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K.R. Srivats

Credit card initiative with Shriram group

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New Delhi Feb. 18 UTI Bank is keen to follow the successful micro finance movement for extending the frontiers of its credit card business and break some of the strongest held stereotypes in the credit business.

After having partnered (five years back) with the Shriram Group for lending medium-term to truck drivers for the purchase of second-hand trucks, UTI Bank has now tied up with the same Group for lending short-term to truck drivers (small road transport operators) through issuing credit cards.

"Our intention is to issue 1 lakh credit cards to truck drivers over the next 12 months," Dr P.J. Nayak, Chairman and Managing Director, UTI Bank, said here recently.

Mr Nayak said that UTI Bank-Shriram co-branded credit card was targeted at slightly higher income segment — a segment that combined the aggressive level of entrepreneurship and arduous working conditions.

He also said that this card would replace cash and bring safety in the working lives of truck drivers.

While the Shriram Group would help in the identification of truck drivers, the UTI Bank would extend credit and assume credit risk.

Minimising error

Drawing a parallel to the statistical errors used by statisticians, Dr Nayak said that bankers have been committing many type-I errors of excluding borrowers who are creditworthy and therefore eligible for credit.

"Bankers have tried very hard for avoiding type-II errors (a person who is ineligible gets included) as such inclusion can be injurious to the balance sheets. In this process, they have committed too many type-I errors," he said.

In seeking to break this stereotype, Dr Nayak underscored the need to go beyond the standardised rating model and to understand the credit risk of borrowers more directly in terms of their willingness and ability to pay rather than surrogates such as their incomes and asset ownership levels.

The co-branded credit card would be a photo-card with free mobile alerts on all transactions, cash access at all ATMs and reward points for usage.

With truck drivers being heavy consumers of diesel, lubricants and other consumables, Mr Nayak said that a purchase track record would help petroleum companies to recognise and reward their consumption.

The co-branded credit card would carry a personal accident cover of Rs 3 lakhs, lost card liability of Rs 40,000, credit shield of Rs 25,000 and purchase protection of Rs 25,000.

More Stories on : Credit Cards & Debit Cards | Roadways | Strategy | Private Banks

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