AU Small Finance Bank Ltd aims to use its premium credit card offering to attract new deposits and retain existing customers seeking more banking services.On Tuesday, the SFB introduced the Zenith+ metal card, with an annual fee of ₹4,999, excluding taxes. It offers customers complimentary rounds of golf, free movie tickets, as well as other benefits. “We are not building this card for our assets. It is to provide depositors an option to have a long-term relationship with us as a bank, and credit cards will play an important role. If you keep a credit card of a bank, you will also keep a current account or savings account because you need to pay as well,” said Sanjay Agarwal, chief executive, AU SFB. The rise in deposit rates has raised funding costs for banks. At the same time, deposits are essential for credit growth. For AU SFB, the cost of funds rose by 29 basis points sequentially in the June quarter to 6.58%, and “remains a key monitorable”. In fact, the figure has steadily risen from 5.7% in Q1 FY23. As of 30 June, its deposits totalled ₹69,315 crore, up 27% from the year earlier.“Cost of funds is a real challenge not just for AU SFB but for the entire industry. People have a lot of options now, however, growth will not be an issue because of rising cost of funds,” he added.Launched three years ago, it had 645,027 outstanding credit cards in July, showed RBI data. Its per card spending stood at ₹20,156 for the period, and its credit card portfolio is growing at 30% annually and may reach one million cards by year-end.“My credit card strategy is to really have a hook to my depositors. They should feel (happy) that AU can offer a metal card. It is not an ordinary card given to ordinary depositors but has its own price and one needs to have a larger relationship with us,” said Agarwal.Internal research, a bank official said on condition of anonymity, has shown that about 10% of its customers would be eligible but the bank wants to restrict offering the new credit card to less than 5% of the customer base to retain its exclusivity.“As a small finance bank, we require deposits and it is my stated position that a depositor expects us to have the finest products. We cannot go to customers saying that we are new and small, so our products are inferior,” said Agarwal.According to Agarwal, the bank is trying to improve its brand, products, channels and services, things when put in place would lead to more depositors banking with the lender.“We do not only want a term deposit relationship but a more transactional relationship,” he said.