Saturday, May 17, 2008

SBI should coach American Banks

What am I to make of this? SBI Chairman O.P.Bhatt had reportedly told Business Standard that the entity may not grow the book aggressively in the present financial year. The card company will work to arrest and bring down defaults, improve asset quality and make all efforts to stop making losses.

I recall my helpless plight at the SBI branch a few years back (where my family has multiple relationships), when a persistent card salesman almost drove me mad. He repeatedly clamored “sir, it’s FREE. All that you need do is just sign up. We need no salary slips, no documentation, nothing. We are issuing it because of you’re a privileged customer having excellent relationship with us for all these years”. My express statement that I already hold lifetime FREE cards from a few other banks made no difference to his sell-I-will attitude. Wanting to put an end to that nag and sparing a benign thought to his desperate pitch, I had obliged.

Not being a great spender, I’d never used the card till date. But now after a couple years, I receive email from SBI saying that my Annual Fees are due. Yes, on the FREE card thrust upon me asking no documentation and just because the bank thought we are good credit risks and it wanted to treat its A-Listers well.

Now I understand why they play dirty. The report quotes Crisil -
the company's delinquencies have shown an increasing trend and as on September 30, 2007, they were at 5.6 per cent on the past dues basis of over 90 days' past dues against 4.4 per cent a year ago. Along with the rise in defaults, the card company has also seen a rise in its costs. SBI Cards' credit costs increased to 20.8 per cent in the half-year ended September 2007 from 8.3 per cent in the year ended March 2007 and 6.2 per cent in 2005-06.
The company suffered a loss of Rs 150 crore in 2007-08. Asked about any plans to put more capital in FY09 to support business, the SBI chief said, "In March 2008, the bank had infused Rs 250 crore into SBI Cards. At present, there are no plans to pump additional capital, unless it makes losses."
So what does the beleaguered card company do? Go fleece the A-Listers and earn their ire too. I think of the big American banks busy writing down billions of $$ because of bad lending practices. Isn’t there a good consulting opportunity for SBI?

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