reward payouts against income.
4. Focus on Sustainable and Targeted Rewards
Instead of across-the-board benefits, issuers are moving toward spend-linked and targeted rewards:
Bonus points or vouchers only once you meet higher thresholds
Tighter caps on redeemable points (e.g., monthly redemption limits on HDFC Infinia)
Rewards focused on core value categories (travel, dining, retail) rather than all transaction types
This ensures banks reward profitable behaviours and reduce incentives that don’t contribute meaningfully to revenue.
5. Regulatory Environment Isn’t the Primary Driver
While RBI does regulate banking practices, credit card reward tightening is largely bank-driven, not directly mandated by regulators. Issuers are optimising reward economics themselves — adjusting structures that make sense for their individual business models.
What This Means for You
Good for sustainability:
Rewards programmes that last longer are better than overly generous ones that burn out quickly.
Perk value may feel lower:
- Fewer bonus categories
- Higher spend thresholds for elite benefits
- Changes to lounge access and entertainment offers
Smart card strategy now:
- Use cards that reward your habitual spend categories
- Watch for bonus caps and spend conditions
- Mix cards to balance value (e.g., one for travel, one for everyday bills)
Bottom Line
Banks like SBI, HDFC and ICICI are tightening rewards not because they don’t want to reward cardholders, but because they’re trying to:
Make reward programmes economically viable
Align offers with revenue realities
Cut benefit misuse or disproportionate payouts
Focus value on behaviours that benefit both cardholders and banks