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Priya Nair

Mumbai , April 27

CREDIT cards are no longer tools of personal finance. They provide an alternative means of raising working capital for companies, especially in the small and medium enterprises sector.

Witness the recent introduction of credit cards by ICICI Bank for travel agents of Air Deccan.

Typically, this business segment operates by availing themselves of overdraft facility against current accounts to meet the credit requirements. However, ICICI's credit card offers them credit for short periods, without waiting for the bank to approve the overdraft.

The ICICI Bank-Air Deccan credit card for travel agents is available in 100 cities in India.

This is how the scheme works. Travel agents book air-tickets through Air Deccan online CRS (centralised reservation system) and thereby settle payments with Air Deccan. After authorisation from ICICI Bank the transaction is approved and the PNR number is generated. At the end of the monthly billing period, statements are sent to the cardholders (travel agents in this case) and, accordingly, they make payments to the bank.

The credit limit varies and is directly proportionate to the financials of the travel agent. "Even if I offer an overdraft facility, I will look at the financials of the travel agent," said Mr B. Madhivanan, Joint General Manager, ICICI Bank. The credit range can be between Rs 20,000 and Rs 10 lakh.

The advantage for travel agents is easy access to credit, which leads to increased revenue generation, convenience of usage and reduced paperwork.

For Air Deccan, it translates into more booking, no loss in credit as the risk shifts to the bank, focus on core business due to removal of non-value added activities and reduced administration.

The travel agents get interest-free credit for a maximum period of 40 days. After this, the interest rate is between 1.45 per cent and 1.9 per cent per month. Effectively this works out to between 17 per cent and 23 per cent interest per annum.

The typical interest rate charged for overdraft against a current account is 14-15 per cent, though it may vary from case to case.

However, the high rates do not seem a deterrent given the convenience the scheme offers, say ICICI Bank officials. The rates are the same as the overdraft facility against current account, they insist.

Capt Gopinath, Managing Director, Air Deccan, said: "Normally we allow advance payment. Once the travel agent pays Rs 10,000 his account gets uploaded and he can book the tickets to that extent."

The ICICI scheme helps because, he said, "As a low cost carrier we need cash in regular flow. As we do not have people to reconcile payments post delivery of tickets, this scheme helps as it involves less manpower."

ICICI Bank has launched a similar pilot project in Chennai for automobile dealers, in a tie-up with the Federation of Automobile Dealers Association.

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