Delhi-based Punjab National Bank (PNB) the second largest government-owned bank had announced in September 2007 that it has entered into a partnership with AIG and Infotech Global for credit card business. The bank has applied with the Reserve Bank of India for the approval of its joint venture. Following the delay from the RBI in granting them approval for the joint venture with American International Group (AIG) and Venture Infotech Global the bank has decided to go on its own with its credit card business.
When PNB’s chairman and managing director K C Chakrabarthy was contacted for his comments he declined.
As per the sources of the bank it has waited for about six months for the approval from the RBI and subsequently decided to go ahead with credit card business departmentally, rather than floating a subsidiary.
The bank has plans to launch the credit card business by October this year. Currently, the bank is having a co-branded card with HSBC, wherein PNB would only source clients, the risk and the rewards are reflected in HSBC’s books. Once the bank launches it’s own card, it will discontinue the tie-up with the foreign bank.
While RBI has not given any clear reason for delay, but according to the sources RBI might not be very comfortable with PNB’s tie-up with foreign partners for the credit card business as they do not have full regulatory control over the JV which would fall in the NBFC category.
“We have decided to start it within the bank since it does not require regulatory approval. Subsequently, as and when RBI approves the JV, we will hive off the credit card department as a separate subsidiary,” said a senior bank official. Among other Indian banks, State Bank of India and Bank of Baroda has separate subsidiaries for credit card business, while Bank of India is considering it. “We will approach the RBI when we have identified a partner for the alliance,” said Bank of India officials.
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