In a strategic move, RBL Bank and Bajaj Finance have mutually agreed to discontinue the issuance of new co-branded credit cards. This decision, effective immediately, reflects the evolving dynamics of their partnership and the changing synergies over time.
Background of the Partnership
The collaboration between RBL Bank and Bajaj Finance began in 2016, aiming to offer co-branded credit cards that combined the strengths of both institutions. The partnership was initially set for five years and was renewed in 2021 for an additional five-year term. Over the years, this alliance facilitated the issuance of approximately 3.4 million co-branded credit cards, significantly contributing to the credit card portfolios of both entities.
Rationale Behind the Decision
After discussions over the past month, both RBL Bank and Bajaj Finance concluded that the synergies initially envisioned had undergone significant changes. Consequently, they decided to halt the issuance of new co-branded credit cards under this partnership. RBL Bank emphasized that this decision does not materially alter its plans for the credit card business, including new issuances and spending.
Impact on Existing Cardholders
Current holders of the co-branded credit cards will continue to enjoy the same benefits, rewards, and offers associated with their existing cards. Upon renewal, these cards will be reissued as RBL Bank-branded credit cards, ensuring a seamless transition for customers. RBL Bank has committed to servicing the existing portfolio, providing uninterrupted support and maintaining customer service across all channels.
Strategic Implications for RBL Bank
Over the past 18 months, RBL Bank has diversified its credit card issuance channels, reducing reliance on the Bajaj Finance partnership. The bank has established new co-branded partnerships with entities such as Mahindra & Mahindra Finance, TVS Finance, Indian Oil Corporation (IOC), and the Indian Railway Catering and Tourism Corporation (IRCTC). This strategy aims to minimize dependence on any single partner, with plans to ensure that individual co-branded partnerships contribute only 10-15% to the overall credit card portfolio.
Bajaj Finance’s Perspective
For Bajaj Finance, the decision aligns with its evolving business strategy. The company has been exploring opportunities to issue credit cards independently, leveraging its extensive customer base and technological capabilities. This move allows Bajaj Finance to have greater control over its credit card offerings and tailor products more closely to its customers’ needs.
Regulatory Considerations
The Reserve Bank of India (RBI) has granted extensions for the co-branded credit card partnership between RBL Bank and Bajaj Finance in the past. However, the central bank has been cautious about allowing non-banking financial companies (NBFCs) like Bajaj Finance to issue credit cards independently. This regulatory environment has influenced the strategic decisions of both institutions regarding their credit card businesses.
Market Impact and Future Outlook
The cessation of new co-branded credit card issuances between RBL Bank and Bajaj Finance is expected to have a limited impact on the market, given the diversification strategies employed by both entities. RBL Bank’s focus on building a varied portfolio of co-branded partnerships positions it well to continue growing its credit card business. Similarly, Bajaj Finance’s efforts to develop its own credit card offerings indicate a strategic shift towards greater autonomy in this segment.
In conclusion, the mutual decision by RBL Bank and Bajaj Finance to stop issuing new co-branded credit cards reflects the evolving nature of their partnership and individual business strategies. Both institutions remain committed to serving their existing customers while pursuing new avenues for growth in the competitive credit card market.
