SCRAMBLE AMONG SHADOW BANKS FOR CREDIT CARD LICENCES LIKELY

MUMBAI: The latest Reserve Bank of India (RBI) decision allowing non-banking finance companies (NBFCs) to offer credit cards without a banking partner could spark a scramble for these licences, though only a few are expected to make the cut. On Thursday, the RBI said in a master circular that a non-deposit taking company looking to issue cards would require a certificate of registration from the regulator and minimum netowned funds of ₹100 crore.

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

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

So far, the central bank has allowed only two NBFCs to issue credit cards without banking partners: SBI Cards and BoB Cards. Analysts believe the biggest beneficiary of the 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 by another five years till 2026.

“RBI will now be more open to granting licences to various large players, and NBFCs like Bajaj Finance, who have a tie-up with RBL Bank currently, could apply, thereby increasing competitive intensity,” a Macquarie report said on Friday. “The interpretation is that RBI will be more open for a liberal credit card licensing regime and will be fine with NBFCs retaining risk on the balance sheet,” it added.

“The RBI’s recent guidelines to allow NBFCs to issue credit cards after prior approval from the central bank is a welcome step,” said Abhay Bhutada, MD of Poonawalla Fincorp Ltd.