IDFC First Bank : High Aggresive Strategy in Credit Card Business

IDFC First bank is going quite aggressive in its approach to acquisition clients. First, it was 7% interest in savings and now a new strategy to offer interest-free cash on credit cards. Well, it is a high-risk strategy and time will tell how it works out. However, we are optimistic about the prospects of the bank.

Banks typically charge ₹250-450 for every cash withdrawal on credit cards, along with an interest of 2.5-3.5% per month, applicable from the day of withdrawal till the full amount is repaid

IDFC First Bank Ltd seeks to expand its credit card business with two unique offerings, including interest-free cash advances for 48 days and dynamic interest rates on revolving credit. The services were launched on last Friday.

The interest-free cash scheme is a first for the industry and is a feature that the bank is testing, B. Madhivanan, chief operating officer, IDFC First Bank, said in an interview.

IDFC First Bank is entering the credit card space with its existing customers on an invitation-only basis, but will extend the facility to other customers after March, Madhivanan said. "When you are underwriting the customer, you are underwriting him for a credit limit and giving a certain percentage of that as cash. It has always been positioned as an emergency feature. The industry always tried to charge you both a fee and interest on the cash component to prevent people from taking it or to make
money out of it," he said.

IDFC First Bank, Madhivanan said, wants to make just the right amount of money, about ₹250 per transaction, irrespective of the amount a customer withdraws. "It is an experiment and is not like our primary feature. We will see how it plays out and, accordingly, look at it," he said. 

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