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Kolkata: Canara Bank will soon seek regulatory approval to convert an IT subsidiary into a credit card company as the state-owned lender aims to leverage its existing customer base for selling credit cards with unbridled focus to tap this potential growth market.
Managing director K Satyanarayana Raju told ET that the bank is in the advanced stages of submitting an official application with the Reserve Bank of India to start the venture where it will have a 94% stake with Karur Vysya Bank holding the remainder.
Canara Bank currently holds 69.14% stake in the subsidiary, Canbank Computer Services. Bank of Baroda owns 18.52% while DBS Bank and Karur Vysya hold 6.17% each. Canara Bank has received commitment from BoB and DBS to buy out their respective stakes.
Canbank Computer is mainly engaged in IT and software development services, BPO services, ATM services and consultancy. It earned a net profit of Rs 16.25 crore in the last fiscal year.
As a preparation to the plan, Canara Bank has already moved the general manager of its card division to head the subsidiary. At the bank level, it had 877,000 credit cards in circulation as of December-end, about 45% more than the previous year. This customer base would be transferred to the new unit once it is operationalised.
In comparison, BoB, which has a separate credit card subsidiary, had 2.24 million outstanding credit cards while SBI Cards had 18.5 million cards circulating in the market as of December-end.
“We have a 110 million strong customer base which can be leveraged for the credit card subsidiary with specific focus,” Raju said.
India’s credit card market is growing steadily with the number of credit cards in circulation touching 97.9 million as of December-end, a more than 20% year-on-year growth. The market is grossly under-penetrated with just five out of every 100 people using credit cards.
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