It’s hard to fathom whether the RBI can’t keep up with fintech innovations or the latter can’t keep up with India’s central bank’s pace of regulatory reforms.
Be that as it may, in April, the RBI set the cat among the (card) pigeons when its directives on co-branded credit cards made it clear that it wasn’t happy with the fintech firms exploiting the “regulatory arbitrage”. The prolific mimicking of a credit card on a prepaid banking identification number (bin), as it were.
Now, two partners of India’s most successful co-branded card story—a bank and a non-bank lender—find themselves at a crossroads.
RBL Bank became the fifth-largest card issuer in six years because of its co-brand partnership with Bajaj Finance. Of its 3.75 million issued credit cards, 2.75 million cards are co-branded with Bajaj Finance.
The 100% year-on-year growth in credit cards at RBL between 2016-2020 gave it a 5% market share, but it also ballooned its loan books with unsecured assets. The Ken has learnt that RBL is looking to cut those growth rates dramatically to 20-25%, and “grow in line with the industry”.
That puts Bajaj Finance in a bind. The non-bank lender was denied permission to issue its own credit card, had to grudgingly take on a partner, and now has to deal with RBL’s scaling down when it has publicly stated that it aims to be among the top four credit issuers in the country. At one point, it even held talks with ICICI Bank for nearly a year but the deal fell through.
While RBL’s priority today is to maintain market share, for Bajaj it’s growth at all costs. Although Bajaj took on a new partner in January, in DBS Bank India, it still needs more alternatives. And fast.
the-ken.com
