Utkarsh Small Finance Bank plans to start its secured credit card business in the first week of April, Managing Director Govind Singh told Moneycontrol in an exclusive interview.
“We have started a pilot mode within our user group to see how the process is working and everything is in place. And in the first week of April, we will also go public with our credit card,” Singh said on March 18.
In November, Singh told Moneycontrol that the Varanasi-based bank planned to enter the secured credit card business in this financial year. A secured credit card is backed by a cash deposit from the cardholder, whereas an unsecured card requires no security deposit.
In October, the Reserve Bank of India flagged the high growth in certain components of consumer credit and advised banks and non-banking financial companies to strengthen their internal surveillance mechanisms and address the build-up of any risks. It then increased the risk weightage on credit card receivables of scheduled commercial banks and NBFCs by 25 percentage points.
“We have opted for a slow process for our credit card journey because you have to put the entire process in place,” Singh added. “Most of our employees who are in the closed user group are already using the credit cards.”
Prior to this, AU Small Finance Bank launched a customisable credit card on June 22, which allows cardholders to choose the features they want and for the duration they want. In November, online travel platform Ixigo and AU Small Finance Bank launched a credit card to cater to the growing demand of travellers from smaller markets.
Singh said Utkarsh Small Finance Bank will focus more on secured cards than unsecured cards that are typically issued by banks.
He said the bank's credit-deposit ratio is very close to 100 percent.
"Our CD ratio might have been 300-400 percent in the first and second years, and gradually it has come down," he said.
“We take a lot of refinancing from established institutions like NABARD, SIDBI, and NHB. So that's all a significant part of this deposit. We have very comfortable liquidity,” he added.
He said Utkarsh Small Finance Bank's profit growth is on track.
The bank's profit rose 24 percent to Rs 116 crore in the third quarter ended December 2023, while total income climbed to Rs 889 crore from Rs 712 crore in the year-ago period. The bank’s interest income grew to Rs 806 crore from Rs 641 crore in the October-December period of the previous financial year.
"Our NIMs (net interest margin) should be in the range of 9.5 percent, so again that’s on track,” said Singh.
In April 2021, AU Small Finance Bank became the first SFB to roll out credit cards and it has issued 40,000 cards, half of them to first-time users.
Experts said there was scope for growth in the credit card segment.
“Growth is going to be robust. There was a shake up last year with COVID-related risk and in the longer term, we expect robust growth in the market for the top few players,” said Sanjeev Moghe, EVP and head of cards and payments at Axis Bank.
The growth could be either organic or based on partnerships (co-branded cards), Moghe added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
