Canara Bank, a government-owned lender, believed that the establishment of a credit card subsidiary would help its nascent card business, but the Reserve Bank of India has denied the proposal
Canara Bank now offers credit cards on its own, but in order to house the credit card business, it requested approval from the regulator to obtain a non-banking financial service license. According to a source acquainted with the matter, "the RBI seems not in favor of granting an NBFC (non-banking financial service) licence to a public sector bank."
It's interesting to note that SBI Cards and Payment Services, a prominent credit card issuer in the nation and a non-banking financial organization, operates independently from the State Bank of India. In a similar vein, BOB Cards is a subsidiary of Bank of Baroda.
These NBFCs have permission dating back a long way. The aforementioned person stated that the regulator's way of thinking may have altered. By the way, the regulator's decision was made at a time when worries were raised about the rapid rise in unsecured loans from lenders.
Generally, credit card companies make unsecured loans, meaning that cardholders receive the credit without providing any collateral. At the end of June, there were 9 lakh credit cards in use at the Bangalore-based Canara Bank, around 37% more than there were a year earlier. The distinct subsidiary was intended to utilize the bank's current clientele of over 11 crore and to place a particular emphasis on the credit card industry, according to bank managing director K Satyanarayana Raju.
The popularity of e-commerce, increased use of digital payment infrastructure, and better internet and payment services have all contributed to the development of a favorable environment for the card sector. But rather than starting a brand-new business, the bank intended to turn an already-existing IT services subsidiary into a credit card division.
Canbank Computer Services, the IT division, started preparing to become a credit card unit last year. Canara Bank is the largest shareholder in the subsidiary with 69.14%, followed by Bank of Baroda with 18.52%, DBS Bank with 6.17%, and Karur Vysya with 6.17%. Canara Bank had asked all other parties to sell their stakes to it as part of the process. Canbank Computer primarily provides BPO, ATM, IT, and software development services, as well as consulting.
