LIC partners GE Money in card JV

Life Insurance Corporation of India (LIC), the country's largest financial services firm, has finalised GE Money India, a subsidiary of the US-based financial services to electronics conglomerate, as one of the partners in its proposed credit card venture.

LIC wants to leverage its 200 million base to tap opportunities in the credit card payment industry, which in 2006-07 grew by 22 per cent to Rs 41,361 crore.

The other partners in the credit card venture would be Corporation Bank and LIC subsidiaries, LIC Housing Finance and LIC Mutual Fund. The partners have signed a memorandum of understanding and plan to finalise the definitive agreement by the end of next month. 

PLASTIC PUSH Card based payments Volume of transactions ('000)
	Credit cards	Debit cards
2003-04	1,00,179	37,757
2004-05	1,29,472	41,532
2005-06	1,56,086	45,686
2006-07	1,69,536	60,177
Value of transactions (Rs crore)
2003-04	17,663	4,874
2004-05	25,686	5,361
2005-06	33,886	5,897
2006-07	41,361	8,172

As per the MoU signed, LIC would own 40 per cent, GE Money 30 per cent and Corporation Bank, LIC Housing finance and LIC Mutual Fund 5 per cent each.

LIC plans to sell the remaining 15 per cent stake in the proposed venture to financial investors.

"We are now setting up a separate team for this business with members from LIC and GE Money to take forward the new initiative. The exact features of the cards will take some time to finalise," said Hemant Bhargava, CEO of the proposed credit cards company, which will be based in New Delhi.

GE Money is already a strategic partner in SBI Cards, a subsidiary of the country's largest lender, State Bank of India (SBI). SBI Cards is the second largest credit card issuer with over four million cards issued, though way behind ICICI Bank, which has a credit card base of over seven million.

T S Vijayan, chairman, LIC said, "This partnership brings excellent management skills, credit card experience, and unparalleled distribution networks under one roof and we look forward to working with one another."

About any likely conflict of interest with SBI Cards, Vishal Pandit, GE Money India's CEO, said, "We have a signed a memorandum of understanding with LIC for a credit card venture. At present, GE will provide backoffice support to the venture.

"We intend to work with both SBI and LIC. There is no question of conflict of interest since the computer systems will be separate, the company boards are separate and there is no sharing of database.''

Roopam Asthana, CEO of SBI Cards, said, "As far as SBI Cards is concerned, irrespective of who comes in as competition, we will continue to focus on our business. There is no conflict of interest at all as GE is in the business of partnering with various players not only in India but globally. They are partnering both Wal Mart and Carrefour, which compete in the same market. From that point of view there is no conflict."

Asthana said SBI Cards would watch LIC's business strategy as and when it rolls out and compete as we would with any credit card issuer.

LIC will be putting in place a business strategy and corporate governance structure with GE to ensure there is no conflict arising in future on issues such as customer database, products and ethical practices, taking into account the US- based company's similar joint venture with SBI.

The proposed venture would leverage LIC and Corporation Bank's strong brand and extensive branch, ATM, and sales distribution network, and GE Money's global and local expertise in credit cards, business management processes, and technology-driven platforms.

The JV aims to become a major player in India's fast-growing credit card industry, LIC said in a statement.

LIC had engaged KPMG to advise it on the entry into the credit card business and for identification of joint venture partners.