Citi rejigs cards & retail finance

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Mumbai, Aug 5: With its credit card and consumer finance portfolios “hurting”, Citi India is currently giving shape to a new strategy in both these areas to tackle delinquencies in the new high interest rate environment. Simultaneously, the bank is being extra vigilant to ensure the economic slowdown does not lead to mounting non-performing assets in its substantial SME portfolio as well.

The key elements of the credit card clean up are to reduce dependence on direct sales agents, maintain a sharp focus on how cards are originated, put in place strict underwriting norms and step up collection efforts. The new strategy for Citifinancial, the bank’s consumer finance arm, will centre on origination of loans, and have an accent on ‘eye-to-eye’ lending.

Citi India CEO Sanjay Nayar told FE that both the cards and consumer finance businesses were “hurting”, but the new strategy was to “hang in there” and remain close to clients while the clean up took shape. While revenues were equally divided between corporate and consumer banking, profits were clearly skewed in favour of the former, as the latter faces a delinquency threat, primarily from credit cards and unsecured loans.

Citi, which was once the largest credit card issuer, has dropped to fourth place, as the bank focuses on improving the quality of its card assets. “We are now focusing on cross-selling cards to our other customers, and aiming to make the credit card the most important item in the wallet and more of a payment instrument,” Nayar explained, adding: “Our cards portfolio is the best in the industry now. If it’s still hurting, you can imagine how bad the industry numbers must be.”

According to industry sources, ICICI Bank is currently the country’s biggest credit card issuer with around 8.5 million customers. It is followed by HDFC Bank, which has a credit card base of about 4 million. The number of credit cards issued by the entire banking industry at the end of June 2008 was 27.02 million, against 24.39 million in June 2007. Public sector banks issued 3.8 million, of which SBI Cards, a joint venture with GE Money, issued 3.09 million. Citibank, at number four, has around 3 million credit card customers.