Life Insurance Corporation of India (LIC) is going to join hands with a public sector bank to rollout its credit cards. The company is planning to launch a white label credit card for its policyholders who are considered high net-worth individuals (HNIs).
LIC may partner with Corporation Bank, in which the insurer will own a 26.7% strategic stake, for the joint venture credit card company. The company may also consider Canara Bank for this foray. LIC has been looking forward to partner with a PSU after the failure of a proposed joint venture with GE Money.
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."
"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 form LIC.
Officials said that company's white label credit card will be launched initially for HNIs as they are the lowest-risk segment. Based on the response, LIC will further rollout these cards to its other policyholders.
LIC will partner with a bank, which will carry the underlying assets and risks associated with the business for a fee.
On September 6th, 2007, LIC had inked a memorandum of understanding with GE Money India, Corporation Bank, LIC Housing Finance and LIC Mutual Fund AMC to initiate a new credit card company. According to the MoU, LIC held a majority of 40% stakes followed by GE Money which took over 35% stakes. Corporation Bank was assigned 5% shares in addition to LIC Housing Finance and LIC Mutual Fund AMC carrying out 4% and 2% stakes respectively.
The Joint Venture was proposed by LIC to offer premium-payment facility to its over 200 million policyholders with their own credit card along with reducing the transaction costs for LIC. However, the MoU, which was valid for a period of 90 days, lapsed.
Market sources claim that State Bank of India, which has a tie-up with GE Money for SBI Cards, did not like GE's association with LIC. This might be a reason for US Company to walk out of the proposed JV.
The SBI-GE Money JV had incurred a loss of around Rs 150 crore last year.
Lately, the private insurers' entry in life insurance has resulted in a drop in the market share of LIC. There have been periodical ups and downs in new premium income of the insurer, yet it has emerged as a regional giant with assets of over Rs 8 lakh crore. Life Insurance Corporation has been providing consistent returns to the government and policyholders for 52 years.