Canara Bank may seek RBI’s permission for credit card subsidiary soon

13 Feb 2024 , 12:12 PM

Canara Bank will shortly seek regulatory clearance to turn its IT subsidiary into a credit card firm, as the state-owned lender seeks to harness its current customer base to sell credit cards with unwavering emphasis on this prospective growth sector.

According to Managing Director K Satyanarayana Raju, the bank is in the process of filing a formal application to the Reserve Bank of India to launch the partnership, in which it would own 94% and Karur Vysya Bank will own the balance.

Canara Bank presently owns 69.14% of the subsidiary, Canbank Computer Services. Bank of Baroda holds 18.52%, while DBS Bank and Karur Vysya own 6.17%. Canara Bank has obtained a commitment from BoB and DBS to buy out their respective interests.

Canbank Computer specialises in IT and software development, BPO services, ATM services, and consulting. It made a net profit of ₹16.25 Crore during the previous fiscal year.

In anticipation for the proposal, Canara Bank has already appointed the general manager of its card business to lead the subsidiary. As of December 31, the bank had 877,000 credit cards in circulation, which was around 45% higher than the previous year. This client base will be moved to the new unit once it is operational.

In instance, BoB, which has a separate credit card arm, had 2.24 million outstanding credit cards, while SBI Cards had 18.5 million cards circulating in the market as of December 31.

India’s credit card industry is expanding gradually, with 97.9 million credit cards in circulation as of December 31, representing a more than 20% year-on-year increase. The market is woefully underserved, with only five out of every 100 individuals using credit cards.

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