LIC not to partner with GE Money in proposed credit card venture

LIC was to get into joint venture with GE Money in the credit card business. According to industry officials this decision had annoyed State Bank of India (SBI). As SBI was not comfortable with the idea of GE Money partnering with LIC since it feared a conflict of interest.

In the proposed plastic money venture, GE Money was to have 30 per cent stake and LIC 40 per cent. Corporation Bank, LIC Housing Finance and LIC Mutual Fund were supposed to have 5 per cent each and the remaining 15 per cent was scheduled for a private equity player.

But now according to an LIC official, Life Insurance Corporation (LIC) will not be partnering with GE Money for its proposed venture into credit card business due to huge loss reported by SBI Cards & Payment Services Private Ltd, in which the US firm has a 40 per cent stake.

For the first time, for 2007-08 (April- March) SBI cards have shown a net loss of Rs 150 crore in its decade-long existence.

According to official, “The experience of SBI Cards with GE Money was not encouraging. We also had experienced problems in the past with foreign players. We may go alone for the credit card venture”.

It will take sometime for LIC to decide whether to go solo though a grasp of institutions are already line up to partner the insurance behemoth.

The official without giving out further details said, “There are already four to five institutions that have shown interest in partnering us”.

Official added in case LIC decided to go solo, then the insurance firm will have to take the proposed stake of GE Money, thus taking up its holding in the venture to 70 per cent.

On the other hand LIC clarified that it does not have any problem with GE Money partnering it as well as SBI for the credit cards business.

“We do not have a problem with GE Money’s presence,” Hemant Bhargava, chief executive officer-designate of the LIC’s card venture had told on April 10. Banking industry officials informed that after SBI announced an increase in bad assets from its credit card business in May, LIC was forced to start to rethink the deal.

As per earlier plans, LIC’s card venture was scheduled to start operations by the end of the current year, which seems to be uncertain.

After reporting of loss in SBI Cards, Diwakar Gupta was appointed, who was the chief general manager of State Bank of Patiala, as the chief executive officer of SBI Cards. Earlier, the post was held by a GE Money official.