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1 Skin diseases like eczema and scabies can also cause red itchy palms. 2  Bumps and exfoliation of palmer skin is observed in these conditions. 3  Bacterial and fungal infection of palms can be a reason for itchy palms. 4  Dry skin of palms can be a reason for itchy palms.
Visage/Stockbyte/Getty Images. Exfoliative keratolysis is an excessive peeling of the skin on the palm of the hands and is sometimes called focal palm peeling.. The condition is preceded by an outbreak of air-filled blisters across the fingers and palms, which may be caused by eczema. These blisters inevitably burst, causing the palm peeling.