Canara Bank is converting its subsidiary Canbank Computer Services into a credit card unit to derive more value from the unsecured line of business. The public sector bank has already bought out Bank of Baroda and DBS’s holdings in the subsidiary, and is currently negotiating with Karur Vysya Bank to buy out its stake.
Once the conversion is complete, Canara Bank’s 620,000 credit card holders and outstanding balance of Rs 1,100 crore will be transferred to the new unit.
Canara Bank is looking to grow its credit card business exponentially by cross-selling its products to its existing customer base of over 80 million. The bank’s overall gross loan portfolio was Rs 9.24 lakh crore at the end of September.
Canbank Computer is currently engaged in IT and software development services, BPO services, ATM services, and consultancy. It made a net profit of Rs 16.25 crore in the last fiscal year.
The Reserve Bank of India allows banks operating in India to do credit card business either departmentally or through a subsidiary. Setting up a subsidiary needs the regulator’s prior approval.