GE's tie-up with LIC for cards irks SBI

GE Money's tie-up with Life Insurance Corporation for cards has not gone down well with State Bank of India. While SBI and GE Money have had a decade-long cards joint venture, the global giant in September 2007 joined hands with LIC for a similar venture.

Senior SBI executives said the deal with LIC could affect SBI Cards, the second largest issuer of cards in the country, and there could possibly be a conflict of interest.

SBI executives have blamed the existing management of the cards business for the huge third quarter loss and are pushing for a change of guard.

In fact, some SBI chief general managers have already been interviewed for taking over as the CEO of the cards business. SBI Card suffered a net loss of Rs 123 crore for the period April-December 2007.

A senior SBI executive said: "It is a unique situation where we did not have a say in deciding the management even with a 60 per cent stake."

The GE Money spokesperson, however, termed the statement about the change of guard as "mere speculation" and said that there has been no decision internally or any announcement.

Besides, GE Money said that SBI Cards CEO Rupam Asthana was appointed in consultation with SBI.

The spokesperson added that an executive search firm had been hired to look for suitable candidates and it came up with names of people who were screened and interviewed by both the partners.

There are two entities under SBI Cards. GE Money holds 60 per cent in the company responsible for the backend operations (GE Capital Business Process Management Services Pvt Ltd) with the remaining equity capital subscribed by SBI.

In the entity responsible for front-end activities (SBI Cards & Payment Services Pvt Ltd), India's largest commercial bank is the majority shareholder with a 60 per cent stake, while GE Money holds 40 per cent.

In the new card venture, LIC will hold a 40 per cent stake, with GE Money subscribing for 35 per cent of the capital. Corporation Bank, LIC Mutual Fund and LIC Housing Finance are the other shareholders.

SBI executives said that no prior consent was taken before the agreement with LIC was signed.

However, they themselves conceded that the deal with GE Money was structured in a way that prior consent was not required.

A GE executive, however, said that SBI was informed before the announcement was made.

While pointing out that GE Money has multiple tie-ups in a host of countries, including the US, the UK, China and Thailand, the company's spokesperson said that each JV in India will have independent management teams which will be decided in consultation with LIC and SBI.