ICICI Bank Ltd, India’s largest private sector bank, has quiet its lifetime free cards scheme, signalling a change in business tactic for consumer banking. The bank has decided to charge new credit card customers.
ICICI Bank had introduced the lifetime free card scheme in August 2005, an aggressive idea to gain market share. The move forced other banks to waive fees on their card offerings.
The percentage of non-performing assets, or NPAs, in the credit card portfolio of the Indian banking industry has almost tripled—from 5-8% in fiscal 2008 to 15-20% in 2009.
With ICICI changing strategy, other banks too have started charging fees for credit cards. State Bank of India, which runs a joint venture with GE Capital Services for its card business, is one of them.
Rising NPAs are also forcing many card issuers to shift focus from the mass market to the premium segment.
For instance, Standard Chartered Bank has stopped issuing its gold cards—a mass market product—and is only offering platinum cards.
A gold credit card is an entry-level card, given to individuals with an annual income of Rs1.5-2.5 lakh.
To qualify for a platinum card, one would generally need to have an annual income of Rs6 lakh and more.
An email query sent to Standard Chartered Bank remained unanswered.
Citibank NA, HDFC Bank Ltd and Axis Bank Ltd, however, continue to offer free credit cards. Axis Bank is a relatively new entrant.
ICICI Bank, the market leader with 7.5 million cards in 2009, now shares its position with HDFC Bank with its card base shrinking to five million. HDFC Bank, which had a credit card base of around 4.4 million a year ago, has scaled it up to five million. “The bank is adding about 80,000 new cards every month,” said HDFC Bank’s spokesperson.
SBI’s credit card portfolio has shrunk from three million to 2.8 million in the past two years. Chief executive officer, SBI Cards and Payment Services Pvt. Ltd, said: “We are focused on offering strong value propositions to our customers. Right now, SBI Cards offers only fee-based cards.”
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