IIFL Finance could be the next in line to unveil a bank tie-up for a co-branded credit card, with IIFL Finance MD Nirmal Jain saying the company is “exploring co-branding partnerships with bank” in a recent interview with businessline.
Non-banks have opted for the route given the reluctance on RBI’s part to give such a licence and also because credit cards are harder for them to monetise given the lack of liability options such as deposits.
“Although we have a possibility to doing this business on our own, no NBFC has been granted a license for credit cards business since the April 2022 circular,” said the CEO of an NBFC which is exploring a co-branding tie-up with banks.
RBI had, in April 2022, opened the door for NBFCs to apply for a license to operate and issue credit cards. Since then a few players such as Bajaj Finance and Poonawalla Fincorp had initially shown interest to apply for licenses.
“There have been conversations with the banking regulator on this matter, but we are yet to have anything concrete on credit card licenses being issued to NBFCs,” said a person aware of the matter.
It is understood that RBI’s hesitation stems from its apprehension over NBFCs’ ability to handle voluminous customer complaints.
“Over 50 per cent complaints received in the retail business tend to be on credit cards and the regulator is doubtful about the ability of NBFCs to handle such a load efficiently,” said the NBFC CEO quoted earlier.
With credit cards seen as an upmarket product, the regulator is also keen to protect its niche and positioning of the product segment in the market. “Unless NBFCs ramp up their grievance redressal mechanism satisfactorily, it could create a product risk in the market,” said a bank CEO.
With direct entry into credit cards being restricted, NBFCs are now instead looking for co-branded cards to test the water on underwriting and their ability to handle customer complaints, sources said.
“It’s a mutual partnership, the NBFCs also have a good client base to which these credit cards can be positioned,” said another private bank head adding that the main issue for NBFCs is the recovery and profitability, both of which are taken care of to a large extent by partnering with a bank.