In order to capitalize on its current clientele and aggressively pursue this expanding market, the state-owned lender Canara Bank will shortly apply for regulatory approval to transform an IT subsidiary into a credit card business.
According to ET, the bank’s managing director, K Satyanarayana Raju, is currently working on filing an official application to the Reserve Bank of India to launch the project in which it will retain a 94% interest and Karur Vysya Bank the remaining portion.
As of right now, Canara Bank owns 69.14% of Canbank Computer Services, the subsidiary. DBS Bank and Karur Vysya each control 6.17% of the shares, while Bank of Baroda holds 18.52%. BoB and DBS have committed to buying out their respective interests in Canara Bank.
Canbank Computer primarily provides BPO, ABM, IT, and software development services, as well as consulting. In the most recent fiscal year, it made a net profit of ₹16.25 crore.
Canara Bank has already transferred the general manager of its card division to lead the subsidiary in readiness for the proposal. As of December 31, there were 877,000 credit cards in use at the bank, which is almost 45% more than the same time last year. Upon operationalization, this customer base will be transferred to the new unit.
By contrast, as of December 31, SBI Cards had 18.5 Million active credit cards and BoB, which operates a distinct credit card business, had 2.24 Million credit cards in circulation.
‘We have a 110 Million strong customer base which can be leveraged for the credit card subsidiary with specific focus,’ Raju stated.
The credit card market in India is expanding gradually; as of December 31, there were 97.9 Million credit cards in use, an increase of more than 20% from the previous year. There are only five credit card users out of every 100, indicating a glaring under penetration of the market.
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