NEW DELHI: DBS Bank India Limited (DBIL), the wholly-owned subsidiary of DBS Bank of Singapore, is preparing to enter the country’s credit card market this year in a bid to grow the high-margin unsecured loan portfolio. The lender plans to cash in on the consumer credit that is likely to peak this festive season as second wave ebbs and economic activity gathers momentum.
“DBS Bank already issues debit cards to digibank customers. Now, we have outlined a strategy for expansion into credit cards. By the end of 2021, DBS plans to launch a co-branded credit card along with Bajaj Finance and subsequently come with our proprietary card over a period of 2-3 quarters,” Prashant Joshi, Managing Director and Head - National Distribution, DBS Bank India told The New Indian Express in an exclusive chat.
Over the next five years, the bank is looking to take loan mix towards 60:40 for consumer and SME as well as corporate, respectively. The balance sheet composition before the Lakshmi Vilas Bank (LVB) merger in November last year was 75% corporate, 25% SME and Consumer, while including LVB the composition is 53% and 47% respectively.
“Our objective is to give revenue impetus in all the LVB branches which are largely spread in South India. LVB’s strengths were consumer businesses and SME,” he said.
Joshi expects the overall credit growth for the financial year ended March 2022 to be strong at about 20-25%, excluding the impact of the balance sheet merger. Gold loan, affordable housing loan and personal loan will be the main areas of growth. DBS, however, doesn’t intend to offer passenger vehicle financing organically at the moment. According to Joshi, there was a sharp slowdown in consumer spending seen in early April and through May was followed by a quick rebound in July and so far in August, trending well above 2019 levels. But for DBS, the two consecutive waves didn't really have a significant impact because of a small consumer and SME loan book. "As we chart out our growth plan, Covid seems like a blessing in disguise as one has seen and learnt from what happened in possibly the worst kind of a credit slowdown. It will now allow us to tailor our credit programme and attract the right kind of customers," he said.
According to the latest data from the Reserve Bank of India (RBI), credit card spending has increased to Rs. 62,746 crore in June - higher than the pre-pandemic levels - as restrictions on mobility and business have eased. Spending in the pre-Covid hit period of June 2019 stood at Rs. 56,928 crore, while post the first lockdown in March credit card spending dipped to Rs. 50,696 crore, the data showed.
Currently, HDFC Bank is the largest credit card issuer with 14.8 million cards outstanding at the end of June, followed by SBI Card with 12 million and ICICI Bank with 11.03 million. Among global banks, four dominate the credit card space — Citi, American Express, StanChart and HSBC. However, Citi’s decision to exit retail business in India and Amex being temporarily barred from issuing cards in India for their failure to meet data localisation norms prescribed by the Reserve Bank of India in April 2018 could reduce the share of foreign banks. As of March 2021, the foreign banks had a 10.7% market share in volume terms, down from 15.2% in March 2018. Local private and public peers, meanwhile, have increased their market share to 66% and 23.2% (from 63.2% and 21.6%) in these three years. Still, the penetration of credit cards remains low in the country accounting for just around 6.5% of the total cards.
On the status of integration process with LVB, Joshi said that the organisational integration with LVB is done, while the tech platform integration will take another 15 months. LVB has Flexcube as its core banking platform, while DBS has Finacle 11. “Our immediate priority after the merger was to stabilise and assure both customers and staff about the safety of the bank. That’s because LVB was placed on a moratorium. Then, the focus was also on keeping the entire business running and we managed to do that reasonably well. We have grown the CASA franchise of the bank, retail term deposits were stabilised and we were able to maintain a large gold loan book despite falling prices,” Joshi added.
Between December 2020 and June 2021, gold loans grew by 5%. Total outstanding of gold loans of the total loan book stands at Rs. 3,400 crore.
Capital Adequacy Ratio stood at 15.13% as on June 30, 2021. Total deposits grew 44% to Rs. 51,501 crore (including Rs. 18,823 crore from LVB). Savings account balances rose 207%, and current account balances were up 98% year-on-year, including the growth on account of the merger. Overall CASA ratio improved to 31% from 19%. Gross NPA remained moderate at 1.83% for DBIL, excluding the LVB portfolio. While gross NPA deteriorated to 12.93% after the amalgamation of LVB, the net NPA for the bank on a combined basis stands at 2.83%, given 84% provision coverage. “This combination of factors is an early indicator of the success of the current strategy,” Joshi said.