BoB bets big on credit cards, to issue over 1 million cards in FY23, says BoB Financial MD

BoB Financial Solutions, a wholly owned subsidiary of Bank of Baroda (BoB), is planning to grow its credit card portfolio aggressively in the current fiscal year, the company’s managing director and chief executive officer (MD & CEO) Shailendra Singh told Moneycontrol on Tuesday, June 7.

During FY23, BoB Financial Solutions will “easily” issue over 1 million credit cards, Singh said, adding that the company will seek promoters’ approval for capital infusion of Rs 200 crore to Rs 300 crore in June to support its aggressive growth plans.

As per Reserve Bank of India (RBI) data, Bank of Baroda credit cards have grown from 0.12 million in March 2018 to over 1.1 million cards in March 2022. The monthly credit card spends, on the other hand, have grown 10-fold over the same period and stood at Rs 830 crore in March 2022.

During April, transaction volumes crossed Rs 1,000 crore, Singh said.

Singh said that BoB Financial, despite having been established in 1994, did not focus heavily on the credit card space until 2018. The company’s transformation journey started somewhere around 2018 when PS Jayakumar was the MD & CEO of BoB.

“That is the time when we started huge lateral recruitment from the market to build up a very strong leadership pipeline. We also worked on the technology platform and building a synergy-based Bank of Baroda franchise. I think these are the three pillars which are driving our growth,” Singh said.

“Today I have 8,000-plus branches… Imagine a situation where every branch of Bank of Baroda starts firing for credit cards, that is where we are going to derive the ignition engine… I think we are totally in synergy with the aspiration of positioning Bank of Baroda among top five issuers over a period of at least two years,” he added.

Currently, a pilot is also being run to test the viability of customer accretion through the business correspondent channel (BC), Singh said. The company will, however, “remain extra cautious and careful” while using the BC domain to gain customers.

Further, BoB Financial is at an advanced stage of signing a co-branded credit card deal with one of the leading e-commerce platforms, Singh said, without naming the entity.

The company is also looking to expand its small and medium enterprise (SME) segment by trying to design and construct a product around the sector and aiming to aggressively increase corporate credit card issuances, Singh said.

BoB Financial’s gross and net non-performing asset (GNPA and NNPA) ratios stood at 7.1 percent and 1.74 percent, respectively, as of April end. The figure has come down substantially over the last 24 months, Singh said, which was tough in the context of unsecured lending during the Covid-19 period.

“One stance which we categorically took is that we did not restructure any book to cosmetically window-dress the stress, and allow the fissures to come later,” Singh said.

“We strongly believe that the worst is behind us, and as we continue to sharpen our pencils in risk management together with quality partnerships in the form of the defence forces, and professional bodies such as ICAI, ICSI, we expect a significant improvement in our NPA rates in the coming quarters,” he added.

The net interest margin, on the other hand, will likely rise to 13.35 percent in FY23 from 12.26 percent in FY22. The growth is projected to come from increasing customer base together with deepening customer engagement through monthly instalment-based products, Singh said.

Credit cards market

There has been an exponential rise in the number of credit card transactions in the country over the last few years, experts say.

As per an August report by PricewaterhouseCoopers (PwC), credit card issuances have grown at a compound annual growth rate (CAGR) of 20 percent in the last four years. The number of credit cardholders increased from 29 million in March 2017 to 62 million in March 2021.

On May 6, Moneycontrol exclusively reported that Canara Bank was in initial talks to set up a separate credit card subsidiary and that the announcement on the same was likely in two quarters.

Another major private lender, Axis Bank, on March 30 announced the acquisition of Citibank’s India consumer business for $1.6 billion in an all-cash deal.

And not just banks, but with the Reserve Bank of India allowing non-bank lenders to issue credit cards, the cards market is expected to heat up even more.

Moneycontrol on May 4 exclusively reported that Mahindra Finance was exploring the possibility of launching a credit card for its customers and employees. Even the Shriram Group is looking at issuing its own credit card.

When asked about the increasing competition in the credit card industry, Singh said he feels each issuer has the space to create their own niche market.

The credit card industry is in a nascent stage in India and people living in tier-II and tier-III cities are changing their lifestyle which will enable BoB Financial to continue with its issuances despite competition, Singh said.