Federal Bank look at venture into credit card
In a bid to extend its retail clientele, private sector lender Federal Bank is planning a foray into credit cards. Initially, the bank plans to outsource the back-end mechanism and would only market the product under its brand name.
“We have sensed a need to launch a credit card,” Abraham Chacko, the executive director of the bank, told Moneycontro.
“It is at the preliminary stage, and we are internally discussing the proposal. We are connecting some external parties to gain knowledge about outsourcing the product in terms of pricing, customers and other business details,” Chacko said.
There are some banks and financial institutions, which develop back-end mechanism of credit cards for other institutions on a cost sharing basis. Some of those include Bank of India , State Bank of India , SBI Genpact, ICICI Bank , Standard Chartered Bank and others.
Federal Bank has an existing debit card base of around 16 lakh. Its retail business (with special focus on non-resident Indian customers) forms around 55% of total business. Retail products currently include gold, home and car loan.
If the credit card business is able to achieve a certain scale, Federal Bank will stop outsourcing it and will operate it on its own. The executive director, who had spent over 20 years in foreign banks before joining Federal, however, did not mention any tentative launch time.
“We will also open 1,000 branches in CY2012. Half of those branches will be out of the state of Kerela. We will equally drive efforts to boost our fee income through those branches,” he added. Currently, majority of its branches are confined within the geographical boundaries of the southern most state.
Meanwhile, the bank is expected to open a branch in Dubai soon. The Reserve Bank of India is yet to give a final approval for that. The lender also aims to open two representative offices in Singapore and US or UK to expand its NRI customers’ base. In June quarter, its loan book stood at around Rs 32,000 crore, up 18% year-on-year.
Last six months, two top officials with vast banking experience from foreign banks have joined Federal Bank. They are Shyam Srinivasan as MD and Chacko himself. This led to some market optimism about the south-based bank, which was widely considered as a low-profile community driven lender.
At 12:45 hours, Federal Bank shares were trading at Rs 357.50, down 1.20%.
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