Citibank, Reliance Retail plan to get into a joint venture

Citibank a private sector lender and Mukesh Ambani – owned Reliance Retail will be getting into a 50:50 joint venture. Reliance Retail will be distributing Citibank’s consumer finance products such as loans and credit cards. The joint venture will be working as a non-banking financial company (NBFC) with a combined investment of Rs 500 crore.

A senior Citi executive informed Business Standard that both the parties will be investing around Rs 250 crore, whereas the rest of details are being worked out.

“We have already started distributing Citibank’s retail banking products through Reliance Retail. Both of us would have equal contribution to expand the business. We have invested about $62 million in the partnership,” the executive added.

However formal announcement of the deal has to be made, as per sources the joint venture will be initially targeting Reliance Retail’s large customer base, which is approximately around 4 million. Reliance Retail, at present, is having over 1,000 retail outlets across the country.

There is also proposal of launching a couple of new co-branded cards in collaboration. Previously Citi had entered in a joint venture with Maruti Suzuki for car finance in recent months, although the JV’s activities have reduced in recent months.

Reliance is ramping up its retail operations with premium and luxury brands as well as the consumer durables business.

Consumer finance, including loans and credit cards, is one of the fastest-growing segments in the financial services sector. The sector is estimated to grow at a rate of about 30 per cent annually. It is expected that the sector will grow at a rate of about 30 per cent annually. In India the annual credit card spending is in the range of Rs 50,000 crore. Whereas the penetration of credit cards in India is about 1 per cent as compared to a global average of 4.6 per cent.

Although over the past few quarters there has been rise in the delinquencies in the credit card industry.

In an interview Sanjay Nayar, CEO, South Asia, Citi, told Business Standard, “For credit cards, where you actually get industry numbers, the industry average is around 11-12 per cent. Citi is half that number. On unsecured loans too, we are better than the industry. We still have a very good risk management system. We get a lot of signals and we act on it. We are trying to do a multi-product relationship with our customers.”