Life Insurance Corporation of India (LIC) is planning to partner a public sector bank to launch its credit cards. The move follows a failure of a proposed joint venture with GE Money after the US company walked out.
According to officials close to the development, LIC is now considering launching a white label credit card for a select section of its policyholders, probably high networth individuals (HNIs). Based on the experience gained from the pilot project, LIC will then roll out credit cards for its remaining policyholders.
The officials said LIC could partner with Corporation Bank, in which the country’s largest insurer owns a 26.7 per cent strategic stake, for the joint venture credit card company. The other name doing the rounds is Canara Bank.
Officials said LIC’s credit card will be a white label credit card, which will be launched initially for HNIs as they are the lowest-risk segment. LIC will partner a bank, which will carry the underlying assets and risks associated with the business for a fee.
“The reason for tying up with a public sector bank is that LIC will not require to place a request for proposal,” said the officials.
LIC Chairman T S Vijayan said, “We cannot take the GE Money plan forward now, but since we want to launch our credit card, we have decided to partner with a public sector bank as we are a government entity. Corporation Bank will be preferred, if it is willing to partner with us. We are trying to get the relevant issues in order as we require several approvals being a government company. Some ideas are there, but we have not finalised on any.”
On September 6, 2007, LIC (40 per cent) had signed a memorandum of understanding with with GE Money India (35 per cent), Corporation Bank (5 per cent), LIC Housing Finance (4 per cent) and LIC Mutual Fund AMC (2 per cent) to create a new credit card company. Through this JV, LIC aimed to offer premium-payment facility to its over 200 million policyholders with their own credit card and also reduce the transaction costs for LIC. However, the MoU, which was valid for a period of 90 days, lapsed.
According to sources, State Bank of India, which has a tie-up with GE Money for SBI Cards was peeved at the latter’s decision to tie up with LIC. The SBI-GE Money JV had incurred a loss of around Rs 150 crore last year. But SBI and GE Money have put their differences behind them and decided to extend their partnership.
