RBI’s MasterCard Ban May Hit Citibank India’s Retail Biz Sale

The Reserve Bank of India’s (RBI) recent regulatory ban on MasterCard has raised questions over the likely valuations of Citibank India’s retail banking business, which is up for sale. Citibank has an exclusive tie-up with the payments company for issuing debit cards and will have to stop issuing them from July 22, according to the RBI circular.

While the ban does not impact existing customers and businesses, it will impact addition of new clients between now and the actual sale and could weigh on the price that the potential buyers are likely to pay.

“Citi has a great franchise on the retail side and so there may be many suitors interested,” said a banking excusive. “But with this ban, the bank cannot add new liability customers. Though it does not affect the business already built, it can be value destructive if this situation drags on as wealth management customers are an important part of the business up for sale and closely linked to the liability portfolio of the bank.”

Bankers said that though the RBI action does not impact existing customers, the impact could be felt if the ban long and the transaction is delayed.

Citibank declined to comment. Data from RBI shows that Citibank had 1.6 million debit cards outstanding in India as of May 2021, less than 1% of 902 million debit cards outstanding in the banking system, though it has the highest amount of cards outstanding among foreign banks in India.

“The Citi business is up for sale. People are right now bidding for this existing business,” said another banking executive. “Citi may have to look to migrate to another card company like Visa in the short term because if this MasterCard issue does not get resolved soon then it would weigh on this deal and could lead to a customer exodus impacting value.”

India is among 13 markets where Citibank has decided to exit retail businesses as its first woman CEO Jane Fraser decided to conserve capital and focus on higher yielding businesses. Last week, it received about a dozen non-binding bids from private sector and foreign banks looking to acquire its retail business in the first step towards the sale. These bids will now be evaluated to seek binding offers. The process is likely to take months and will also need RBI approval.

It is estimated that Citibank has 2.9 million retail customers and 1.2 million bank account in India. It has 2.61 million credit cards. It operates 35 branches in the country and had deposits of Rs. 1.6 lakh crores as of March 2020. In a report in April, Macquarie valued the Indian business of Citibank at between $ 1.91 billion and $ 2.15 billion. S-ET

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *