The travails of unregulated Customer acquisition
Customers acquisition sans any regulations is a surefire guarantee of future problems. That's exactly what's happened to SBI cards in India.
HT Mint reports that 'an aggressive customer acquisition drive has taken its toll on India’s second largest credit card issuer, SBI Cards and Payment Services Ltd (SBI Cards), with defaults rising to possibly the highest in the industry.
SBI Cards, which has so far issued about 3.5 million credit cards, has posted a net loss of Rs186.61 crore in the quarter ended December 2007, its first since 2003, wiping out a substantial portion of its net worth (equity and reserves). SBI and GE Money pumped in Rs200 crore of capital into the company in the quarter.
What should worry the credit card firm more, however, is its rising non-performing assets (NPAs). As on 31 December 2007, its NPAs stood at 16.28%, possibly the highest among all credit card issuers in India. This means 16.28% of the total outstandings of customers could not be collected by the company.'
SBI Card's travails are a reminder to other financial institutions to adopt a more prudent approach to Customer acquisition.