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For a bank whose origin dates back nearly eight decades, RBL Bank is still relatively small. Its loan book size is just 4% of that of India’s largest private lender, HDFC Bank. But when it comes to issuing credit cards, RBL Bank packs quite the punch.

Within just eight years of starting to issue credit cards, it has quickly grown to become the fifth-largest player, with a 5% market share. It’s behind only bigwigs like HDFC Bank, SBI Card, ICICI Bank, and Axis Bank.

Most of that growth, though, has come since 2016, after RBL Bank hitched its wagon to the high-speed Bajaj Finance train. With a base of over 57 million borrowers currently, the non-bank lender’s loan book is worth over Rs 1,90,ooo crore ($24 billion)—three times larger than RBL’s. Out of RBL’s 3.75 million active credit cards in India, 2.75 million are co-branded with Bajaj Finance—making it one of the largest such partnerships in the country.

From 2016 to 2020, RBL Bank’s credit-card portfolio grew at a compound annual growth rate (CAGR) of 100%, albeit on a small base, said Bikram Yadav, its business head for credit cards. The speed of this expansion has been such that credit cards account for about 20% of the bank’s total loan book.

But this isn’t particularly a good thing. In fact, it’s rather concerning because credit cards are unsecured and not backed by collateral. For most large banks, credit cards make up about 10% of their loan books, according to an analyst who works at an investment bank. At HDFC Bank, it’s just 5-6%, he said. The analyst and other unnamed sources quoted in the story requested anonymity because they did not want to comment on RBL Bank publicly.

Even India’s banking regulator, the Reserve Bank of India (RBI), seems concerned concerned Livemint RBI  moves to allay fears as  RBL  Bank  stock tanks Read more about RBL Bank’s exposure to unsecured assets. Which is why RBL is looking to cut its credit card growth rate substantially to about 20-25%, The Ken has learnt. From adding over 100,000 cards each month, it has slowed down to about 75,000.

Given the current scale of the business, Yadav said that RBL Bank’s aim is to maintain market share at 5% by growing in line with the industry. But this will be tough. Other banks like Kotak Mahindra, too, nipping at RBL’s heels with their  aggressive plans plans Hindu Business Line Kotak Mahindra Bank wants to be the preferred credit card product for every Indian Read more to grab market share.

However, RBL Bank doesn’t have many options. Apart from the RBI scrutiny, it’s also battling market perceptions after the regulator last month approved bad loans expert and former Indian Overseas Bank head R Subramaniakumar as its new MD and CEO.

AUTHOR

Arundhati Ramanathan

Arundhati is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She writes the newsletter Ka-Ching! every Monday. She lives in Bengaluru and has spent over 12 years reporting and writing on various subjects.

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