Sbi Plans Credit Card Venture

SBI was undecided on the route it would take to get into the credit card business. It had two option either to set up a division or go in for a subsidiary. Says a top official of SBI, We are planning to go in for a credit card subsidiary and have got presentations from various card issuing companies from the US to form a joint venture. State Bank would like to have a majority stake in the joint venture.

The main reason for going for a joint venture is get the requisite technology from the partner. Says the SBI official, credit card is a technology driven business and we need this technology to be profitable in the busniess. Many of the Indian banks which have issued credit cards are not profitable. It is the foreign banks like Citibank and Standard Chartered Bank that are profitable in the business.

 

The reason to go in for a subsidiary is that SBI will able to hire officials from outside to run the company.

SBI officials point out that three US based card issuing companies have made presentations to the the bank to set up the joint venture. After the joint venture partner has been decided, SBI will go in either for a VISA tie up or a Mastercard. Unlike other card issuing banks which tie up with both Mastercard and Visa, SBI is planning to tie up with only one. Visa and Mastercard have already made presentations to SBI.

Sources point out that if SBI plans to form a joint venture with American Express, which issues proprietery card, it will run into problems with Visa and Mastercard. Both Visa and Mastercard have told card issuing member banks that if they have tie up with American Express the franchises will be withdrawn. SBI may face a similar fate in India.