Citibank, Reliance Retail plan 50:50 finance joint venture

Proposed non-banking financial company to offer loans, credit cards.

Citibank will form a 50:50 joint venture with Mukesh Ambani-owned Reliance Retail to distribute the former’s consumer finance products such as loans and credit cards. The joint venture is expected to work as a non-banking financial company (NBFC) with a combined investment of Rs 500 crore.

A senior Citi executive told Business Standard that both the parties would shell out close to Rs 250 crore, while the rest of the details are yet to be worked out.

“We have already started distributing Citibank’s retail banking products through Reliance Retail. Both of us would have equal contribution to expand the business. We have invested about $62 million in the partnership,” the executive added.

While the deal is yet to be announced formally, sources said the joint venture would initially target Reliance Retail’s large customer base, which is estimated at around 4 million. Reliance Retail, at present, has over 1,000 retail outlets across the country.

The proposed joint venture is also expected to launch a couple of new co-branded cards. Citi had earlier set up a joint venture with Maruti Suzuki for car finance, though in recent months, though the JV’s activities have slowed down in recent months.

Reliance has been ramping up its retail operations with premium and luxury brands as well as the consumer durables business.

Consumer finance, which would include loans and credit cards, is one of the fastest-growing segments in the financial services sector. The sector is estimated to grow at a rate of about 30 per cent annually. The annual credit card spends in India are estimated to be in the range of Rs 50,000 crore. Penetration of credit cards in India is about 1 per cent compared with a global average of 4.6 per cent.

The credit card industry has been witnessing a rise in delinquencies over the past few quarters.

“For credit cards, where you actually get industry numbers, the industry average is around 11-12 per cent. Citi is half that number. On unsecured loans too, we are better than the industry. We still have a very good risk management system. We get a lot of signals and we act on it. We are trying to do a multi-product relationship with our customers,” Sanjay Nayar, CEO, South Asia, Citi, told Business Standard in an interview.