Updated April 10, 2019 06:24:23 India’s biggest credit union will open its doors for business after the government eased restrictions on opening new branches.
Key points:Credit union operator India’s Credit Union Limited (ICUL) said it would open up its credit union service to a limited number of people with a minimum credit of $500 a monthSource: RTE NewsWire, AFPAirlines and retail outlets will have to go on credit to open branchesA new business license will allow the ICUL network to open its branches to a larger number of customers.
India’s Credit Unions Limited (CUL), the largest credit unions in the world, said it had been granted a license to operate by the Reserve Bank of India (RBI) and would open its credit unions to a smaller number of creditworthy customers.
The government eased a number of rules on credit unions’ opening, including allowing them to accept customers with a credit of up to $500 and to offer online banking services.CUL chief executive Ajay Kumar said the regulator would also allow credit unions with less than 10 branches to open up, allowing them access to a broader group of customers with no formal connection to the organisation.
“The credit union operators will have access to people who do not need a credit card,” he said.”CUL will not allow anyone to open a credit union branch if they are not eligible to do so.”‘
No financial incentive’CUL’s chief executive said it was difficult to make the transition from a small business to a credit unions.
“We are having no financial incentive from our credit unions because we cannot attract new customers.
We have to be careful with the money we spend, but the financial incentives we have are not very attractive,” he added.
India has about 3,400 credit unions and about 30,000 credit unions are listed on the International Monetary Fund’s website, while the average credit limit is $50,000.
The country has a strong credit rating and has seen a steady decline in business lending.
But its credit rating is not good enough to attract many new credit card customers, said Rajesh Bhatia, chief economist at Capital Economics.
“For the next few years, credit unions will be able to operate, and they can operate at a higher level than they can now,” he told Al Jazeera.
India is India’s third largest economy with a gross domestic product of about $4 trillion.
The country has the world’s highest per capita debt, about $7,600 for every Indian adult, according to the IMF.
India does not have a single bank with the authority to issue a commercial bank credit card.
But there are several small banks that issue credit cards.
One of them, National Credit Union Bank (NCUB), said it has a credit limit of $50 000 a month.
It has been operating since 2007.”NCUB is not a credit agency and we do not have the authority, but we do have the ability to issue cards,” NCUB chief executive Amit Jain told Aljazeera.
“There are more banks like NCUB but we are not the only banks in the country,” he noted.
India was one of the first countries to introduce a nationalised credit union system in 2001.
Since then, there have been several attempts to start a credit industry.
But it has struggled to keep up with the growth in credit use in the developed world.