SBI to restructure credit card business

Mumbai: India's biggest bank, the government-owned State Bank of India will undertake an elaborate restructuring exercise for its SBI Cards that will see the installation of a new CEO at the helm, who will come most probably from within the SBI cadre, along with around a dozen SBI officers implanted into the joint venture company.

The restructuring follows the accumulation of non-performing assets (NPAs) over the last two years of the credit card portfolio, with the latest losses estimated around an estimated Rs50 crore, and NPA's at around 16.25 per cent.

SBI Cards is a 60:40 joint venture between SBI and GE Money. With 3.1 million cards, SBI is the second largest credit card issuer in India, behind ICICI Bank. Being an unsecured form of lending, the bank has had to write off bad loans on its card portfolio.

''We will be restructuring the company,'' said SBI chairman O P Bhatt. ''This will also include inducting a new CEO. The company has not done well in the last 18 months and there has to be a change in the business strategy and risk management processes.''

Bhatt clarified that its partner in the credit cards business, GE, will be assisting the bank in the restructuring exercise. Industry sources say that the bank will place tighter controls on the issuing of credit cards once the restructuring is completed, with more consideration given to the income levels and the quantum of credit that can be given to new applicants.

The restructuring is likely to see SBI change focus from business growth to a consolidation of the existing business. The bank plans to channelise the entire distribution through its branches with a view to place tighter controls on the scrutiny of prospective card holders. Also, delinquencies would be managed with online processing, and marketing strategies too will most likely see a revision.