In India’s financial services landscape, there are some lines companies can’t cross. Unless you are the State of Bank India (SBI), that is. With over a 200-year-legacy behind it, the government-owned bank has a $7.7 billion company in market capitalisation in SBI Cards and Payments Services Ltd., its credit card arm.

Only banks can issue credit cards. Loans can be issued by both banks and Non-Banking Financial Companies (NBFC). But an NBFC cannot issue credit cards. There’s no crossover and there’s no exception. Normally.

SBI Cards is an anomaly—it’s an NBFC that only issues credit cards.

“The single biggest reason why SBI Cards became SBI Cards is because of its special NBFC licence,” said an NBFC founder who did not want to comment publicly.

The licence, awarded by banking regulator Reserve Bank of India (RBI) in 1998, ensured that SBI Cards would go on to become the second-largest credit card issuer in the country. The parent entity reaped the benefits of a portfolio of 8.3 million cards that generated Rs 7,286.8 crore ($955.6 million) in revenue and Rs 863 crore ($113 million) in profits in the financial year ended 2019.(SBI has issued 10.2 million cards till January 2020)

This is something that none of the other banks or NBFCs in the country have been permitted to do. “The RBI has not created regulations for this entity it created,” said the founder quote above. “Because if it did, it would open up other NBFCs to demand for access.”

India’s second-largest public sector bank, the Punjab National Bank, was not allowed to spin off a credit card company. Bajaj Finance Ltd., an NBFC, wasn’t allowed to issue credit cards.

But what the RBI giveth, the RBI also taketh. Sometimes it just takes a few years to play out. And for SBI, this came in the form of Yes Bank, India’s fourth-largest private lender.

SBI Cards’ initial public offering (IPO), announced in 2019, meant that there would be a windfall for SBI; the bank was to get close to Rs 2,800 crore ($375 million) of the Rs 10,000 crore ($1.3 billion) from the IPO proceeds. It was to be the country’s biggest listing since 2017, which was a record year for IPOs.

But the RBI roped SBI into a rescue mission to save Yes Bank and, as a result, SBI Cards’ IPO opened at a 12% discount to the listing price. The tide had turned in a single week—from the time it allotted shares to investors to the listing.

SBI’s rescue sorties

Yes Bank had piled on bad assets to such an extent that RBI had to impose a moratorium on withdrawing deposits from the bank. (Read The Ken The Ken The Ken In taking down Yes Bank, RBI threw India’s digital ecosystem into a tizzy Read more story on how this impacted fintechs) It enlisted SBI and other lenders to help pull Yes Bank out of debt-filled quicksand by investing close to Rs 7,250 crore.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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