Indian Credit Card Industry – Towards Untied Growth

Soon you will no longer need to carry your plastic money with you for your payment purposes as your mobile number acts as a credit card number. Recently, the Reserve Bank of India (RBI) announced in its annual policy statement that it was in the process of formulating guidelines for a mobile phone payment system. RBI is in talks with both public and private banks, service providers and industry associations to develop the payment system. RBI said the draft guidelines would be posted on its official website by June 15, 2008.

In India, the use of mobile is growing rapidly. There are about 250 million cell phone connections in the country while credit card holders are much lower compared to the number of cell phone users. Therefore, mobile payment has long been considered a progressive step forward.

As reported by The Times of India, RBI said in the policy statement, “The rapid expansion of this way of communicating and transacting has opened up a new delivery channel for banks.” RBI further states, “This channel will certainly enable small payments to merchants, utilities and the like and transfer money at a low cost.”

The credit card market will see some more progressive changes this year. A joint venture between Life Insurance Corporation of India (LIC) and GE Money is likely to launch its first product in late 2008. As reported by Business Standard, the venture is now on the map. But we’ve resolved those issues (conflict of interest). We are currently working on human resources related issues. The two financial giants plan to launch the card by the end of the calendar year.

Once launched, the credit card will only be offered to LIC customers and policyholders for the first year. GE Money has a 30 percent interest in the card company, while LIC Housing Finance Company, LIC Mutual Fund and Corporation Bank each own 5 percent in the card company. LIC will have 40 percent in the company, which is capitalized at approximately Rs.150 crore. LIC has yet to make a decision on the remaining 15 percent of the total investment. Another positive development is that ABN AMRO has recently launched a distinctive co-branded credit card, ‘Go Card’, with the Indian travel portal MakeMyTrip.com. The card offers special rewards benefits and a good range of travel-related promotions and packages.

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