SBI Cards and Payment Services Limited (SBICARD) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SBI Cards Second Quarter FY '21 and First Half FY '21 Earnings Conference Call with Analysts and Investors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwini Kumar Tewari, Managing Director and Chief Executive Officer of SBI Card. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of our company, SBI Card and Payment Services Limited, I extend a very warm welcome to you, and thank you for joining us today for the Q2 and H1 Investor Call for the Financial Year 2021. You would have seen the presentation which has been uploaded. I would like to extend my gratitude to all of you for helping SBI Card grow as a trusted and responsible organization. I also hope that you and your families are staying safe and healthy. It is imperative to continue taking precautions during this festive season and beyond as the country goes through Unlock Phase 5. So despite the challenging macroeconomic environment we are operating in, I'm happy to share that our business has continued to perform well. SBI Card has remained agile in responding to changes in the operating environment and has continuously harnessed new opportunities to sustain business growth. This, when combined with our sound business fundamentals, has enabled us to focus an impressive performance on new account acquisition as well as spend, with both coming closer to the near pre-COVID levels. So let me just give you a high-level view of what the performance has been. On the new account front, on a sequential quarter-on-quarter basis in Q2, which is July to September, over Q1, our new accounts volume has grown more than 2.4x to 688,000 accounts compared to 288,000 accounts in the previous quarter. This obviously is lower than the previous pre-COVID levels. But in the month of September, we almost reached the pre-COVID level at about 98%, and we had a loan rate of 308,000 accounts, which was almost the same level as pre-COVID, which we defined by December to February months because March -- part of March was also part of COVID. The other thing I want to point out, which is detailed in the presentation, is that we are also expanding the market. And this is on the back of increased sourcing from the Banca channel. The Tier 3 plus sourcing in Q2 was about 15% higher Y-o-Y, and new to credit card was 28% as against 25% in the Y-o-Y. And new to credit itself was 23% compared to 18.6% in the previous year. So therefore, we are expanding the market going into Tier 3 and beyond and also new to credit and new to credit card customers. And the delinquency levels on these are behaving better than these others which we have simply because they're coming from the bank, and therefore, we have a visibility on the account and also an access to account should they default. As per Bureau data also, our market share in these segments in new to credit was 31%, so we are leading the market here. In terms of spend on a sequential Q-on-Q basis, retail spend grew by 50%, and the increased growth was a result of the sales unlocking we have been seeing and the resumption of economic activity and consumption. There was also some element of pent-up demand, which is due to the lockdown in quarter 1. Overall retail online spend, which we gave in Q1 as 105% of pre-COVID, has gone to 114%. And overall, it is 54% of the total retail spend, and the estimate is this will continue to grow well. The retail point-of-sale spend are at 72% of pre-COVID levels, whereas the online spends are 114%, as I mentioned. Retail spend for month of September especially have improved, and they are almost at 92% of the pre-COVID levels, which, as I mentioned, are defined by December to February period. Retail online spend at 7 -- 114%, and POS spends are at 75% in the month of September. For October, we are -- we have seen further growth in spend in the launch of festive offer because the festival season began in October, unlike last year when it began in September. We had a 6-day billion dollar sale -- billion dollar day -- Billion Days sales with Flipkart, which has seen a significant jump in volumes compared to last year's program during the festive season. We've also seen cardholders increasing adoption to the nontouch contactless payments. And almost 1 in every 4 point-of-sale transactions which we -- which our cards see is coming in as a contactless transaction. And the card popular categories include grocery, departmental stores, fuel and restaurants, and this is likely to continue. Our performance is a result of various proactive and strategic initiatives we rolled out. And we -- for giving more choice to the customer, we have continued to forge new and strategic partnerships to give a differentiated value proposition. Thus, we partnered with American Express to bolster network and premium play, and now the SBI Card is available on all payment networks in India. Our payment cards, SBI Card Elite and Card PRIME, are now available on the American Express' global network. We also launched a flagship offering of IRCTC SBI Card on the rupee platform, extending the product to a larger customer segment and in making our master premium portfolio more comprehensive. We have also collaborated with Google to enable our cardholders to make contactless payments using Google Pay. We continue to strengthen emotional connect with customers through various brand campaigns, and we brought in targeted offers in line with consumer spending trends through extensive use of data analytics. On the merit of many such initiatives, we continue to grow faster than the industry and market share on both parameters. Spends in cards in force has risen for the quarter. One positive outcome of the COVID-19 is that digitization is the new normal. We expect consumer interest in digital and contactless payments to grow further. We also continue to monitor the situation closely and realign ourselves to leverage emerging opportunities as also manage any potential business impact. On the other financial performance highlights. On profitability, despite a tough operating environment, the company did well in delivering a 37% Y-o-Y growth in pre-provision earnings for quarter -- second quarter FY '21. This was enabled by a robust performance in the business front ensuring positive operating leverage. Our net revenues for the quarter grew by 9% even as our operating expenditure reduced by 10%, leading to a positive operating leverage of 19%. The credit risk situation is also impacted by the macroeconomic variables around us post COVID. The assessment of credit risk in the financial services sector has become complex, and it is also influenced by the RBI moratorium and Supreme Court orders on NPA standstill effective 31st August 2020. To cover ourselves for future credit risk, we have enhanced the management overlay by INR 268 crores in quarter 2. And the overall management overlay in books stand at INR 758 crores as in September. This is over and above the base required provisions of INR [ 1,295 ] crores. Our GNPA number is 4.3% as compared to 2.3% Y-o-Y quarter 2 last year. The profit of the quarter has been impacted by higher provisions outlay with the PAT for the quarter at INR 206 crores compared to INR 381 crore in Q2 financial year '20. And therefore, the ROAA for September 20 is 3.4% and ROAE is 14.1%. We have much greater detail in the presentation, and we'll be discussing more about this in the questions which follow. On the market share, we have been steadily growing our market share in terms of cards in force and spends. And I'm happy to share that our market share for cards in force has grown to 18.7% in August, which is the last RBI available data, from 18% in Q2 FY '20. And our market share for spends in Q2 FY '21 has grown to 20.5% from 18.6% in Q2 '20. In each of the previous 3 months, our market share, both in spends and cards in force has grown. Moving on to the cards in force and receivables. Our cards in force grew by 16% year-on-year to INR 1.10 crores or INR 11 million from INR 0.95 crores in Q2 FY '20. Receivables grew by 4% year-on-year to INR 23,978 crores compared to INR 23,038 crores in Q2 FY '20. On liquidity and capital adequacy, our liquidity position continues to be strong. We have a lot of lines which are still not utilized. Our capital adequacy ratio for the period ended September '20 is 25.3% as compared to 19% last year in the same period. Our Tier 1 capital ratio has moved to 21% from 14.8% in Q2. Our credit ratings remain excellent with A1+ and AAA rating with CRISIL and ICRA for both short-term and long-term borrowings. These ratings by rating agencies reflect our robust business and financial fundamentals. At SBI Card, we are working towards driving market expansion. And as I mentioned earlier, sourcing of new to credit, new to credit card customers is continuously increasing. We are seeing increasing percentage of customers from Tier 3 plus cities. Our share of market in new to credit, new to credit cards and Tier 3 cities continues to be significant as per CIBIL report for quarter 1. This is -- this also reflects an increasing penetration of the SBI's base. We understand that the SBI Card has also been included in the FTSE Global Equity Index Series in September '20, which reflects our strength and trust of investors. And the foreign portfolio investment share in our stocks has increased to 5.93% in September '20 from 4.23% in June '20. We at SBI Card have always been working towards holistic and sustainable changes impacting our communities. We have recently implemented a sustainability policy approved by Board which will strengthen our commitment to building a better society. We have included a summary of the ESG areas in this presentation. Just to highlight our digital interventions. Through paperless communication has enabled a saving of over 1.5 lakh trees in the last 3 years. In this year, we have contributed 18.66 lakh medical equipment and distributed over 3.1 lakh meals and ration kits to the underprivileged. Our social intervention through community development remains strong. I also want to call out the diversity. We have a share of 29% women in our workforce. And more important point is that in the senior leadership position, we have a similar number, 29%, which is much better than many others in the industry. We also have a very young workforce, with 40% of the workforce being less than 30 years. I would like to reiterate that our business operations are running normally, and we at SBI Card remain committed towards supporting our colleagues and customers are remaining financially robust. Over the years, we established ourselves as a leading player in the Indian credit card industry. And today, we are the largest pure-play credit card issuer in this country with deep domain expertise and a strong legacy. Before I end, on behalf of SBI Card family, I also extend my heartiest warm wishes in advance with the upcoming festivals. Enjoy the festivities while staying safe. Thank you very much for your time, and I will request the operator to please open the line for any specific questions you may have on the performance of the company. Thank you.

[Operator Instructions] The first question is from the line of Nishant Shah from Macquarie.

Sir, I just had a question.

Sorry to interrupt, Mr. Shah. Sir, we are not able to hear you clearly. Your voice is breaking.

Okay. Is this better now?

Sir, your audio is not clear.

So is this better now? Hello?

Much better. Yes. Thank you.

Yes. Yes, so I'm just trying to figure out what is the total pool to monitor. So we have about 9% of restructured loans. We also have about 7.6% NPLs excluding the Supreme Court judgment. So first of all, is there any overlap between these 2 portfolios? So that's question one. Question two is, is this 9% of restructured, does it include only the RBI restructuring? Or does it also include the easy payment plan restructuring as well? And third would be what is the likelihood pool of Stage 2 or like any potential weaker funds which are not yet completely reflected? So first, could you just answer on those questions, please?

Yes. So I will ask Aparna to actually answer all of this. But 7.4%, which you mentioned, is the number including the Supreme Court standstill. It is not excluding that. So that's the first thing. So therefore, when we talk about 7.46%, it has the NPL number which we have. And it also includes the standstill, which is not classified yet but had it not been for the order would have been NPL. So that's the point number one. Second is the RBI Re number which you're talking about does not include the easy payment plan for the moment. And third is what? Stage 2?

There is no overlap.

And there is no overlap as well.

So yes. So could you just like quantify all these things for us? Like what is the easy payment plan AUM under that thing? And like even quantify some of the overlap. So we're just trying to not have any double counting.

Of course, not. So the NPL numbers overall, the absolute numbers are...

INR 1,028 crores.

INR 1,028 crores, which is the 4.3% number. There is INR 762 crore which is standstill. And therefore, the total number including the standstill is INR 1,790 crores, and that accounts for 7.46%. So that's the first big number. You also have an RBI Re number of INR 2,108 crores. So -- and there is no overlap between these 2 sets of numbers. The easy payment plan we haven't given out actually in the results. So...

But Nishant, to your point, the easy payment plan was given only to customers who paid all their overdues and became current. And hence, that's the reason why it's not being called out separately.

Yes. And that's a smaller -- much smaller number compared to the RBI Re book.

Still, it could be really helpful for us as investors to like figure out what this number is. So if you can quantify it, we'd be grateful.

So, okay. Nishant, Nishant, Nishant, okay, we had not given out what this number is, just INR 160 crores. And it is all current because they all paid up the -- whatever dues, the old dues there.

Okay. Okay. INR 160 crores, that's the total amount, right?

Yes.

Perfect. That's...

Total amount in Q2, I mean it might -- more people might come in later at Q2.

Okay. Got it. And just the last thing on the Stage 2, do we just interpret that the difference between the 4.3% NPL and the 7.6% NPL? Is that the comprehensive Stage 2? Or are there more accounts that's held up as well?

So Nishant, Stage 2 for us will be accounts that are what we call as SICR, so they are not current. So they are basically claiming credit risk. And this INR 762 crores which is asset sector. So it's not just INR 762 crores, there is -- debts are there also. We haven't given the breakup between 1, 2 and 3 here. However, I need to look at our financials that's been uploaded there. The numbers are available on that.

Okay. Perfect. I have some questions. I'll come back later.

Okay.

We'll move on to the next question that is from the line of Anuj Singla from Bank of America.

So my question again relates to the 7.46% GNPA number. So we actually take a cautious strategy of pushing people out of moratorium 1. And that's why we had a significant decline in moratorium 2. So when I look at this number, this is a very elevated number. So what kind of resolution that you had -- do we have towards the second half of the year? And if at all, we can give some kind of guidance on the credit cost side as well, what the credit cost we can see for FY '21?

So 2 or 3 things. See, we can't -- we don't really give a guidance as to how the numbers will behave. Two or 3 things: one is that the problem actually is only on the moratorium stock because what we have been seeing from the post moratorium, which is those who did not go into moratorium like, let's say, somebody funded in April, May and thereafter. That number, from an analysis, tells us that it is already below the pre-COVID level. So that portfolio is behaving good. I mean all of that which has taken the post moratorium period. So that is one part, that the current business, as we grow that business, is behaving good. And in fact, the delinquency levels are lower than the previous pre-COVID level. That's one. The second is on the moratorium pool. As I mentioned in the previous -- this thing also in the Q1 call, a lot of these business people have already paid up. So what you see here, which is in terms of the RBI Re book, which -- from which, as per this, the first month of the RBI Re book in terms of repayment has just started out in the month of October because many of them came in from August towards mid-August or, let's say, towards the end of August. And their first payments became due towards in September. And almost -- I mean a large proportion has already paid up. I'm not saying that there are no delinquencies there, there are, but we are able to pull back quite significantly. So that gives us some comfort because there was always this share whether all of these people are going to pay or they're not going to pay. But we need to watch this book for the next quarter or beyond. If they pay the first 3 installments, in our view, then this book should be good. So that's the second part of the piece. And the INR 2,108 crore number has actually gone up since then. I would not -- I can't give you that number, but it has gone up since then. So what the Supreme Court order has done is given us some more time to actually enroll more people into the Re because the difference between the Re and the APP is that for APP, people have to pay quite a lot upfront. And that is why most people are today preferring the Re. So that is the second part. Third is that the standstill, we have already provided for the entire standstill and given all those numbers so that whatever hit we had to take, we have already taken. Now part of this standstill has also been pulled back into Re. So it's not that this is the final number. There is, of course, just some other number beyond this also, which is today sitting in, let's say, beyond the -- I mean midway between the NPL stage and a standard overdue stage, which might turn NPL also going forward. But again, from that pool also, we are working to get them into Re. So the other thing is that there are some who are coming in for even these settlements, so where we might have to take some hit, but the account gets closed, and they want to settle in one go. So we are open to all the things which are out there. We are also engaging with a couple of other partners for communications and reaching out in innovative ways. For example, Creditas, that's one of our partners. We're also talking to the main -- to SBI for Gold loans to many of these who are -- who may be are customers or otherwise because SBI is into a big way in Gold loans. So a combination of all of these factors, in my view, should help us going forward. This number, which is elevated, which you see might stay around that for some time because, clearly, the resolutions will take over time. RBI, of course, will remain standard till the time the customer continues to pay us. But the elevation part could be a little bit elevated like you see. But I don't think that we are not in control of the situation. When we began this quarter actually and when the people just came out of moratorium, we had a real issue whether -- how we are going to pan out because the RBI scheme wasn't there. It came only on the 6th of August. Since then, actually, our team has done a fantastic job in terms of enrolling this many numbers. And this number is able to -- I mean lakhs of people, almost like 3 to 4 lakhs of people who have been enrolled, it's not a small number. So we are continuing to work on this program as we go along. And I'm sure that we are on top of things, and we will continue to provide if necessary.

Understood. Okay. And the second question relates to Slide #7 on the presentation. So it's hearty to see that on the incremental sourcing, SBI now contributes around 58% in 2Q. However, when I look at the card in force, the back book, the total number of SBI sourcing has actually declined on a future basis. Is this on account of some amount of cancellations which have happened for SBI customers?

Okay. Yes. See what happens is that you're referring to the overall CIF data. Any kind of archival or attrition activity also impacts the CIF number, and that's not evenly distributed because that's not being caused by the acquisition effort. So the distribution that we have given to you on acquisition is the correct distribution in this quarter, which is 59% and 41%. But you are right, this number will be impacted by the cancellation side as well.

But what we have been seeing actually is that this number also is trending upward. So overall distribution also, the Banca side is coming up. This is more a short-term thing because of the upside as well as that which was mentioned.

Okay. Understood. And lastly, sir, Tier 3, sir, orders account for around 27% of new card sourcing. Now what kind of confidence we have -- and many of these might be untested customers as well. So what kind of confidence we have that this is not going to lead to any kind of escalation on the delinquencies on the credit cost side?

Yes, that's a very good question. Just I'll refer you to Slide 9, where we have given the tier-wise distribution. And what are -- what we have seen here is that, for example, the -- I mean I'm referring to that right now. The 32% Tier 3 -- is that 33%, 32%? And if you look at the delinquency beside it, it is lower than the others. I mean the Tier 1 itself. So our comfort is that most of this Tier 3 and beyond is coming from Banca. So therefore, that is where we know the account. We have a visibility on the account. We also have a history of the -- transaction history of the person. And also, finally, we also have access to the account. We can sweep the balance from the account were there to be a default. So combination of all 3 gives us confidence that it will behave well, and the delinquency number bears this out that, so far, it is lower than the Tier 1 itself.

The next question is from the line of Ashish Sharma from ENAM AMC.

Yes. Two questions from my side. One is on the SBI Card, Google Pay partnership. And second is a clarification on the Stage 2, I mean, classification. So we aren't providing stage-wise classification half yearly. So any comment on that? And based on your observation, given that the annual report, the Stage 2 number was quite high, I mean how do we see the credit cost outlook for FY '21?

So the Google Pay partnership is really very important for us. I mean I'll start with that because this is one more way to actually push the digital journey forward, and you know the future is all digital. And since GPAY has really taken over quite a significant chunk of the UPI transaction volume, I mean they are the #1 player at the moment, close to 50% of the UPI transaction pool. So we thought it's important that we are part of this journey. And now we are there and we are -- as a tokenized card, we are available wherever the GPAY app is used for payment. So as this has just begun, I'm sure that this will go a long way in terms of our acceptability as a payment mode. So that's very important. And we are also in conversations with other things which, as they materialize, we will disclose. So that's on the Google Pay side. On Stage 2, we haven't actually given the numbers, as you also pointed out. We have not distributed between the stages as they are. But -- you want to comment?

So it would include 2 things. The RBI Re that we are booking. That will be part of Stage 2. The other piece to note is the INR 762 crores that we were talking about, the SC sanction, that is also a part of Stage 2. So to that extent, Stage 2 will not be a pure Stage 2 number.

Okay. Just on how to sort of see -- given that the annual report mentions that the profitability of default and the loss given default on the Stage 2 is a high number, so how should we see the credit cost panning out? And just on the Google Pay partnership, in that -- in this case, do the regular MDR rules apply? Or we have a separate arrangement?

No, no, the regular ones apply because you have to understand the debit card, there are limitations. I mean up to INR 2,000 crores, there is nothing. And beyond INR 2,000 crores there is something. But in credit cards, so far, the MDR, there has been no change. So for us, as far as this partnership goes, there is no change in the MDR for the moment.

The next question is from the line of Shweta Daptardar from Prabhudas Lilladher.

The first question pertaining to asset quality. One, first, the fact that SBI channel sourcing has gone up. What would be the GNPA number approximately from the Banca channel sourcing? And secondly, if I look at revolver stage, so for this particular quarter, if I add up the RBI Re number, revolver mix quarter-on-quarter has actually not changed or remained as the statement. So how -- so is that any indication that the credit cost still should continue to remain higher and it hasn't peaked out?

So to go -- I mean from the second question first, if you add those 2 also, it is 43%. So it is a little lower than 45%, which it was. But the RBI Re, we've just shown separately to be very transparent because this is rather converted into a kind of an EMI program where the customers will be paying over a period of 1 year or 2 years. The key question definitely is how is this book going to behave going forward. Because there could be questions on this. And as I mentioned earlier in response to an earlier question by Nishant, that what we have seen the first round of payment which became due for quite a significant portion of this book has been paid. And those who did not pay, we have been able to claw a lot of number. There are still some delinquencies left, but we are on top of it. So we -- if we watch this book for next 2, 3 months and we are able to collect a significant portion of this, I think, will be good. So that is the question. I mean we can't totally predict it because this is just the first month. And even there also, not everybody has been segmented. So over the next 2 months, we'll probably have a better handle on how this book is going to behave. So that's one thing. Regarding the other part, which is the standstill NPA, as I mentioned, we have already provided for it. We are already pulling back some of that into the RBI Re scheme, because the RBI Re scheme, as you know, is applicable till December. So therefore, we are doing that. And the Supreme Court order is still, at the moment, until 2nd of November. We will get this dispensation. So until 2nd of November, provided the 2nd November, it opens up the NPA thing, we still have some time to go. And we also have our own restructuring scheme which we -- which at the moment we were not applying, but that applies to NPA accounts. So we will -- we are working on that as well. So we have a lot of tools available. As far as the credit cost goes, I don't think we'll have many fresh surprises, but the level could be -- could remain high until we are able to provide for it completely and/or recover it. Even if it goes into Re, it will still continue for a period of 1 or 2 years, and there will be a certain amount of uncertainty on that book.

Secondly, on the Banca channel asset quality...

I'm sorry, yes.

So will it actually be better off, yes.

So Banca is much, much better. So therefore -- I mean, while I don't think we have given the numbers separately, I mean it is much, much lower than even the declared GNPA number what we have. So since we have not declared the number, I'm not giving you that number, but it is much better than the declared SBI number, not continued standstill. So you can take -- draw your conclusions from that.

The next question is from the line of Pankaj Agarwal from AMBIT Capital.

Sir, what's the economics of this Billion Day sale? I mean how do we...

Sorry to interrupt, Mr. Agarwal. Sir, your voice is breaking up.

Is it better now?

Yes, I can hear you, so go ahead, please.

Yes, so what's the economics of this Billion Day sale? I mean because the expense are quite high on such transaction. So is it not a high cost-to-income kind of transaction for you?

Yes, Girish, please answer.

So the economics works like this. Typically, if you have seen this offer, let's say the Flipkart offer, it was broken into 3 2-days offers: so INR 1,750 on first 2 days; INR 1,500 maximum cash back on second; and then INR 1,500 once again. So -- and the cash-back was also -- there was a minimum transaction amount, and this was a maximum amount of cash-back that you get. So there are actually limits to the way the cash-back is given. Secondly, this particular cash-back amount is shared. There is a contractual sharing of this between the -- there is a back-to-back contract which we have with Flipkart or Amazon, whenever when we are doing a cash-back offer in terms of how this whole -- how the money is going to be looked at, okay? We -- a lot of this is under NDAs. But the way it works also is that we see a large proportion of some of these sales because these sales, typically, people end up buying smartphones, consumer durables and high-ticket size categories. What we see is a lot of this gets converted into an EMI options. So typically, anywhere between 25% to 30% of the volume comes as EMI purchases, which stays with us over a period of time and gives us interest income also.

Yes, just to add actually, one other thing is that we have a fixed amount which we paid for as part of cashback. There are, of course, caps around the cashback as well. But it's not that the sale, if it goes beyond that, whatever we had budgeted, we will continue to pay more. No, we don't pay more. And actual numbers are actually far more than what the budgeted sale number was.

So for example, the Flipkart sale, there are multiple things which happened. So for example, Tier 2 and beyond, almost 50% of the sales comes from Tier 2 and beyond. So we are very strong in Tier 2 and Tier 3, and we are sourcing a lot of cards from there. It helps us activate those customers. For example, a lot of inactive customers, almost a lakh -- around 1 lakh customers who are inactive for the last 6 months suddenly started using their card during this stage. And then they continue to use their card over a period of time with us. So this sale has multiple benefits. It improves not only expense, customer engagement, it builds assets over a period of time and also lesser attrition because once the customer gets a cash-back offer, he realizes that he has got some value from the card. So there are multiple benefits of this.

And the cost is limited because we budget for a particular sale. Beyond that, we don't pay at all.

Okay. But leaving aside the long-term benefits, right, EMI or customer engagement, would it be fair to say that at the time of transition, such transaction is less profitable than a normal credit card transaction?

Well, if you would just say that the cashback on its own, of course, the cashback is upfront, and the MDR is very small portion compared to the cashback. So on that day, perhaps, yes, that's the case. But overall, what we have seen, and this is not the first time we are doing this. Last year, we had with Amazon.

So we've been doing this for last almost 7 years. We have quantified the benefits of it. And not to mention the benefit which the brand gets because new customer acquisition, it is -- these are the biggest sale in the country at this point of time. And being the largest stand-alone credit card sales provider, we have to participate, and we should be participating in these. We did participate with Amazon. We tied up with Flipkart and that...

We are not losing money. Let me make it clear. That on that day of the sale, maybe you can say what you have said, but not -- we're not losing money at all.

Okay. Okay. And sir, my second question is on your standstill NPA. So where is the provisioning on these NPAs sitting on balance sheet? Because if I look at your normal provisioning outstanding, it's roughly, I think, INR 675 crores. And if I take net NPAs on standstill NPAs, it's roughly INR 1,140 crores, right? So this additional INR 500 crores that's not being routed through P&L, right? Is it from -- where is it taking this extra provision?

No, of course, it's just through P&L. How can a provision be outside the P&L.? So that number for our actual NPAs, et cetera, et cetera, is about INR 1,200-odd crores. And then we have the other overlay of INR 758 crores on top of that. That includes INR 500 crores of the standstill -- I mean provision against standstill NPAs plus an overlay of INR 268 crores. That's the total distribution. So I mean I don't know which slide are you watching this? Let's say that it is not being seen.

Yes. So like I was looking at your 1Q provisions outstanding. It was roughly INR 250 crores outstanding, right, provisions outstanding. And on reported NPAs, it comes out INR 675 crores, right? So roughly INR 250 crores of provision suited through your P&L, right? And then you have some management over there and some line of sight. But now if I include the standstill NPA, then your total provisions outstanding should be INR 140 crores, right? So this INR 500 crores, is it -- are you including that management overlay which you have provided in 4Q and this quarter or is that...

Yes. That is included. So this is as on -- they don't -- [ key account ], that INR 489 crores is separate. If you go by that logic, that INR 489 crores should be read today as INR 268 crores.

Okay. So this management overlay is part of this [ provision ], right?

Correct.

The next question is from the line of Bharat Shah from ASK Investment Managers.

My question is more with respect to this moratorium in subsequent action by the Supreme Court. Sir, essentially a business like yours, which is revolving around medium-term credit, any idea of a moratorium is a very problematic part. But when a moratorium of 3 months gets doubled by one more moratorium, it makes it even more difficult. On top of it, when Supreme Court intervenes to not declare an NPA for the given length of time for not really clear, really, rationale, it makes from a credit culture and a debt standpoint, very complicated kind of situation because one would have thought Supreme Court probably isn't really a place to stand in this matter as well as it's probably not a domain [ logic ]. And matters like this are actually upholding of the legal contracts, which is what courts are supposed to do. The courts allow legally entered context to be delayed or deferred or to be offered concessions. Then it's actually a problematic overall issue. So in a short credit business like yours, doesn't it introduce kind of an unforeseen, unborne kind of risk?

Mr. Shah, frankly, I cannot comment on the Supreme Court's rationale or whether it was right or not. All I can say is 2 key things. One is that we are actually at the end of the moratorium 1. And of course, the uncertainty part is absolutely correct. It lends a lot of uncertainty. And the general thing is that nobody can pay 42% or 43% interest on a revolver for a long time, just not on. And that is why our -- what we did at the end of moratorium 1 was to make it -- instead of an all-out, to make it opt-in, which means people have to go online and then apply for a moratorium. And what we found, that our numbers of INR 7,000-plus crores which were there at the end of May had already come down significantly at the end of moratorium 1. And about INR 1,500 crores remained. And that also came out to the significant extent in the next 1 or 2 months. So actually, for us, the moratorium 2 is a very small number. And of course, was not there at all actually for us. Most of our customers, there was no moratorium 2. So that is one thing -- I mean I wouldn't say that we are on top of the moratorium game altogether, but we decided that let's face this problem as it stands. And therefore, for the last 3, 4 months, we have been working with all of these customers. And RBI Re came at a very, very good time because people were not willing to pay the upfront significant minimum amount due required under the in-house plan. So once the RBI Re came, which was an equal kind of distribution, and they did not need to make a significant payment upfront. From 6th of August till 30th September 30, INR 2,108 crores is what we enrolled and some more number beyond that. So therefore, this was a good success. And our pitch was -- to all of these customers was, well, you get more time. But more importantly, your rate comes down. It becomes like less than half of what you're paying. And that, actually, many of the customers understood. So therefore, from that standpoint also that the sustainability of the debt, we were pushing this scheme not so much to defer the NPAs or any other recognition, et cetera, because we will take provisions as they come along. And if the book does not behave as we intend, we'll provide more. So our idea was to make it sustainable. And that's why we are continuing to work in this direction. And of course, the Supreme Court judgment, when it comes out, we have already taken the standstill numbers. We have given it out. We have provided for it. So we are ready. And when the judgment comes out and what they will decide, ultimately, hopefully, we'll get reimbursed. But at the moment, we don't know, and we will wait for the judgment when it comes out. So that's where we stand. The uncertainty definitely is there, but we can't help it. And as a responsible corporate, we better face this uncertainty.

[Operator Instructions] The next question is from the line of Jaimin Shah from RWC Partners.

Two questions on my end. The first one is could you talk a bit on how -- what are the contours of restructuring duration rates, whether the spends are allowed, how the credit limits kind of [ risk ]. And the same for the other 2 brackets, which is the RBI standstill and the EPP scheme. That's my question and I'll come back to question queue.

Sure, sure. So RBI Re scheme, the accounts were all blocked because these had become delinquent. Our pitch is that if the customer pays 1/4 of the scheduled EMI, let's say, a 1-year plan and they pay for 3 months, then we will open up the card for them to a limited extent of what has been paid. So that's the pitch. And at the moment, those cards are blocked if we reach that level. Same applies to the EPP also. Initially, it is blocked, but then as they pay about 2 or 3 EMIs, we will open up their card. So that is where what both the accounts stand. In terms of contours of the scheme, the RBI Re scheme, actually, the limitation is that the maximum period is 24 months, and a customer has a choice to take plans. I mean we came out with only 2 plans actually, 1 year and 2 years, so which means just to simplify it. And we have an interest rate of 14% and 16%. So those are the 2 interest rates for these 2 periods. We have not placed any limitation on prepayment or earlier payment, et cetera. And some customers actually came back to us and paid the entire thing upfront, I mean, after the first payment. So we are seeing all shares here. So that is what the RBI Re scheme is. The EPP scheme is more advanced. We give time from -- right from 3 months...

To 18.

To 18 months, and the rate of interest varies from 12% to 20%. So therefore, there's a greater range there. The other difference is that the EPP scheme is not reported to the Bureau because the minimum amount due has been paid, and therefore, they are current. Whereas the RBI Re scheme is reported to the Bureau as a restructured account. However, if they do pay us, then we would look at cleaning up the CIBIL book. So that's the overall way in which the RBI scheme and the EPP scheme are structured. As I mentioned, the number for September was INR 2,108 crores for RBI Re and INR 160 crores for EPP.

Okay. Okay. That's helpful. That's helpful. Sir, broadly, how many of the accounts are in each of the scheme? I'm just trying to understand this because if your spends, for example, on online as INR 114, so the existing active accounts are essentially kind of spending a lot more. And just wanted to understand when do these accounts come out of either EPP or restructuring so that your spends kind of -- I'm just trying to understand when the growth on spends come back, it helps to kind of increase your receivables later on with a lag, which then kind of -- we don't start to focus on quarter basis because on a balance sheet basis, the growth on 4% Q-on-Q was -- seemed a little subdued and probably because of the blocked cards.

Yes, that is a significant factor in terms of...

2.3 lakhs.

Okay. So the numbers -- okay. So you are right that in terms of the significant number of cards blocked, and these are in a couple of lakhs, these are blocked. And therefore, to that extent, the spend is not happening on these cards. And it is also not happening or those which have become NPLs and where they're not still part of the RBI Re. So that's a significant number. But the other cards, which are existing cards, are spending more on the back of a lot of these schemes and campaigns which we are running and also the new sourcing which we are doing. A lot of that is becoming active, and therefore, our spend levels, as we mentioned, in the month of September had already reached 98% of pre-COVID levels. And in the month -- I mean since then, actually, our receivable also have gone up significantly, especially in the Flipkart campaign. So we don't give a number, but it's gone past whatever number was there in the earlier year-end number. So therefore, we are already doing good on both spends and receivables. And as these cards get opened up and start spending, I think we'll have a very, very good cycle going. So I think on the spend side, we are not worrying too much. If these cards get opened, so be it because one other thing which I had also mentioned in Q1, that 54% of these customers who were not paying us had been very good customers earlier, not missed a single payment in the previous 24 months. So therefore, we do want to retain these customers. We want them to actually become regular and start spending again.

Right. If I were just to kind of squeeze one more question as a related note, is -- on these 2 schemes, EPP, RBI, how should we think about the leverage of the consumers, if you can? It's because how much is from Banca, and you can see that -- take into account if it's outsourced, is it second card, third card, are these leverage customers, new to credit customers, any content on there? Because I'm just trying to understand is if they are leveraged, they're clearly kind of going to default in the next 3 months...

We are not giving that data. Just to -- I mean I'll just give you some high-level figures. We are not giving the data, but a high-level thing is that the bulk of the major segment out of this pool is the self-employed segment. And we have really tempered down on that segment by tightening the credit filters. So whatever self-employed is currently happening, the bulk of it is today happening from the Banca channel. And as I mentioned earlier, the Banca default rate is very, very low. So there, we're not seeing any default for a simple reason. One is that we knew that account details and the transaction history earlier. And we also have an access to the account. So if it is defaulting, we can seize that account. So therefore, the default rate in Banca was very, very low. So therefore, all of this which you see is not from Banca. Mostly, it is from the open market and the earlier ones, self-employed and categories. Those are the major segments. Going forward, yes, whatever has been classified or whatever is in the RBI Re book, we could still have some default or delinquency there and -- but we need to continuously follow them up. We have a special team to actually only look at following up on the RBI Re because we understand that for the first 3 months at least, we need to actually follow these customers closely, explain to them the benefits of continuing to pay. I mean some of them may actually advance the payment a bit, some of them may be a little delayed. So we will work with them. If they pay the first 3, 4 installments, I'm pretty sure that they will be good because then they'll know that just 1 or 2 installments later, the card is going to be opened up. And today, many of the customers actually are very sensitive about credit history, and they do want their credit history to continue to be good. The credit culture, in terms of the Bureau history, is very, very important to many customers. So we are very, very positive on the continuation of repayments in those areas.

Sir, just to clarify, major of this is self-employed? And of them, their bulk of them are from Banca, right?

No, no. The default segment is not Banca. That's what I said. The default segment which we have majorly is self-employed, not from Banca, but it is generally from open market, from the previous slide.

The next question is from the line of Dhaval Gada from DSP Investment Managers.

A couple of questions. First, if you could give the number of accounts in the standstill in RBI Re and the EPP scheme? I just want to understand what quantum of customers are not seen -- are going to be inactive basically, just trying to remove them from the base. So that is point number one. And then the second point was, can you also give the net NPA number, if possible? And then I have one more follow-up, yes.

So Dhaval, we've not given the number of customers. We have given the balances. So like Mr. Tewari mentioned, there's about INR 2,108 crore sitting in RBI Re, and there's about INR 762 crore that is sitting in the SC standstill book. However, again, like we said, we may not have classified them as [ NC ], but we have taken provision on them as a dividend mean. So to that extent, we've already covered that.

Understood. And approximate cumulative number also, would it be possible to give across what is the kind of customers who are under standstill or who may not be able to spend at this moment, any ballpark? Just want to model the spend accordingly.

Dhaval, I don't think the logic that only standstill accounts are not able to spend is not correct. Even under a regular court, at BAU, there are accounts that get blocked for spend depending on their Bureau history, depending on the kinds of transaction that they are doing. So I don't -- by that logic, anybody who crosses a particular number of days, I mean, they get blocked for spend. So I don't think you could draw the line between NPA and inability to spend. That wouldn't be correct.

But just to give you some comfort, actually, all of the moratorium customers have their cards blocked. So whatever the peak was, which was -- I mean I think we did declare -- did we declare the Q1 number?

12.5 lakhs.

12.5 lakhs. So 12.5 lakhs, which was the oriental number of moratorium. They -- to begin with, their cards are blocked. Out of this, 1/3 by numbers had paid up at the end of, I think, Q1 itself. So you can draw that conclusion. So significant numbers have paid up. But whatever remains -- which remained in moratorium or where -- which actually either came into Re or became NPLs, they continue to be blocked. But as I mentioned, we have already reached a 98% pre-COVID spend level in September. And this is before this Flipkart and other sales, et cetera, and the festivities have not even begun. So I think we are very good on the spend side. We don't have a challenge. If these customers come out of moratorium, et cetera, you will see a significant leg-up in the spend. So that's what we are hoping for. That's an additional bonus. We're not counting on it to happen.

Got it, sir. And the net NPA number. And the third point was related to corporate expense. We've seen some pickup in the second quarter. What's driving this? If you could give some color. And for the rest of the year, any comments around that?

Sure. Net NPA is 2.7? Net NPA is 2.7%. And corporate spend, Manish, please go ahead.

Yes. Yes, sure, you're right because in the numbers, in the first quarter, we had about INR 2,477 crores spend and then INR 4,700-something crores in quarter 2, principally driven by new use cases. Because international travel and corporate travel, yes, it is correct, it is still not happening. There is a domestic travel component which is happening. It is going up. DTC has put a 60% limit on the flight that the domestic airlines can carry. So it's not fully back to normal. So that stays subdued. But the opportunity has opened up in other use cases for corporates. They are also adopting digital payments in present times. Especially GST payments, tax payments, utility payments, vendor payments, these are some of the categories. So we have signed either new deals or we have activated some of our customers who are doing those spends, we don't look at getting B2B spends from these customers into these particular segments. And proportion of that within the mix of total corporate card spend has increased. And we will continue to follow that strategy because, as it is, it deepens the corporate card spend space from an opportunity standpoint. And once the corporate travel is back, international travel is back, because we are in an unlock stage, it's bound to happen at some point of time. Then those numbers will add up to this base which is already built, and this is not [ happening ]. What we have created as use cases is not for this period alone just to offset the loss of spend on the other side. These are actually making sense to the corporates. They're adopting the cards for these payments, and we expect that to continue.

Just to add, actually, the pre-COVID, about 80% to 90% was travel in this segment. And now that we have already reached a 70% level of pre-COVID and there, the travel, et cetera, is very, very small. So therefore, once that comes back, I think, will be very good because of these new use cases. And for net NPA, just to clarify, 2.7% includes the standstill, and 1.4% is our Q2 number for net NPA.

Understood. And sir, just one follow-up on the corporate bit. What would be -- from the new use cases, 60%, 70% is now coming from these new use cases?

Well, if I look at the mix, there is a bit of domestic travel which is there. While we don't release these percentages, but yes, I can give you a sense. Yes, about 50% plus is coming from the new use cases, a bit from the T&E from domestic travel. That also is there. And we also have a business where the travel inventories in bulk, the ticket sales in bulk are done from the airlines by the travel agencies. We've had a pretty dominating spend in that particular segment. Some bit of that also continues. And that is what constitutes the total spend and a small percentage on utility payments.

We'll move on to the next question that is from the line of Gaurav Kochar from Mirae Asset.

A few questions from my side. How do you, largely, index particular delinquency in the new to credit and new to credit card traits? Does it fall in that particular category? Or [indiscernible]?

Sorry to interrupt, Mr. Kochar, your voice is breaking up.

Yes, is it better?

A little better. Thank you.

Yes, my question was, how do we plot this 30% delinquency in Slide #14? Is it industry average for that particular category in the first part? Or how is it plotted?

Slide 16, Side 18, I think.

18, Slide 18.

Indexed 30-plus delinquency.

It's not linked to the industry, Gaurav. It's just indexed against our own portfolio. So if you're looking at new to credit versus others, they're just indexed against the others. It's our focus. There's no industry data.

Okay. So if -- well, that has been my experience as new to credit on the credit card category, you just [indiscernible], right?

I couldn't get your question.

Mr. Kochar, your voice is breaking up. We're not able to hear you clearly.

Okay. Is it better?

No, sir. Can you use the handset mode while speaking?

Yes, it's on my handset mode. [indiscernible]

I am so sorry, sir, but we're not able to understand what you're saying.

The new to credit cards, Gaurav, you're saying -- talking something about new to credit cards. What was that?

Yes. My question was where does this indexed, I mean, 30-day delinquency that we have [ projected ] against new to credit card, is it based on our experience of 30-plus in this category?

Okay.

Yes. Yes, it's based on our actual data.

Okay. Okay. Sure. Sure. My next question was this INR 758 crore provision that we are carrying as management overlay, does this also include the provision of the restructuring, both as well as on standstill now?

No. So for restructuring, RBI had mandated a 10% provision that is part of the base provision. So the overlay has 2 aspects. One is INR 500 crores that is coming on account of the SC standstill of the NPA, and the balance is the overlay. So we have provisions in addition to the standstill.

INR 268 crore is that overlay number, yes.

Okay. Okay. Sure. Sure. And another question that I had was on the ALM. So on ALM, I can see there is an INR 1,800-odd crore inflow after 5 years. So just wanted to understand, is that a restructuring or anything which is beyond 5 years? Do we have any loans outstanding which is more than 5 years in tenor?

One second.

Do you want me to...

I don't think we have but...

Nalin could...

Nalin, can you answer? Slide 15, I think.

15.

14.

Yes. So some of the receivables which are there, there could be longer duration, and those are included in the 5-year bucket. So this has nothing to do with the receivables, the restructuring part.

Okay. These are your EMI loans in normal course?

Yes.

These are what? Oh these are other than loan assets. They are not loan assets.

Okay. Because I was just looking at your balance sheet. I cannot see -- even if I include the cash bank and other receivables, the total is roughly INR 800-odd crores. So just wondering where this INR 1,800 crores came from.

Even our EMI, which is the maximum tenor is 48 months, so there will be no loan asset for us, receivable for us, which is more than 5 years. These are other assets.

Okay. Okay. Sure. Sure. And just my last question was, in the previous quarter, we did not make any COVID related provisions. And then probably the outlook was that things cannot be as bad. We saw the moratorium are coming down. After that, I mean in 1 quarter, we have seen the delinquency go up so sharply. So what has changed in terms of the environment? Because on the ground, I think the unlock is really -- if anything, the unlock has improved. So what has happened at a hopeful level so that we're experiencing this kind of trouble in our asset quality? Any qualitative remark?

Yes, qualitative only because, obviously, the environment continues to be uncertain. It was even more uncertain at Q1. And at that point of time, many of the borrowers had just come out of moratorium. And because during the moratorium, they were at a standstill, so many of the installments were not even due then. So therefore, we did not have any visibility as to how much was due and whether they will pay or not pay. I mean, hindsight one can always argue that, yes, we could have, as a matter of [ elevated ] precaution provided more, but that is all history. So therefore, once we started working with all these customers, once we started to understand and we got the RBI Re and there were others who could not pay, so then we understood the real extent of the problem. And then we realized that -- and we decided that we'll proactively provide. And that is why we have covered all the entire standstill as well. And this will be our philosophy going forward also that if the -- if any of the book does not behave, we will provide for it. Because this problem is -- I mean this is not fully solved. The pandemic is still on, and therefore, we really don't know how the environment around us will behave. But at the moment, we are on top of what we have, the problem we have.

Okay. Okay. Sure. And the last question is with regards to your 9% restructured book. So I mean the -- what is your sense of this book? Will it go up from here on now that restructuring has only started? Or you expect this number to keep coming down as we go ahead?

So my only -- I mean this is your fifth question, by the way, but I'll answer it because it might help others as well. So this book is the first set of dues, actually, in terms of the payments, became due only this month. And from our initial thing, there were some delinquencies, but we were able to pull back quite a lot of it. So therefore, our hope is that as we go along and these people continue to pay for 2, 3 months, they will get regular. And later on, we'll, of course, open their card as well. But this obviously cannot -- we cannot predict that some of them will not default. So 10% is already covered as per RBI mandate. If we watch and see the book is not baring as far our expectations, we'll provide more for it. But we have some hopes because we have been talking to these customers that they will pay, most of them will pay actually.

The next question is from the line of Kunal Shah from ICICI Securities.

Yes. So most of them have been answered. Just a couple of, I think, [ that were published ]. So firstly, in terms of interest, interest being first. If that comes through, what impact do we see on our customers' behavior? Would that be like a significant benefit to that, and we'll really see the improvement in the repayment behavior? And how would that maybe, in fact, happen on maybe the other account? And secondly, maybe just to clarifying. I think the provisioning the overall RBI Re being translated [ 10% ] is something more than just on a prudent basis, which we would affiliate on that, the RBI Re. And on that sense, sir, so what is the provisioning that we affiliated?

Okay. So we'll work backwards. Yes, RBI Re, recorded 10%. On the other standstill, we have provided like we do for all our Stage 3 NPLs, which is a number close to about 70%, Aparna?

65%

67%?

65.5%.

65.5%. So that's what we provide for all NPLs and we have provided that. And that number is INR 500 crores out of the INR 768 crores, which is the overall financial book. Now in terms of customer behavior, actually, we don't really know because here are customers who have had much higher expectations of maybe the entire labor, et cetera. Some of them were not ready to pay because of that. And all we said to them, well, if you get a benefit from the court or from anywhere else, we want to refund it to you. And that's what we will do for those customers who've already paid. Our only hope is -- I mean this is something, again, a speculation because we really don't know. Nobody has come out with a real circular or instructions as to how this will happen. Our only hope is that whatever we have to compensate the customers, we will be paid back by the government. But clearly, how this will work out, we don't know. So we'll wait for the government or the court to come out with the detailed instructions. We are not seeing too much change actually in the customer behavior because of this. Because on an individual customer level, this may not be very significant. But we will wait to see what exactly the instructions are and how we will get paid. If we get paid, that will be good because that will also help us to address some of those which are delinquent.

Okay. But it doesn't -- sir, as a -- it was a significant rate, maybe used in how to refund it to them [indiscernible] any quantification you would have done?

So the quantum is -- I mean we haven't come out with this number because, clearly, this is still something which the final decision has not come out. But the quantum is not very significant. All I can say is that, I mean, if we want to absorb it, we can also absorb that. But since that number is not declared, I can't give you that number at the moment. We have done our internal analysis.

Okay. And just one last question in terms of fee income, is there any extraordinary income maybe in terms of the fee on the interest base [indiscernible] which we have seen in the normal course.

So I don't think we have any extraordinary income. Nalin, would you want to take that?

No, sir, there are no extraordinary income. Every item, the revenue is business as usual.

Ladies and gentlemen, that's the last question. I now hand the conference over to Mr. Tewari, MD and CEO of SBI Cards, for his closing comments.

So thank you very much to all of you. I mean I know that there are many others whose questions were not answered, and we can always schedule follow-up calls like we did in quarter 1 for those of you who are interested in talking to us. I guess the major question trend was around the collections and the NPL and provisions, and we have been able to answer those to a significant extent. We will definitely be open to more questions in the coming days. And as we get more information, we will be open to sharing it with you. So thank you very much for today's call and for participating in the call. Thank you.

Thank you. Ladies and gentlemen, on behalf of SBI Card, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.