YES Bank plans to enter credit card business

Not to charge own customer for more than 5 ATM transactions

In a bid to strengthen its retail credit portfolio, private sector lender YES Bank is looking at entering the credit card business.

“Credit card is one thing that is missing in our portfolio and we would surely like to enter that. But launching a credit card business takes a minimum of eight-ten months as there are lots of things such as underwriting, marketing etc that one needs to take care of,” said Pralay Mondal, senior group president-Retail & Business Banking.

The new generation private sector lender, which started its operations in 2004, has a customer base of 1 million and would look at launching its credit card business once the customer base hits the 1.5-million mark. The bank has been focusing on customer acquisitions aggressively and is confident of reaching the mark soon.

Mondal said the bank would be focusing on starting the credit card business organically instead of taking the inorganic route. “There are not very good opportunities present in the market now. And we believe that it is better to grow the business slowly and steadily. So even after entering, we would like to focus on giving unsecured credit only to our internal customer.”

The bank has working at growing its retail business mix. Currently, retail contributes to 43 per cent of the total business. Mondal believes it is likely that the retail mix can increase to 50 per cent in two years.

Several large lenders, both Indian and foreign, such as HDFC Bank, SBI Cards and Citibank, have been growing their credit card portfolios aggressively over the past few years. Banks had became cautious of unsecured lending following the 2008 financial crisis but later with availability of credit scores from credit information companies and improved repayment behaviour of the customers, banks are again growing their credit card portfolios.

According to Reserve Bank of India data, at the end of June, there were 19.47 million outstanding cards in the banking system as compared to 19.13 million during the same period last year. However, in terms of value of transactions in the same period, credit card spends have increased by 30.6 per cent. Banks are now focusing on encouraging their customers to use their credit cards frequently and cleaning out inactive cards.

Separately, Mondal said YES Bank has decided to not charge its customers for transacting at ATMs even beyond five transactions. Recently, RBI had allowed banks to charge customers for ATM usage — both financial and non-financial transactions — beyond five transactions a month from November 1.

Mondal explained that since the bank is in customer acquisition mode, they believe that not charging customers for ATM transactions will be an advantage for them.