IndusInd Bank has entered into an agreement with Deutsche Bank to buy the latter’s credit card business in India after others in the race pulled out due to expensive valuations.
Dhanlaxmi Bank, Standard Chartered Bank and Karnataka Bank had apparently shown initial interest for the business.
The deal allows IndusInd Bank to tap into Deutsche Bank’s 200,000+ card holders in the country.
“Credit card business is ready for a new phase of growth. The card industry had witnessed a clean-out in the last three years where it went through a phase of maturity. People are now aware of the risks,” said Romesh Sobti, MD and CEO, IndusInd Bank.
Analysts, however, were stumped by the move. “The credit card business is not doing well in India generally. I am surprised with IndusInd Bank’s move. I don’t understand what value they see in this deal,” said Suresh Ganpathy, head financial research team, Macquarie Securities.
The bank will sell credit cards to its existing account holders rather than outsiders, said Sobti.
But this move also seems to have few takers. “That’s unlikely to improve non-performing assets data,” said Loney Antony, managing director of Prizm Payments Services, an electronics payment solutions provider.
Analysts said a slump in bank credit deployment through credit cards indicates the decline in the sector.
Reserve Bank data show such loans declined 7.7 Percent year on year in February.
“There has seen negative variation so banks continue to see degrowth in that segment,” said Nitin Kumar, deputy vice president, Quant Broking.“Banks continue to remain cautious in issuance of credit cards but considering the profitability that the segment offers, they still continue to look at it.”
Samir, Bhatia, managing director and chief executive officer, Equifax Inc, a consumer credit reporting agency, said banks will continue to be selective in issuing credit cards in the foreseeable future.
“We see greater bureau utilisation by banks in their credit decisioning and monitoring process,” Bhatia said.
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