MC Exclusive | Bajaj Finance to halt co-branded credit cards business

bajaj finance

India’s largest consumer finance company, Bajaj Finance, is said to have put a hold on its co-branding credit cards business in the near-term. The lender will not be signing up for fresh contracts with banks for credit cards, said people aware of the matter. If regulatory approvals come through, Bajaj Finance may launch its own line of credit cards instead of partnering with bank, said sources who didn't want to be named.

The decision to halt or exit the co-branded cards business is an outcome of revised credit card norms that were put in place from April 2022 by the Reserve Bank of India (RBI). These guidelines reduce a non-bank co-branding partner to merely an originator of cards. In other words, NBFCs are limited to perform marketing and distribution role in the co-branded credit cards business. Other critical aspects such as data retention, collections, credit evaluation and underwriting vest with banks.

The co-branding partner will also not have access to information relating to transactions of customers using the card. The revised norms, according to sources, leave nothing on the table for Bajaj Finance to pursue co-branded cards business.

“In the current form, co-branded credit cards strategically do not fit its line of business and is also seen as sub-scale in the larger scheme of things for the company,” source told Moneycontrol on condition of anonymity.

Email sent to Bajaj Finance remained unanswered till the publishing of the story.

Incidentally, the co-branded partnership between RBL Bank and Bajaj Finance was the first of its kind between a bank and a NBFC and dates to 2017. With 3.4 million co-branded cards in force, the association between Bajaj Finance and RBL Bank is one of the largest in this segment. What was initially a five-year contact, subsequently received regulatory approval for only another year in December last year. Bajaj Finance and RBL Bank decided to end their partnership just as it was about to conclude later this month.

It is also learnt that Bajaj Finance has halted its co-branded credit cards partnership with DBS Bank India as well, which the non-bank entered in 2022, with about 500,000 cards in force under the arrangement.

Further, the source said that Bajaj Finance might pursue to launch its own credit card business if approvals from the RBI come through. In April 2022, the regulator opened the doors for NBFCs to apply for credit card licenses. However, no application has been approved so far.