ICICI Bank to charge customers for redeeming points on cards

ICICI Bank, the country's largest private sector lender, will charge its customers for redeeming points collected on their credit and debit cards.

In a note sent out to its customers ICICI Bank said, "...with effect from June 12, 2014, a redemption handling fee plus service tax will be charged on every redemption request for payback points earned on ICICI Bank credit cards, Debit Cards or MySavingsRewards."

These charges will be applicable for redemption of payback points, which is the reward scheme of ICICI Bank in collaboration with payback, a customer loyalty programme and rewards points.

The lender would be charging Rs 99 plus service tax on any catalogue based redemptions. And Rs 25 plus service tax will be charged on any online or in-store redemption made by the customer.

A query from Business Standard to ICICI Bank regarding the rationale for the increase in the charge remained unanswered at the time of going to press.

Industry experts believe this could be a result of the waiver of the charges on inoperative accounts. The Reserve Bank of India (RBI) has now made it mandatory that banks will not be permitted to levy penalty on non-maintenance of minimum balance in any inoperative account. As a result, bankers said, consumers would have to pay more on other services. Experts believe this charge on cards is one of the alternatives that banks are now exploring.

Deepak Chandnani, Chief Executive Officer of Worldline India, a player in the payments and transactional services, also believes that pressure on profitability is what could have had led the bank to levy the charge.

"Normally, banks assume that a certain percentage of points will be redeemed. In case the number is not being achieved banks may charge even for redemptions and restore the programme to profitability," he added.

"The profitability of the card business has been under pressure for banks. Card spending has not been increasing rapidly. Moreover, there are still several cards in circulation on which the banks do not yet charge an annual fee and all this has led to bottom line pressure," an industry expert said.

According to a Worldline India report, ICICI Bank has the second largest share of credit cards in the market. HDFC Bank leads with a 27 per cent market share, followed by ICICI Bank at 17 per cent and SBI Cards at 15 per cent.

In the debit card market, SBI has the largest share at 33 per cent, followed by Punjab National Bank at 6 per cent and then ICICI Bank and HDFC Bank both at xx per cent.