The $1.6-billion deal made by Axis Bank to acquire the consumer business portfolio of Citibank India on March 30 is on track and awaiting regulatory approvals, Axis Bank president and head of cards and payments Sanjeev Moghe told Moneycontrol in an interaction Thursday, July 7.
“The deal is on the right track, we are waiting for regulatory approvals, and the work will pick pace further post that but right now it is all on track,” Moghe said.
Citibank India and Axis Bank’s credit card portfolio is stable with low single-digit bad loans, Moghe said, adding that Citibank India is not witnessing any extraordinary attrition among employees and is being able to hold on to and attract more high net-worth individuals (HNI) as customers.
Edited excerpts:
Q: Your credit card portfolio grew at the fastest pace during January-March. What will be the growth strategy in the current fiscal?
A: We have our partnerships which have started giving us results. For example, we launched (a card in a tie-up with) Flipkart three years back and are witnessing very interesting results. The partnership with Google has taken on some momentum, we launched with Airtel Payments Bank in February, and all of these are scaling up now. Flipkart is very substantial where we have crossed 2.5 million cards.
The second part is, the organic business also has solid momentum because we have our learnings from the Covid-19 pandemic and as we scale up post that, my sense is this growth is going to continue. There will be some upset but in the next two quarters, Q1 (April-June) and Q2 (July-September) we should be around a million (issuance of 1 million credit cards), and scale up further from Q3 (October-December) onwards.
We started the year at total CIF (cards in force) of 9 million. The RBI (Reserve Bank of India) has recently issued guidelines on card closure but if we keep that aside for a minute, I will envisage overall CIF at the end of year (March 31, 2023) at close to 12 million cards... I think these numbers are very strong. Obviously, at some point, by December or March, when the Citi portfolio gets added, it will be another 2.5 million cards.
Q: How is the Citi deal shaping up?
A: The deal is on the right track, we are waiting for regulatory approvals, and the work will pick pace further post that but right now it is all on track. We have started work with them (Citibank India) but this is going to take some time but we are on track, as per our schedule.
Q: Is the bank being able to hold on to HNI customers of Citibank India and attract similar clients?
A: Citibank India customers’ international spends are higher than the market and Axis Bank, that is likely to continue purely because of the profile that Citibank has. We believed that if we have to make our portfolio more affluent, if we buy them, it adds a lot of value to Axis Bank, and that point holds.
Is Citibank witnessing any undue or very extraordinary attrition rates in terms of customers? No. We have not seen anything out of the ordinary in the Citibank portfolio. That is why the business momentum on their side is good and on our side as well. When you combine the entities, they are formidable and will become very formidable in the market…
Q: Are you witnessing higher attrition in the Citibank India team?
A: From what we are seeing on the cards portfolio, we are pretty confident of delivering value on the deal that we have made. I do not see a challenge on that.
Employee attrition and those things are fine, overall in the market, too, attrition is happening. Those things will be taken care of as part of overall merger exercise...
Q: Canara Bank is planning to launch a credit card subsidiary and other lenders like HDFC Bank are chasing growth aggressively in the space. How will you beat the competition?
A: The balance sheet of banks is clean. It got cleaned up a couple of years back and during the Covid-19 pandemic phase. That means that risk is pretty low right now. When risk is low you can obviously grow your business that much more…
We are confident about the growth because we have two engines running right now. One is organic bank channels and second we have built through partnerships. We have multiple large partnerships including Flipkart, LIC (Life Insurance Corporation of India), Google, Airtel, Vistara—these are big names. These are big partnerships, and we anticipate some more partnerships to fructify through the year itself. With that the growth momentum will be solid. It is also possible that other lenders will also look at growth. That is fine, we have our strategy in place. Our strategies are dependent not just on top six-eight markets, we have very deep acquisition capabilities…
Q: Are there any acquisitions planned for this fiscal?
A: Nothing in the pipeline. Citi is what we have, we will absorb and deliver on that and if anything is there, it is in the future.
Our rank in credit card space is presently number 4. I do not see our rank improving to number 2 or 3 in the next 12-18 months because that gap if fairly wide.
What I do anticipate is that the gap between us and the others will close, the gap between number 4 and 3 and 2. Partly because of the way Axis Bank will grow, and because Citibank India (credit cards) will come close to reporting by the end of year…
Q: How many partners are you looking to get on board your bank for co-branded cards?
A: Credit card launches will continue. We will not do 8-10 launches, but you will expect some news throughout the year—I cannot talk too much because these are currently being worked on. These launches will happen in Q3, Q4.
Q: How is the asset quality of Axis Bank and Citibank India’s credit card portfolio?
A: It is very clean, NPAs (non-performing assets) are in lower single digits.
Q: Will it continue to be stable?
A: It will be in the lower single digit territory.
Q: Is the RBI diktat to fintechs that they cannot load credit lines into wallets a good move for regulated banks?
A: Lot of people are asking whether it is bad for PPIs (prepaid payment instruments) or bad for NBFCs (non-banking financial companies) and good for banks, etc. I do not view regulations from that lens. The way to look at the regulation is obviously there is some ambiguity which was being used and the RBI has clarified that certain things are not allowed.
Does it impact people who were using ambiguities? Yes it does.
Some of these players will now have to look at alternative solutions. What are the solutions? Whether they talk to banks for partnerships, we will wait and see what happens from here onwards.
Q: Will you continue partnering with fintechs?
A: Yes, we will talk to them. Whatever works out and since we have clear principles that we follow, if it meets those principles, we will partner with some of them…
Q: Will your partnership with Freecharge and the buy now, pay later (BNPL) product continue?
A: BNPL will continue, there is no problem with BNPL.
Unfortunately, people are conflating these guidelines which really say that you cannot load a credit line through PPIs … Freecharge has a product, their product will continue and it is actually doing quite well... The partnership is going well, it will continue to do well and there is no impact of the regulatory guidelines on Freecharge’s BNPL product. People are mixing two issues there.
Q: Should fintechs be regulated more?
A: Whenever the regulatory landscape is clarified, there will be an impact on people who would have interpreted it differently. If they were doing something that was not allowed, it would have to be stopped. If some other aspect is clarified, for example on interest rates, there will be an impact.
As there will be an impact, there will be a reaction… These things will happen at all points of time. We are very focused on the ground on partnerships and organic strategy. These partnerships may come out of our normal discussions, and may also arise as an impact of some of these regulatory changes.
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