The public sector bank will buy out Bank of Baroda and DBS‘s holding in the subsidiary while Karur Vysya Bank is yet to give its consent to the plan.
In a decisive step towards executive the plan, Canara has moved its card division general manager to head the subsidiary, replacing a deputy general manager for the position.
“Although negotiations with Karur Vysya Bank are on for buying out the stake, we are going ahead with the conversion plan as the majority shareholders have agreed to it,” Canara Bank managing director Satyanarayana Raju told ET.
Canara Bank owns 69.14% in the subsidiary while Bank of Baroda has 18.52% holding. DBS and Karur Vysya hold 6.17% each.
The Bengaluru-based lender had about 620,000 credit card holders at the end of March, with an outstanding amount of around Rs 1,100 crore. This would be transferred to the new unit once it is ready.India‘s credit card market, although growing at 18% compounded average growth rate in the past five years, is still under penetrated with only five out of every 100 people having credit cards, according to the latest annual report of SBI Card.Canara Bank is looking to grow its credit card business exponentially, through cross-selling and leveraging the strength of the existing customer base of over 80 million. Its overall gross loan portfolio was Rs 9.24 lakh crore at the end of September.
At present, Canbank Computer is mainly engaged in IT and software development services, BPO services, ATM services and consultancy. It had made a net profit of Rs 16.25 crore in the last fiscal year.
The Reserve Bank of India allows banks operating in India to do credit card business either departmentally or through a subsidiary. Setting up a subsidiary needs the regulator’s prior approval.
RBI data showed that credit card outstanding in the entire banking sector jumped 30% year-on-year to Rs 2.18 lakh crore as of August 25, 2023.
Growing adoption and usage of digital payments, improved internet and payments infrastructure, and popularity of e-commerce have created a favourable platform for the growth of the industry.
