Scramble among ghost banks for likely credit card licenses

Bombay : The latest decision by the Reserve Bank of India (RBI) allowing non-banking financial companies (NBFCs) to offer credit cards without a banking partner could trigger a rush for such licenses, although only a few are expected to make a difference.

On Thursday, the RBI said in a principal circular that a depositless company seeking to issue cards would need a certificate of registration from the regulator and a minimum net funds of 100 crore.

Many non-bank financial companies (NBFCs) will be interested, said Vijay Jasuja, director of PNB Cards.

Credit cards are a lucrative business, yields are high and the Indian market is under-penetrated. There will be many companies applying. That said, existing NBFCs will then not be able to maintain the card relationship with their banking partners. They have to choose one or the other,” he added.

So far, the central bank has only allowed two NBFCs to issue credit cards without banking partners: SBI cards and BoB cards.

Analysts believe the biggest beneficiary of this change will be Bajaj Finserv Ltd, which already issues a series of co-branded credit cards in partnership with RBL Bank.

As of December 2021, the Bajaj Finserv-RBL co-branded credit card base stood at 2.59 million. In 2021, Bajaj Finserv extended its RBL partnership for five years until 2026.

“RBI will now be more open to licensing various large players, and NBFCs like Bajaj Finance, which currently have a link with RBL Bank, may apply, increasing the competitive intensity,” a report from Friday said. Macquarie.

“The interpretation is that the RBI will be more open to a liberal credit card licensing regime and will be fine with NBFCs keeping the risk on the balance sheet,” he added.

“The recent guidelines from the Reserve Bank of India allowing NBFCs to issue credit cards after prior approval from the central bank is a welcome step. This will provide an opportunity to serve creditworthy people using new era data analytics, which are being leveraged exponentially by NBFC companies like ours,” said Abhay Bhutada, Managing Director of Poonawalla Fincorp Ltd (formerly Magma Fincorp) .

Separately, the Reserve Bank also said that information about revenue sharing between the card issuer (bank) and the co-branded partner entity (NBFC) should be shown to the cardholder and also displayed on the card issuer’s website.

Some industry players find this irrational.

“The customer gets a benefit “X”; why should he care about the revenue sharing agreement between the partners is incomprehensible. I don’t think that makes sense. How will the customer benefit from this?” said a senior industry executive.

The Reserve Bank circular also stated that the co-branded partner would not have access to information relating to transactions made through the co-branded card.

“After the card is issued, the co-branded partner should not be involved in any processes or controls relating to the co-branded card, except to be the initial point of contact in the event of a complaint,” added the Reserve Bank. .

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