State-run Canara Bank is planning to float a credit card subsidiary and is looking to rope in a partner in the venture.

“The groundwork for hiving off the bank’s credit card business is underway. We are also looking at a partner for the credit card business but these are initial stages and nothing has been finalised yet,” Canara Bank managing director and CEO LV Prabhakar told Indianbankingnews.com.

A final call may be taken in the next 2-3 quarters. “We want to have a special focus on the credit card business and strengthen it. We are studying various proposals on how to take it forward. The whole process should take 2-3 quarters,” Prabhakar said.

Canara Bank has made an aggressive push to grow its credit card portfolio in the last two years. “I think the time has come to have it as a subsidiary for a focused growth. We have about 923,000 credit cards, which is the second-highest amongst public sector banks after the State Bank of India,” said Prabhakar.

With the Reserve Bank of India (RBI) coming out with regulations allowing non-banking financial companies (NBFCs) to launch credit cards in partnership with banks, many lenders may look at this route to launch a separate outfit so that they can a give a dedicated push to the high-yielding but unsecure loans.

“In a couple of quarters we will have a clear picture on what form the new company will take. But since we have a huge card base, it will be beneficial for the bank if the business is taken off from the parent and run as a separate subsidiary,” Prabhakar added.

State bank of India was the first launch a credit card company in October 1998 in partnership with GE Capital. When GE exited India, the Carlyle group acquired its stake. In March 2020, SBI card became the first pure-play credit card company to list on the stock exchanges in the country.

When asked about offloading equity, Prabhakar said Canara Bank has no plans to lower stake in any of its subsidiaries at this stage.

Canara Bank on Friday announced dividend of Rs 6.50 per share as net profit in FY22 more than doubled to Rs 5,678.42 crore from Rs 2,557.58 crore a year ago. The state-owned bank has also given a 15% performance-linked incentive to its employees.

"We have worked hard on this for the last two years, keeping in mind the interests of our shareholders and staff. The performance-linked incentive was credited to the accounts of the employees on Friday itself. We wanted to encourage the employees for recording such a sharp rise in net profit," Prabhakar said.