The Reserve Bank of India (RBI) is considering allowing certain non-banking finance companies (NBFCs) to issue credit cards. However, sources said that this approval will be given with very strict conditions so that only NBFCs with strong balance sheets can get into this risky business.
India is a market where credit card penetration is very low and only three to four per cent of the population has access to it. Banks also focus only on their prime or super-prime customers, making a large chunk of Indians ineligible for these credit cards. NBFCs and fintech startups want to tap this large segment into the credit card business.
A source said on condition of anonymity, “RBI will work out some guidelines before approving them. It may fix a minimum net worth that only NBFCs with such a minimum net worth can enter the credit card business.”
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Sources said that the rule of minimum net worth is being introduced because till now a company does not require a lot of capital to register as an NBFC. Hence all such firms cannot be allowed to issue credit cards.
Let us tell you that earlier it was reported that the RBI is considering allowing some NBFCs to issue credit cards alone and is in talks with them for the same. NBFCs are so far allowed to issue credit cards only in association with banks.
Apart from the minimum net worth, RBI may also put certain conditions in the guidelines regarding liquidity requirements. It may also look into their IT infrastructure and cyber security measures, as cards can be issued digitally as well.
“There are around 15 large NBFCs in the country which are regularly monitored by RBI. These could be some of the first companies to get approval for NBFC credit cards. RBI may also put a credit limit initially, which will be based on the net worth of the NBFC concerned.”
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As of now, only two NBFCs- SBI Card and BoB Card are allowed to issue credit cards alone and both are state-owned NBFCs.
According to a figure till November 2021, there are a total of 67 million credit cards in the country, while the number of debit cards against this is 934 million. At the same time, about 55 crore customers have credit bureau history.
To bridge this huge gap in the Indian market, various fintech startups are increasing credit through various models. The focus of these startups is on new customers.
New-age fintech companies are offering Buy Now Pay Later (BNPL), EMI, prepaid cards or even the facility to split bills into three or more installments to the customers to grow their business.
A recent digital lending report by the RBI Working Group stated that “digital credit cards/line of credit should be allowed to operate without licence” to further improve financial inclusion.
There are many such fintech companies like Slice, Uni and Lazypay, which are issuing prepaid cards in association with banks with NBFC license. These companies getting approval from RBI to issue credit cards will help them to increase their offers.
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