Citibank has introduced a referral programme for its customers in India, offering cash rewards of up to Rs 75,000 if a customer refers his friend or family member to borrow money from Citibank to buy a house. The amount will depend on the loan disbursal.
"We hope you have been enjoying the exclusive benefits of being a Citibank customer. You can now share this joy with your friends, close associates or relatives and as a token of our appreciation, you will get rewarded for it," the bank said in a mail to its customers.
In India, Citibank's retail lending products include mortgages, credit cards, personal loans, loan against securities and fixed deposits.
Cash rewards for reference is not a common practice among Indian banks and housing finance companies. A few bankers felt Citibank introduced this programme as it does not have an adequate number of branches in India.
"It is a distribution issue. Since Citi does not have many branches, it is trying to get new business through existing customers. It may work in their favour but it is not an inexpensive model. Indian banks have extensive branch network across the country. Hence, there is no need for us to introduce an offer like this," said a senior banker, who heads the retail banking business of a large private sector bank, requesting anonymity.
The restrictive branch licencing policy for foreign banks has left these lenders with a limited distribution network. For instance, Citibank is the third largest foreign bank in India in terms of distribution network but still has only 42 branches across the country. The bank has recently been permitted to open two more branches.
But many believe the referral programme also highlights Citibank's intent to expand its secured consumer loan business in India.
"It clearly shows they are aggressive in getting new businesses. Also, credit quality is relatively better if you get new businesses through customer referrals, instead of direct selling agents," said a banker with another private bank.
Bankers and industry analysts said in the current uncertain macro-economic environment, lenders have shifted focus on secured retail loans to drive business growth. Also, low demand for corporate credit has made consumer loans more popular among banks.
ICICI Bank, the largest private sector lender in the country, introduced a new home loan product in November, 2012 that will offer borrowers cash back on every equated monthly instalment (EMI) for the entire tenure of the loan. The customers are also given an option to renew their fixed rate loans for tenures of two, three or five years at a zero conversion fee within 30 days of completion of the initial fixed rate tenure.
The bank has also been reducing its dependence on third-party direct marketing agents to keep its asset quality stable. It spent Rs 160 crore on direct marketing agents last financial year compared to Rs 1,543 crore in 2007-08.
Other private lenders have also introduced new schemes to attract home loan borrowers. Axis Bank has launched a housing loan product, Happy Ending Home Loan', where the borrower will not have to pay the last 12 EMIs if he has been repaying money on time.
Federal Bank is offering borrowers loans to meet house warming and other related expenses. The bank's House Warming Loan' is given to both existing and new customers.