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Indian banks eat into foreign banks' share in credit card business

Credit card business in India, which until recently was dominated by the resourceful foreign banks, is becoming a very popular niche segment for both public sector and private banks to harvest earnings without funding.

According to leading bankers, Citibank which had the monopoly in credit card business, is now being challenged by the largest Indian commercial bank, State Bank of India. SBI had entered the business in November 1998 in association with GE Capital and grabbed a sizeable market share.

Besides, there are other public sector banks like Bank of India and Bank of Baroda which made early entry in credit card business, much before SBI. But they could not popularise the product because of lack of infrastructure facilities and efficient client service.

Since the card business is a lucrative non-fund business with high rate of returns, several private sector banks are now venturing into this business in collaboration with other established foreign banks in card business.

While among private banks, IDBI Bank intend to venture into this business through collaboration with other matching entities, Bank of Madura, an old private sector bank, recently announced its tie-up with the ANZ Grindlays Bank in launching credit card business.

Bankers said that the card business became so popular that the leading corporates like Hindustan Lever had launched co-branded credit cards for promoting their products and images in the premium market.

Former chairman of SBI M S Verma, under whose Leadership SBI launched its credit card business, felt that new private sector banks could venture into such card business. But they should do it only through networking relationship with other technology-matched banks. This will help them to reduce the cost of operation and enhance the market reach.

The card business is a high-risk, high returns and capital-intensive business and only a large resourceful bank could think of entering into the business alone.

However, a section of bankers were critical over the way the small banks enter high-risk card business without adequate delivery and distribution systems and without effort to educate their clients and end-users.

In fact, in recent months, some Indian banks in credit card business, are experiencing escalation in their non-performing assets due to non-payment of credit card dues. The pressure on NPAs would be enormous in such business, they added.

UNI

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