Punjab National Bank (PNB) will hive off its newly set up credit card business into a wholly owned subsidiary, a source familiar with the development said.

PNB Cards and Services Ltd, registered in March, will hold the credit card business of the bank.

PNB has got permission from the Reserve Bank of India (RBI) to dilute its stake in the new entity to 51%, the source added.

PNB Cards and Services will, however, stay as a wholly owned subsidiary for the first two years of operation.

The structure could be somewhat like how State Bank of India (SBI) has modelled its credit card outfit. The country’s largest lender runs its credit card business through a subsidiary, SBI Cards & Payment Services. It is the only pure-play credit card company to be listed on the bourses. In the initial stages, SBI’s credit card arm had roped in GE Capital as its joint venture partner. Private equity fund Carlyle had acquired GE group’s 26% stake in 2017 but has been recently offloading its shares in SBI Card. 

“The new company is already set up for conducting the non-financial activities of PNB’s credit card business. The card originations, marketing and advertising related activities are undertaken by this company named PNB Cards and Services Ltd,” said a senior officer of the bank on condition of anonymity.

“In due course, the credit card business of the bank will be housed within this subsidiary. We have about 300,000 cards in circulation. Once the business reaches an optimum size, we will migrate the entire business of the cards into the subsidiary,” the official added.

While SBI has housed its credit card company in a subsidiary, other banks like HDFC Bank and ICICI Bank, who are the major players in the segment, have credit cards residing in their retail portfolio.

PNB reported a healthy 9% year-on-year increase in credit card issuance at the end of the first quarter ended June 30, 2021. The bank has 300,000 cards in circulation, with a 27% YoY increase in the number of transactions.  The volume of transactions increased by 65% over the previous year.

The bank is in the process of launching three variants of its credit cards - PNB Signature, PNB Millennial and PNB Corporate cards.

As part of the government’s bank consolidation drive, New Delhi-based Oriental Bank of Commerce and Kolkata-headquartered United Bank of India were amalgamated into Punjab National Bank on April 1, 2020.