At a time when the uncertain macro-economic environment and fear of delinquencies have persuaded most lenders to decelerate the growth in their credit card base, RBL Bank (previously known as Ratnakar Bank) is rapidly expanding this business.
The bank had a portfolio of 138,835 credit cards at the end of May, 2014 – the highest among old-generation private sector lenders. The bank had acquired Royal Bank of Scotland’s (RBS) credit card business in India in November, 2013 and has grown that portfolio by 15% since then.
“While we had plans to start the credit card business on our own, the acquisition provided an opportunity to accelerate the process. The objective was to take over a running business along with the infrastructure and hence get a head start. We took over a performing book consisting of vintage customers with good spends and risk profile. Now, our aim is to scale this business up significantly in the next two to three years,” Harjeet Toor, business head for retail assets and small business lending at RBL Bank, told Business Standard.
To expand its credit card base the bank has adopted a strategy that is contrary to the popular practice. While most banks prefer to give credit cards only to their existing customers, the old-generation private lender is going ‘open market’ and offering credit cards to even those who do not have a prior banking relationship with RBL Bank.
“Currently, nearly 70% of new card sourcing in the industry is from a bank’s own internal customer base. For us, the strategy will not only be to offer cards to our existing customers but also to get new customers in the bank to whom we would cross-sell other products and deepen our relationship,” Toor said.
This strategy has not worked well for some of the banks in the past as it had led to delinquencies and asset quality erosion.
But Toor explains that credit information companies now offer strong inputs on credit behaviour of individuals that help the bank in managing its unsecured retail asset portfolio. “In addition, we use our own analytics to determine the credit worthiness of a customer by evaluating his/her credit history, profile, occupation, etc. We are making a lot of investments in developing these models. Analytics play an extremely important role not only at the time of sourcing of new customers but also to monitor the performance of existing clients,” he said.
RBL Bank has introduced its own branded cards only a couple of months ago and now has three card variants – Titanium Delight (a shopping card), Platinum Maxima (a rewards card) and India’s first cricket card in partnership with Delhi Daredevils team for sports enthusiasts. The bank plans to launch commercial credit cards for corporates and small businesses soon.
The private lender is also exploring opportunities to partner consumer companies to introduce co-brand cards aimed at specific target customers with a defined set of benefits. “We will also be looking at providing white labeled credit cards to some of the other banks who may not want to get into this business but would want to offer this product for their customers,” Toor said.
The bank plans to operate mostly in the middle income segment servicing both salaried and self-employed individuals with a good credit repayment history. It will also launch cards for high net worth individuals but those will only be a small proportion of the bank’s overall credit card base by number.