Private sector lender Federal Bank plans to onboard non-fintech partners for co-branded credit cards, said Chitrabhanu KG, senior vice-president and country head for retail assets and cards.
After the Reserve Bank of India (RBI) slapped restrictions on its credit card business, the lender told the regulator that it was working internally to address the concerns. “We are putting a lot of intensity in the regulation and working on what we have to ensure. We have gone to the regulator twice to understand what they want. We have increased our salesforce and are looking for co-branding partners that are not fintechs. In the next four to five months, we should find some enhancements in terms of business,” Chitrabhanu said.
He mentioned that the bank plans to hire around 300 people in its organic credit card vertical. “We have improved our salesforce in the five-six months and hired around 140-150 people in the last few months for our organic credit card business across locations. We are getting more people in Tamil Nadu, Karnataka, Maharashtra, Hyderabad, Delhi and we will do something in Gujarat if we see potential. And we will hire more employees, maybe double the number of what we have hired.”
The bank, Chitrabhanu said, is looking aggressively at growing its organic credit card business. “In some sense, the regulatory action has given an urgency for the organic team and business team to grow that business. And with this, we’ve been able to bring in a lot of journeys and we have seen that the numbers have increased.”
The bank is yet to make a formal presentation to the regulator.
Latest numbers from the bank’s investor presentation for Q4FY24 showed that its credit card business grew 101 percent on a year-on-year basis. The total credit card spends of the bank jumped to Rs 1,701 crore in March 2024 from Rs 1,091 crore in March 2023. The bank has a total market share of 1.32 percent in the credit card business.
RBI action
On March 7, the RBI released a Master Direction on Amendment to the Master Direction — Credit Card and Debit Card — Issuance and Conduct Directions, 2022. According to the notification, co-branded cards should explicitly indicate that the card has been issued under a co-branding arrangement with clear mention of the card-issuer.
“The co-branding partner shall not advertise/market the co-branded card as its own product. In all marketing/ advertising material, the name of the card-issuer shall be clearly shown,” the amended directions of the RBI noted.
Federal Bank has co-branded cards with Fi, Scapia and One Card, information from its Q4FY24 investor presentation showed.
On March 13, citing regulatory deficiencies, RBI barred Federal Bank and South Indian Bank from issuing new co-branded credit cards. In a separate exchange filing, Federal Bank informed the exchanges that it has stopped issuance of new co-branded credit cards due to regulatory deficiencies and the bank is rectifying the areas of concern.
The bank later said that it will re-launch its co-branded cards business in a few months. Additionally, senior executives said that the bank does not see any major impact on its business due to the regulatory restrictions.
“We will come back to it in the next three-four months once we get the appropriate regulatory approvals,” Federal Bank Managing Director and Chief Executive Officer Shyam Srinivasan said at a concall after announcing the Q4FY24 results on May 2. He added that the bank was working on details to share with the RBI and get necessary clearances.
Executive Director Shalini Warrier said in an analysts' call on May 9 that the bank does not expect any significant impact of the RBI action on its fee income. “We are in the process of working through the details of what RBI has asked us to look at. We have worked through most of the details that need to be done. In the next few days, we will be going back to RBI and presenting our plan, indicating where the corrections have been made,” she said.
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