Introduction:
State Bank of India (SBI) has made an offer to issue credit cards to all of its account holders who have a minimum account balance of Rs.20000 without considering their credit history. This credit card has been named as “Unnati”. (Unnati is a Hindi word which means “Progress”). Unnati will be issued free, at “Zero Annual Fee”, for the initial four years of its subscription. The usual annual fee of Rs. 499 for the issuance of Credit Card which was being charged by SBI Card is being waived off for the first four years. Unnati will be offered through a network of 22500*plus SBI branches (*after the merger).
Launch of Unnati:
SBI Credit Card Unnati was launched at an event held in New Delhi on March 28, 2017 by Piyush Goyal, Minister of State (Independent Charge) for Power, Coal, New and Renewable Energy and Mines. SBI Chairperson Mrs. Arundhati Bhattacharya, SBI Card CEO Vijay Jasuja and other dignitaries were also present.
Need:
SBI felt the need to encourage the adoption of credit cards culture and facilitation of expansion in the digitalized payments in tune with the Prime Minister Narendra Modi’s initiative of “Cashless” India as the nation progresses on the path to digitization. The idea is thus to spread credit inclusion among the masses. This move of SBI Card is a big step forward in that direction.
Collaboration of SBI Card and GE:
This major offer of SBI has come after SBI decided to hike its stake in its joint ventures with SBI Cards and Payment Services Pvt Ltd (SBI Card) and GE Capital Business Processes Management Services Ltd (GE) to 74% by buying out part of its partner GE Capital’s stake for an agreed deal of Rs 1,168 Crores. In the coming days, GE is going to sell its remaining stake to a private equity investor. Mrs Bhattacharya added that SBI hopes to complete its planned stake hike by June this year. SBI Board of Directors has already got approval for a hike in the bank’s stake in its credit card joint venture. “There are a few regulatory issues that are being sorted out,” said Mrs. Arundhati Bhattacharya. SBI currently holds 40 percent stake in GE and 60 percent stake in SBI Card. The balance in both ventures is held by GE Capital.
SBI Card Business:
SBI made its debut in credit card business in 1998 by collaborating with GE Capital India. GE Capital India was a consumer finance arm of US-based GE Capital at that time.
Importance:
Currently the lack of credit history has been a major challenge in issuing the Credit Cards in India and this was a big impediment in boosting the adoption of credit cards penetration in India. In such a scenario, Unnati is likely to facilitate in generation of credit history for new users of credit cards which will help to bring them into organised financial stream. “The card would enable those who do not have a credit history to build one so that they could avail themselves of other loan products in the future,” SBI Card CEO Vijay Jasuja said.
Highlights of Unnati:
- All SBI account holders having a minimum balance of Rs.20000 to be offered Unnati.
- SBI Card Unnati will be offered free (without any joining fee), at Zero Annual Fee, for initial four years.
- After four years bank will analyze how a card holder used the card, and then decide a Minimum Annual Usage Limit for the card. No annual fee will be charged from the card holder if they used the card within specified limits.
- Unnati will be issued to every account holder including Jan Dhan account-holders.
- No Credit History or CIBIL score will be checked at the time of issuing the card. That means people with poor credit history can also apply for Unnati. Here it may be noted that the Credit Information Bureau India Limited, commonly known as CIBIL, is India's first Credit Information Company or Credit Bureau.
- The customer would have to fill only the KYC (Know Your Customer) form and the credit card application form.
- Initially for 12 months from the date of issue, Unnati will be backed by the client’s bank deposit. And after the initial 12 months the bank will free the client’s deposit after going through the first year’s credit history developed after the issuance of Unnati.
- Users of Unnati can empower their family with add-on cards for their parents, spouse, children or siblings above the age of 18.
- Users of Unnati can also withdraw cash through ATMs subject to certain limits.
- Users can pay their electricity, telephone, mobile and other utility bills using the Easy Bill Pay options.
Effects:
With the launch of Unnati, the new credit card users will inculcate the culture of digitalized payments – a move of the Union Government leading towards “Cashless India”. SBI Card will bring in the new users of credit cards into the fold of cashless transactions, thereby empowering them for the digitalized payments and thus making a major contribution and progress towards India's transformation towards a Digitalized Cashless Economy. Currently SBI Card has 43 lakh credit card users, in its digital fold and SBI Card expects 300 percent growth in the very first year in its credit card business. Here it may be noted that SBI has on its registers more than 30 Crores of various types of Customer Accounts, including Jan Dhan Yojana Accounts. Post-demonetization the balance amount in these accounts has also increased significantly. Unnati will change the face of the credit card industry as the process of issuing cards has been made very simple without involving any complications.
Use of Unnati and Reward Points:
Unnati can be used for Utility bill payments; balance transfer towards EMIs, Flexipay and other purchases through over 24 million outlets across the globe, including 325000 outlets in India. Card holders will get one reward point per Rs. 100 spent; excluding payments for Cash Advance, Balance Transfer, and Flexipay and Fuel transactions. There would be a 2.5 percent fuel surcharge waiver for each transaction between Rs. 500 and Rs. 3,000 exclusive of GST, etc subject to a maximum surcharge waiver of Rs. 100 per statement cycle. Users can get Rs 500 cash back on spending of Rs 50,000 or more in a year.
