IndusInd Bank eyeing Rs 1,000-cr credit card biz

IndusInd Bank aims to touch Rs 1,000 crore in its credit card business by March 2014, according to Romesh Sobti, Managing Director and Chief Executive Officer, IndusInd Bank. That would be two per cent of their loan book then. At present the credit card portfolio is about Rs 380 crore.

Sobti said that the business is very profitable as it generates lot of ‘other income’ in the form of fees, foreign exchange business, transactions or issuance fees, etc. “Ours is a transaction-based model so spenders make the money for us...,” he said.

Deutsche Bank buy

IndusInd Bank had bought Deutsche Bank’s credit card business in 2011 for around Rs 224 crore. The bank’s active customer base during the acquisition was around 1.35 lakh.

“This base has grown, though not dramatically, but we have tried to deepen the existing relationship with customers. Currently, we issue about 4,000-5,000 cards every month.” Sobti said.

The acquisition has worked very well for the bank. “It has surprised us. We tried to rationalise a little bit on the cost structure and some rationalisation on the vendors’ side, so there was a cost reduction initially. But we gave stronger propositions to the card holders and there has been almost nil attrition,” Sobti said.

He added, “We see a profit before tax of about 50-60 crore this year. It was a small purchase, easily digested and profitable.”

On recovery mode

The credit card industry went through a difficult phase during the last four years when volumes shrank from 28 million cards to about 17 million about a year ago. It has just begun recovering in the last year and today volumes are around 18.3 million cards. Better underwriting standards, evolution of credit information bureaux such as CIBIL and greater compliance have improved the profitability for many players.

Sobti said, “Credit cards will be very profitable for the banks over the next five years as plastic money is proliferating. People even buy two-wheelers through a credit card and there is more compliance on the tax-side and more surveillance on the credit-card side.”

beena.parmar@thehindu.co.in