The Reserve Bank of India (RBI) had recently turned down Canara Bank’s proposal to set up a separate credit card subsidiary. Canara Bank, a government-owned bank, hoped to create a subsidiary to boost its growing credit card business. SBI, PNB and Bank of Baroda already have subsidiaries for their credit card business.
| Bank | Subsidiary |
|---|---|
| SBI | SBI Cards |
| PNB | PNB Cards & Services Limited (PNBCSL) |
| Bank of Baroda | BOBCARD |
As per reports, the RBI had rejected the subsidiary proposal of Canara Bank due to concerns regarding the high risk associated with unsecured loan portfolios, which would include credit card lending. In June 2024, the outstanding amount on credit cards was nearly Rs 2.7 lakh crore.
Now, a question arises – Will Canara Bank apply again for establishing credit card subsidiary? In a recent development, Canara Bank has announced it will not reapply to establish a dedicated credit card subsidiary after the Reserve Bank of India (RBI) rejected its initial proposal. Instead, the bank has launched a new internal division to manage credit card services, which has been operational since October 1.
Canara Bank’s Managing Director and CEO, K Satyanarayana Raju, confirmed the decision on the sidelines of the Business Standard BFSI Insight Summit. “We don’t want to reapply, but we started the same functions within the bank,” Raju stated. He said that this internal credit card wing will serve the functions initially planned for the separate subsidiary.
In addition to its credit card strategy, Canara Bank is moving forward with an Initial Public Offering (IPO) for its insurance subsidiary, Canara HSBC Life Insurance. According to Raju, the bank has submitted its IPO application to the Department of Financial Services (DFS) and anticipates approval within the next two weeks.
Canara Bank, which holds a 51% stake in Canara HSBC Life Insurance, had previously announced plans to list the insurance company by the first quarter of the financial year. In May, the bank’s board approved a proposal to sell a 14.5% stake in the insurance arm through the public issue.
This IPO would mark a significant step in Canara Bank’s strategic plan to unlock value from its subsidiaries while focusing on new banking initiatives.