Life Insurance Corporation (LIC) will not partner with GE Money for its proposed foray into credit card business following huge loss reported by SBI Cards & Payment Services Private Ltd, in which the Indian arm of the US conglomerate has a 40 per cent stake, an LIC official said.
For the first time in its decade-long existence, SBI Cards has reported a net loss of Rs 150 crore for 2007-08 (April-March).
“The experience of SBI Cards with GE Money was not encouraging. We also had experienced problems in the past with foreign players. We may go alone for the credit card venture,” the official said.
Though LIC may take some time to decide whether to go solo, a clutch of institutions are already queuing up to partner the insurance behemoth.
“There are already four to five institutions that have shown interest in partnering us,” the official said without divulging further details.
In the proposed card venture, GE Money was to have 30 per cent stake and LIC 40 per cent. Corporation Bank, LIC Housing Finance and LIC Mutual Fund were supposed to have 5 per cent each and the remaining 15 per cent was scheduled for a private equity player.
If LIC goes solo, then the insurance firm will have to take the proposed stake of GE Money, thereby pushing up its holding in the venture to 70 per cent, the official said.
LIC’s decision to partner GE Money in the plastic money business had irked State Bank of India (SBI), industry officials said. SBI was not comfortable with the idea of GE Money partnering with LIC as it feared a conflict of interest.
LIC, on the other hand, went on record saying it does not have any problem with GE Money partnering it as well as SBI for the credit cards business.
“We do not have a problem with GE Money’s presence,” Hemant Bhargava, chief executive officer-designate of the LIC’s card venture had told on April 10. However, after SBI announced an increase in bad assets from its credit card business in May, LIC started to rethink the deal, banking industry officials said.
As per earlier plans, LIC’s card venture was expected to start operations by the end of the current year, which now seems somewhat uncertain.
SBI recently appointed Diwakar Gupta, who was the chief general manager of State Bank of Patiala, as the chief executive officer of SBI Cards. Earlier, a GE Money official held the post.
