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Raghu Mohan
Mumbai, Apr 22: American Express Bank (Amex Bank) on Thursday stunned the retail banking market by announcing a balance transfer facility, one that allows customers to transfer their existing loans contracted by them at an "up to 50 per cent" discount on the original interest component. The facility is part of Amex Bank's personal loan schemes and marks Amex Bank's foray as a full services player in the retail segment.
"The balance transfer facility, a first of its kind, allows customers to transfer their outstanding balances on existing loans as also credit cards to Amex Bank. This service will enable savings of up to 50 per cent on interest costs. Customers transferring such loan-balances will have the additional option of freeing up any collaterals pledged under earlier loans," Amex Bank's Business-head (India), personal financial services, KL Muralidhara, said.
Muralidhara explained that the interest rate charged on transfer of loan-balances will vary on the nature for which it was availed of in thefirst instance: housing or car finance, credit card dues, or general purpose consumer loan.
"We will help the customer by rescheduling his earlier liabilities, and offer interest savings up to a maximum of 50 per cent. Again, the attraction for the new product is not just on the interest front. It frees collateral, which can be used elsewhere. It also gives the customer an opportunity to consolidate all his liabilities--various loans and credit card outstandings--to just one to American Express under balance transfer. That too at reduced costs. Or go in a for a fresh loan," Muralidhara said.
Under Amex Bank personal loan schemes, unsecured loans--no gurantors, security or collateral--of up to Rs 10 lakh can also be secured for tenors ranging between 12 months to 48 months. Packaged in also are phone- and home-banking and depository services.
The announcement of these services form part of American Express's strategic initiative to grow its businesses between 25 per cent to 30 per cent on a year-on-year(YoY) basis, and achieve a 50:50 split up in revenues from US and outside markets. The American Express Company, the parent concern of Amex Bank, American Express Travel Related Services (Amex TRS), and American Express Financial Advisors, posted net revenues of $17 billion in 1998.
A key aspect of Amex Bank's strategy is that it more than makes up for being a late entrant in the retail banking segment. "There is an entry cost factor, but it is not that we will not be able to cover our cost of funds. In our case, we will be able to build up volumes, and generate revenues right from day one. It also reduces the time factor involved in building up a portfolio. In a way, the strategy is a combination of organic growth, and acquisitions," Muralidhara said.
While Amex TRS is a long established player in the charge card, travel and related products and services businesses, Amex Bank has operated largely as a corporate bank in the country ever since its entry here in 1921.
In recent times, Amex TRS haslaunched its proprietary credit-card with a balance transfer at 1.45 per cent till May '99, and 1.99 per cent subsequently while Amex Bank has made a conscious attempt to cross-sell products and services across its branch network, gone in for tie-ups on the automatic teller machine (ATM) front--HDFC Bank and IDBI Bank--and with Karvy Consultants and Birla Global Finance for sourcing businesess.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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