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

Ladies and gentlemen, good day, and welcome to SBI Cards and Payment Services Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, Mr. Rao.

Thank you, everyone. On behalf of SBI Cards, I extend a very warm welcome to you. And thank you for joining us today for the earnings call for Q4 FY '21 and FY '21. My heartfelt gratitude to all of you for your continued support and confidence in SBI Cards over all these years. I wish safety and best of health for all of you and your families. While year 2020 saw different stages of COVID-19, the ongoing second wave is impacting the year 2021 also. The need of the hour is to remain safe and extremely cautious while diligently following the COVID-19 protocols like social distancing and observing hygiene. Among all this, intensive vaccination drive that is well underway is the silver lining. Hence, we hope for a safer and a brighter future. As is well known, FY '21 has been a year never imagined or experienced before. During Q1, that is April to June 2020, economy and businesses were drastically impacted. Subsequently, of course, the economy and the consumer sentiment started picking up. Like other companies, SBI Card too had to operate in an uncertain business environment. In my view, following 5 aspects enabled the SBI Card to effectively navigate even this unprecedented period. First aspect is ensuring business continuity. Being an agile organization, SBI Cards focused on business continuity from the very initial onset of COVID-19 and lockdown. With a detailed scenario analysis of the unprecedented economic situation, we realigned and developed strategies to manage its business impact. Our investment in technology, which we calibrated over the past few years, enabled smooth transition to a remote work environment from very first lockdown and across various stages. We provided laptops and remote log-in access to most of the employees. We have built a VPN infrastructure setup for over 5,000 users and can easily accommodate further expansion. We continuously scaled up our collection infrastructure under all channels, field, tele and digital, to effectively manage the entire collection process. Digital outreach augmented the conventional collection efforts. Our innovative products and services supported by a strong technological [Technical Difficulty]

Sir, sorry to interrupt you. Mr. Amara, are you there? Hello? Participants, please stay connected, while we rejoin the management back to the call. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected to the call. Sir, you may go ahead.

Yes. I was talking about the investment in technology. Our investment in technology, which we calibrated over the past few years, enabled smooth transition to a remote work environment from very first lockdown and across various stages. So we have built a VPN infrastructure setup for over 5,000 users and can easily accommodate further expansion. Our digital outreach augmented conventional collection efforts, our innovative products and services supported by a strong technological backbone, advanced data analytics capabilities, customer centricity, values of trust and transparency and strong lineage worked as a bedrock to support our continued business growth. Second aspect is enhancing and leveraging digitization. We focused on building a complete digital journey for customers, starting from new customer acquisition to onboarding, servicing and collections. Proactive investment in creating a robust digital journey came to our rescue during the period. Our chatbot service, AskILA, addressed around 4.7 million queries monthly as of March 2021. The number of queries resolved by AskILA increased by 40% in FY '21 as compared to previous year. Our highly rated mobile app was used by over 4.88 million unique customers in March 2021. Rollout of initiatives like v-KYC enabled contactless customers onboarding. The third aspect is building and enhancing product mix. SBI Card got focused on beefing the product portfolio in the premium segment. We launched BPCL SBI Card OCTANE, a premium version of the existing card. We also partnered with key players, including Paytm, Google Pay and JioPay to further the digital partnerships and portfolio. AURUM got introduced for the super premium segment. This by invitation-only card offers a value proposition that supports and complements the unique lifestyle of CXOs. AURUM has received encouraging response since its launch in Q4. The fourth aspect is harnessing the changing consumer trends. We leveraged data analytics, identified newer opportunities for customer engagement at different stages and accordingly rolled out timely and relevant offers to growth spends in relevant categories. For instance, during Q1, we identified emergence of newer spend categories and sharpened our focus on categories such as OTT, utility, online education, online health consultation and pharmacies. In Q3, to harness the positive consumer sentiment and festive season, we forged a partnership with leading players across key categories to introduce pertinent offers. The outcome reflects success of the approach. Our average retail spends improved across most of the categories, barring travel and entertainment. Online spends especially showed a significant growth and its proportion in the overall spends increased to 51.9% in FY '21 compared to 44.2% for previous year. Our corporate spends during the quarter have reached pre-COVID level, that is Q4 FY '20 level. While the corporate travel continues to remain impacted, the company has been able to build new used cases to generate corporate spends in current environment. For new accounts, we have started applying stricter documentation norms, which impacted our new sourcing in January '21 and February '21, but however, in March '21, our new accounts are back to average daily volume of 10,000 new accounts per day. We also initiated varied digital brand campaigns to keep customers engaged, build an emotional -- and build an emotional connect with them and promote contactless payment as that was the need of the hour. Lastly, the fifth aspect, I'm talking about managing the risk. We have kept a very sharp eye on potential risks and taken measures to manage them appropriately. For instance, we proactively provided for certain loan portfolio segments at a higher rate and kept it as a management overlay. While we continued to pursue sustainable growth, we closely tracked various customer categories, especially those at high risk, like the self-employed or those in industries such as entertainment, travel and hospitality. The potentially high-risk segments of portfolio that is gross NPA plus RBI RE, as a composition, it came down from 13.62% as on December '20 to 10.06% as on March '21. With the lifting of the standstill, we can now recognize the actual NPAs and in line actually bolster the recovery efforts. We have adopted a holistic cybersecurity framework with a comprehensive information system security and standards based on industry best practices with compliance to regulatory guidelines. As can be gauged, with consistent efforts of our colleagues, partners and investors, backed by our robust business model and ethics, we effectively navigated our business in previous quarters. In fact, our spends had reached pre-COVID levels in October itself, well ahead of the industry. Let me now take you through our financial performance for Q4 FY '21. The first aspect I'm going to cover profitability. The company has performed steadily and delivered profit after tax of INR 175 crores for Q4 FY '21, which is 110% higher than Q4 FY '20. And for full year FY '21, profit after tax is INR 985 crores, which is 21% lower versus FY '20. We have increased our market share during this year. As per the industry report available till February '21, our cards market share increased from 18.3% in March '20 to 19% in February '21. And our spends market share has increased from 17.9% in FY '20 to 19.5% for FY '21 til February '21. Receivables have grown by 4% year-on-year to INR 25,114 crores from INR 24,141 crores in FY '20. Total income for Q4 FY '21 is at INR 2,468 crores. And on a full year basis, total income is flattish at INR 9,714 crores for FY '21 versus INR 9,752 crores for the previous year. For Q4 FY '21, while our net revenues grew by 2%, the operating expenditure was slightly higher by 5%, which led to contraction of earnings before credit costs by 1%. However, for full year FY '21, our earnings before credit cost has grown by 10%, and we have a positive operating leverage of 5%. The credit risk situation continues to be impacted by macroeconomic variables surrounding us. To cover ourselves for future credit risk, the overall management overlay stands at INR 297 crores as on March '21. This is over and above the base provision of INR 1,358 crores. Our GNPA is at 4.99% as compared to 4.51% previous quarter, that is Q3. This compares to 2.01% year before, that is Q4 FY '20, but that was also due to moratorium impact where you cannot declare NPAs. Net NPA for the period is at 1.15%. Sequentially, it is lower as compared to 1.58% as of December 2020. This ratio was at 0.67% year on -- a year back due to moratorium impact. During Q4 FY '21, we sold off NPAs of INR 242 crores with book value of INR 80 crores as it was economically viable to realize recoveries earlier. On RBI RE book, as of March '21, 51% is less than 30-day delinquency, 13% is between 30- to 90-day delinquency and 36% is more than 90 days. On a prudent basis, on this 13% of RBI RE book, which is not yet NPA, from provisioning perspective, we have provided it Stage 3 ECL level, that is 65.6%. On the 36% of the RBI RE book, which is more than 90 days, we have provided it 80%, which is higher than Stage 3 ECL rate. For the quarter ended March '21, the return on average asset is at 2.6%, higher by 128 basis points as compared to 1.3% for Q4 FY '20. ROAE is at 11.2%, higher by 465 basis points for Q4 FY '21 as compared to 6.5% for Q4 FY '20. And for FY '21, ROAA is at 3.8% and ROAE is at 16.6%. Second aspect is liquidity and capital adequacy. Our liquidity position continues to be strong during Q4 FY '21. Our capital adequacy ratio for the period ended March '21 is at 24.8%, as compared to 22.4% at Q4 FY '20. In Q4 FY '21, our Tier 1 ratio has moved to 20.9% from 17.7 percentage, March 2020. Our credit rating remained excellent with A1 plus and AAA ratings by CRISIL and ICRA for both short-term and long-term borrowings. The strong credit ratings by the rating agencies reflect our robust business and financial fundamentals. With this, let's open the call for questions. Neerav, you may please open the call for questions.

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

A couple of questions from me. So spends growth clearly has been slight kind of disappointment sequentially. Could you at least qualitatively talk about where you are seeing the spending declines happen? Any kind of geographic color or any kind of like qualitative feedback here would be helpful. And a related question here is the activity -- the 30-day active rates of the cards have also declined by about 1.5% sequentially. So any color on that? And the second question on the incremental card sourcing. So incrementally, we're sourcing about roughly around 24% from self-employed versus an on book mix of about 16%. So you had mentioned a safer carding, more internal carding. So could you just like throw some color over here as well? And again, a related question, would a large part of this be driven by the Paytm partnership? Or is that yet to begin? So yes, these are 2 questions from me.

Yes. I will cover the new acquisition in self-employed category, 24%, whereas my colleague, Girish, will cover the spends part. As you know, like last year, after seeing a bit of slightly higher delinquencies in self-employed category, we tightened the risk filters in open market category, which used to actually contribute to a lot of new acquisitions from self-employed category. But at the same time, under our partnership with the parent bank, Shikhar program, we were able to see a lot of opportunities of going in a very safe way where delinquencies can be managed where we had access to the operating account of the customer and still going for the self-employed category. So this 24% actually came from the Banca channel, not from -- not much from the open market.

Understood.

Yes. Girish, would you like to...

So Nishant on the spend space sequentially, typically, what happens is, every year, if you look at the numbers, way that it stacks up, there is a seasonality trend which happens from Q3 to Q4 because Q3 being all the festivals in that period. There is a seasonality, which is built in there. And you have average spend per customer going up as well as the active rate being higher or the highest in the year. Q4, it comes down a bit, but it is still higher than -- it will remain higher than the average. So that's the usual normal seasonal trend. If you look at from a sequential absolute perspective also, we -- the number on the retail spend is around INR 30,000 crores for the -- for this quarter, whereas on the earlier quarter, which was a festival season with a lot of pent-up demand, it was close to INR 31,000 crores. So on an -- it is a more stability which we could see. Some flavor on the kind of spends which I -- because you asked for the geographical part and the breakups also. A lot of Q4 spend was coming from point of sale. So point of sale actually recovered quite a lot in Q4 compared to Q3. Q3 was a lot of those Flipkart, Amazon sale offers, which built up the spend at one point of time, whereas Q4 was a more sustainable point-of-sale spending, which was happening from a normalcy perspective. We actually saw online spending kind of coming closer to 50% and point of sale going close to almost pre-COVID levels.

Understood. No, sir, I was hoping to get some color, like because we've been adding a lot of these cards in Tier 3, Tier 4 kind of geographies, is it just -- like the optical kind of stagnation in the spends per card, is that more a function of just those new cards taking a little bit of time to ramp up their spends, having a J curve, or is that not an appropriate kind of interpretation?

Okay. So if you look at the Tier 3, Tier 4 numbers, I'll give you a flavor of how the movement is. Typically, a 30-day active rate in the Tier 1 is usually higher, okay? When we look at Tier 2, Tier 3 and Tier 4, they are slightly down than Tier 1, but the rates are broadly constant. And the reason for this is that today, online spending has become a major part or more than 50% part of the overall customer spends. So the active rate, if you look at it from a tiering of cities, is broadly similar in Tier 2, Tier 3, Tier 4. What, however, is the area where we need to get more growth is the spends rate, the average spend of the absolute spend per customer that needs -- that takes time to build up because people, as they start building more categories, they will first start online, POS had been closed, and even at this point of time, if you go through our presentation, travel and some of those categories, they are still down. So some of those category buildup is still yet to happen in these areas.

Fair. And just like the 1 earlier question on the Paytm co-brand card, any comments out there?

No. So that number is not very large. It does not have -- these numbers do not have any impact on the Paytm.

Okay. Just -- sorry, 1 last data point, I would request. Could you share the number for the outstanding EPP restructured portfolio, easy payment plan? Yes, that's it from me, the last question.

So Nishant, we will get back to you on that. We don't have it handy. We'll just give it back.

The next question is from the line of Anuj Singla from Bank of America.

Sir, two questions. First, on the -- you talked about the seasonality spend, 4Q versus 3Q, which is well undergone. But if I look at the market share as well, we -- our market share peaked out in the month of October. Since then, we have lost around 300 basis points of market share, which is a pretty significant number over the last 4 months. Can you point us to the key reason for this? And any action we are taking to address this decline?

You are right. However, when you have to look at the market share, you have to look at for a period of time. But you are right that even if I take Q3 for the full -- for 3 months together, there were a lot of offers. And at that point of time, we also did a lot of offers to get that market share. In Q -- in the Q4 period, what we -- we have -- we did our offer with Amazon in the January 26 period. There is travel, which was picking up during this period of time, and our share of premium is what -- we want to increase the share of -- in the premium space, which is more in the case of -- where the spending is more in case of travel and lodging. It's primarily in those segments, we still have to cover up a lot of market share. So we saw some decline during the period of Q4. And even -- and the results are available in RBI till -- for the month of January and February. We believe that the March because we -- there was a lot of offers and a lot of programs that we did for our customers, we should see an increase in the market share in the month of March. So on an overall year basis, it is still -- from 17.9% or so to 19.5% -- 17.9% to 19.5% is a good jump on a cumulative basis. So we hope to continue to keep our alpha over the market. Even during this period, whatever -- even -- on a month-on-month basis, our growth rates have been better than the market.

Okay. So Girish, the key takeaway, which I want to have is when I look at, let's say, FY '22, FY '23, and we have been -- since FY '17, since we launched Shikhar, we have been gaining market share on a consistent basis every year -- year-on-year. So I can expect that trajectory to continue for the next year as well, right? Nothing [ leads to argument ] there?

I cannot comment on the future, but what we have always done in the past multiple years is that we have always kept our alpha over the market growth, both in case of cards as well as in case of spends.

Okay. Understood. Understood. Okay. And the second question relates to the risk and the book. So if I look at the RBI RE book, 30 DPD plus, the book has increased to 49% versus 33% Q-o-Q. Now if I understand, in the last quarter conference call, we had shared that this seems to be a seasoned book. And 4Q, in my opinion, was a much better quarter in terms of economic activity, in terms of cash flows. So it's pretty surprising to see that when the things are improving, we have seen a deterioration in this book on a Q-o-Q basis. So 2 questions there. One, what are the key reasons for this? And secondly, when we look at the COVID 2 wave, which is going to hit in the April to June period, can this deterioration further accentuate during this quarter?

I think, Anuj, this RBI RE, like we built a portfolio of around INR 2,700 crore kind of booking over a period of starting from August to till December, there was no further booking after December. By December, I think we declared when we came to the market, it was around INR 2,344 crores. We had payments around roughly, if I can recollect, around INR 377 crores or so over the kind of payment. So broad expectations were the kind of repayments will continue, which was actually manifested even by the current kind of repayments. We had almost INR 436 crores of repayments or closure kind of accounts were there. So if you look at it in the context of overall INR 2,721 crores, we have received payments of INR 813 crores, which is around 30% of the portfolio. Current portfolio, like less than 30-day delinquency, where at least they have received 2 installments, minimum, is around 36% and 30-plus delinquency kind of portfolio, including some NPAs, is around 34%. So overall, actually, if you look at -- I mean this is a category which has -- who have availed moratorium before, who were slightly uncertain of their income sources. So they bargained and they negotiated with the bank for a kind of -- they wanted to avail that RBA scheme of settling the payments for a number of installments. So it was a kind of -- with that kind of approach, we did this. But in hindsight, we can say, like, it was a win-win for the company as well as the customer. In the sense, it has given time for both of us to work these portfolios.

Sir, my question relates to the risk in this portfolio, like you have provided 80% for the 90 DPD, which again points to view that you don't expect a significant recovery in this portfolio. And so my question is can the composition deteriorate further given the COVID 2 impact? Is that a possibility? And obviously, it's difficult to say what can happen. But is that a clear possibility given what the experience, what we have seen over the last 6 months?

I mean I cannot comment, but what I can say is that whatever repayments are there from the portfolio, we expect more or less the same amount, minimum, INR 300 crore to INR 350 crore kind of payment are bound to happen. I mean -- I mean, of course, we only hope this lockdown, which is there in a few states, doesn't spread to all other states and simultaneously being imposed throughout the country. Barring that, I mean we expect this kind of run off, INR 300 to INR 350 crore kind of runoff every quarter. And in as much as we have already provided 80% for the RBI RE NPA, we are presuming like we have provided and a better position to absorb any loss further, whatever happens in the next quarter.

Sir, lastly, if I may, the rising GNP is a bit surprising, 4.5% to 4.99% on a Q-o-Q basis, again, given the economic recovery or the pace of economic activity picking up. If you can give us some pointers on that, the key reasons for that, that would be great.

So Anuj, if you recollect, even in December, when we had declared to 4.5%, we had mentioned that the RBI RE portfolio at that point in time because they have all been booked into the plan. They have not seasoned enough for them to be recognized as NPA. And we had mentioned that NPA on that portfolio will come in only in this quarter. So I think the way to look at it is that whatever has happened in this quarter, despite that RBI RE book becoming NPA, we actually went from 4.5% to 4.99% only. So I think that's the point we were trying to make, that of the RBI RE book, we managed to collect more than INR 400 crores. And it's still -- we managed to keep the GNPA stable. I think that's the way to look at that number.

So incremental GNPA deterioration pertains to only RBI RE book, primarily?

Primarily. Just before we move on, Nishant, the number that you were looking for in terms of EPP balance, that's approximately INR 300-odd crores.

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

A couple of questions. One is, does the INR 685 crores, which is more than 90 DPD, does it include -- is it included in NPAs?

Yes, that is included in NPAs, correct. But the provision rate was higher than the normal Stage 3 ECL, where we provided at 80% vis-à-vis our normal rate of 65.6%.

Okay. Okay. So secondly, just to cue from the previous question. Apparently, I might sound repetitive because there are some network issues. So your write-offs have doubled quarter on quarter. On the other hand, your provisioning has gone up way too higher vis-à-vis all the previous quarterly levels. Going forward, in the light of second wave, how do you see this write-off number panning out? And just last but not the least, if I may squeeze in 1 more question. So you mentioned that POS infrastructure-led spend has moved up in Q4. But in the light of second wave and -- where there are state-wide costs and also the fact that currently, Amazon and Flipkart shows are running empty, how do you see even these retail spends panning out in the next quarter? Those are the 2 questions.

In terms of write-offs, there are 2 points that you should note. One is last quarter, the accounts were on SC standstill, if you recollect, and those are not getting aged or getting written-off. So if you look at -- so some of the impact -- majority of this is the Supreme Court standstill, which is now getting written off. So either the 2 quarters are not exactly comparable, Q3 is understated to that extent. And I think we'd mentioned that if you recollect in December, we said because the accounts have not aged, we have not managed to write them off. Majority of the write-offs in this quarter is the Supreme Court standstill.

So going forward, that implies this number will come down, if any ballpark kind of number, can you just provide? How would the next quarter pan out?

I don't think we can give you a guidance about what next quarter is going to look like. But I think you made the point yourself that the economy and what's happening outside from COVID itself is a little uncertain. We have to wait and see. I won't be able to give you any projection about what next quarters will look like.

Sure. Madam -- sir, on the spends next quarter, vis-à-vis POS and retail side?

I think in the month of April, till third week, I think it was comparable to the previous month like March, but obviously, couple of states, which are big states, with lockdown or near lockdown kind of conditions are there, we could see some softening, particularly point of sale location spends have slightly come down. But we only hope like things will improve over a period of time, and then there will be pent-up demand, which will come back to us. Wherever online, typically, we have seen a trend last year where online was available, then obviously, people switch over from point of sale to online. But as you pointed out, like some of the locations, even the e-commerce players are not allowed to handle anything other than some emergency kind of things. So to that extent, perhaps the online spend shift may not happen. But the moment it opens up, obviously, the pent-up demand will be there. We are still 2 months away in this quarter. We hope we will be -- I mean it may be normal, but we are -- it all depends upon how the external situation is panning out.

The next question is from the line of Subramanian Iyer from Morgan Stanley.

So could you -- there was a sharp decline in loan yields this quarter. So could you point out to the factors that led to that? And also how should we think about loan yields going forward on a normalized basis? That was the first question. The second question is that if I do a back-of-the-envelope calculations, your bad loan formation this quarter was about INR 1,100 crores, if I am not wrong, broadly. So part of it would have come from the RBI RE slippages. But what explains the balance? It's slightly higher than the recent run rate. Yes, these are my 2 questions.

So Subramanian, in terms of yield, if you look at it, our asset composition, and this is one of the things that we've done in the last few months that we've been very, very careful about the kind of business we are sourcing. So we have had a good amount of transactors in our asset profile, and that is what has led to a lower revolve rate and consequently a low yield. On a full year basis, you will find that our yield is almost -- is not that low. It is comparable to the previous year. On a NIM basis, we are actually 10 bps better than last year. So that's the way one would look at it. Going forward, we believe that as the spends will pick up in the subsequent quarters, the yield will also move accordingly. Subramanian, can you repeat the second part of your question?

Yes. The second part of the question was that approximately if I do a back-of-the-envelope calculation, I get to about INR 1,100 crores of bad loan formation this quarter. So while part of this could be driven by the RBI RE slippages, so what explains the rest as that's slightly above the recent run rate?

So the RBI RE slippages we've given separately. If you read that, it said greater than 90 DPD, RBI RE is INR 685 crores. That's there on the asset quality page. That's the extent of the RBI RE NPA. And the balance is obviously coming from the BAU portfolio.

Yes. So I mean, that was the question that the BAU slippages seem to be slightly on the higher side. So what's driving that, and especially given that the economic activity did improve in the fourth quarter, and how do you expect this to trend going forward?

So let me clarify this again, okay? So let's go with your INR 1,100 crore number. If you do the back -- it's actually maybe slightly higher, a few crores here and there, but doesn't matter, let's go with that. There are 3 components of this bad debt, okay? Like I said, INR 685 crore is coming from the RBI RE portfolio. We still have some of the Supreme Court standstill that is not written off, that will get written off in April. And if you recollect, that is the comment we had made -- sir has made in the opening speech that we've actually provided for it at 100%, and the balance is the BAU NPA. So actually, our BAU portfolio is running as well as it was in terms of collection efficiencies and all at pre-COVID levels. So whatever we are seeing as slippages into NPA is largely coming from the Supreme Court standstill pool and the RBI RE pool.

Okay. And how do you feel about level of provisioning that you are carrying at the moment? And do you think that if COVID is managed as well as the second wave is not so extreme, can you get back to your normalized levels of provisioning around 700 basis points in the next year?

So I think the way to look at it is we made provisions in March when we didn't know much about what's going to happen this year. We went out and took a provision of INR 489 crore. Over the whole of last year, every time we felt the need to make additional provisions, we've made additional provisions. Even currently, for everything -- see, the difference is that now we know clearly what -- what are the stress segments we have the behavior, we're able to have a lot more information, and we have provided adequately for them given the available information, okay? And that's why, if you notice, we're carrying almost INR 300 crores of additional management reserve in that spend, discretionary provisions or overlay. Now what will happen over the next 3 months, we will watch. Just like we did last time, if we see there is any need for additional provision, we will take it. I think the 1 piece is you've noticed that's something we've done consistently this whole year. Every time we felt the need for it, we've gone out and taken additional provision. Currently, we believe that for the segments and the behavior that we see, we are adequately provided.

So Subramanian, just to give some numbers. RBI RE is provided at 80%. RBI RE, which is delinquent, which is 30 to 90, is provided as if it's NPA. Supreme Court's standstill portfolio is 100% reserved. And BAU NPA is treated as an NPA reserve. So as far as NPAs and delinquent portfolio is concerned, we have quite a lot of reserve available with us. As far as what future holds, let's wait and watch. But as of now, whatever book is there, we seem to have covered it adequately.

The next question is from the line of Mahesh MB from Kotak Securities.

Just 2 questions from my side. One is on the question which was asked previously. When do you see the extent of revolvers to come back as per your expectation? And between the revolvers, have you seen any material change in behavior out there that the tendency to revolve has come off from your existing customer pool?

So on revolvers, there are 2 elements which are playing. The first element is on the -- in the existing book, as this -- as the moratorium happened and a lot of customers were put into RBI RE, and we are now seeing payments coming back from a lot of these customers. As it goes, we will get to reinstate the good ones and get the revolver base of some of those customers back. So that is one part of it. At least the good customer, good revolvers, we should get back. So that is 1 part. The second is during this period, we have been -- as you've seen, we have been sourcing more customers from Banca. And the Tier 3, Tier 4 percentage is also there. So what we are getting at this point of time is that once these customers start to spend, it takes the portfolio 12 to 18 months to mature. So work is -- we are doing work at both the ends, getting the new customers to come, spend, mature, get into the habit of spending on the card. And on the existing portfolio, recover as many revolvers as much as possible. The third piece is working on the cross-sell part because these days, you know that a lot of good quality assets with transactors can also be built on when people spend on their card and then they convert it into EMIs at the point of sale itself or later on. So that is the third action. However, this -- it takes time to build that asset portfolio back given the kind of impact that it has had.

Perfect. Girish, just 1 clarification. When you say there are, let's say, good revolvers or, let's say, bad revolvers. Do you have some sense as to how has this book behaved in the past or is it something completely new for you guys as well?

No, no, it is not. See, everybody is a good revolver till the time he doesn't pay you back. So you can't look it like that, because end of the day, spender first becomes a revolver, gives you income and then he flows into 30, 60, 90. So it is a customer life cycle that you have to look at. So there is a thing called -- you would eventually want people to...

Sir, we are just trying to look whether there are some heavy revolvers, light revolvers, just trying to understand as to, has that changed or it's just been the same?

No, no. So that has changed. In the absolute percentage, the number of revolvers has changed. It is, as Nalin also mentioned, the revolve rate has also come down, okay? And part of it is a conscious part because in the new acquisition, we have been very careful of getting this -- during this period of time, good quality customers. So that is a very important element into this. In the existing book, there were people who were -- who had financial difficulties. Now they are paying back. And as they're coming back, we've been looking at reinstating some of those customers back whose credit bureau records are also good. So we are taking action on all fronts.

Sure. Okay. Just, Girish, just second question to you again. The EMI cards, the EMI book has been flat Q-o-Q. I think you made a brief comment about it. Do you think you can get that back at least in terms of growth rates in the next couple of quarters? Or do you think it will be -- that will also take some more time?

Yes, you are right. The EMI book, typically, there are 3 kinds of EMIs, okay? Now we have not given a breakup, but there are 3 kinds of EMI. One is when you convert your spends into EMI at the point of sale itself or later on. And second is the kind of -- we also give a product called Encash, which is kind of a product on top of your credit line, okay, which is the EMI. So both of them are different. One is on an average tenure 30-plus months, the other is around 8- to 9-month average tenure, which is when you convert your spends into EMI, that is around 8 to 9 months average tenure. So that is a -- that product is continuing to do well, but it is a seasonal thing. So for example, somebody will buy a mobile in the season for a 3-month EMI and will pay you back. So that continues to -- will always continue to stay on a treadmill kind of thing. The other product, Encash, is a long-term product. We are going cautious during the COVID period on that product. Now we will -- we are going to look at doing -- as the situation improves, we are going to do that far more.

[Operator Instructions] The next participant is from the line of Pankaj Agarwal from AMBIT Capital.

Am I audible?

Yes. Yes.

Sir, what percentage of your topline spends are contactless? And how the trend has been for the last year? contactless.

Contactless has been growing very rapidly over last period of year. Instead of spends, actually, what we -- what I'll give you is the transaction at point of sale. So more than 1/4 of our transactions now are contactless. And as RBI has increased it from INR 2,000 to INR 5,000, it is continuing to grow. And what we have also seen is that people who do contactless transaction at point of sale are usually more engaged with the product.

Okay. And it is 1/4 of your POS transactions, right?

Yes. I'm not saying eligible transactions because transactions of less than INR 5,000 are only eligible, but still out of POS, more than 1/4 are contactless.

And all of these are through cards or some of it is coming through your tokenized cards, Google Pay or your own [indiscernible]?

Both, both. So majority is coming through physical plastic card, where the customer is tapping on the machine. Some of it is also coming through the post card emulation technology programs that we have on the mobile phone also.

But have you seen any traction in these kind of earnings, through your app or Google Pay?

There is -- traction does come. It is preferred by younger segment, more early adopters. We see those people very active because they find it very easy. However, there is still a limitation in terms of machines, still not in the -- when I say Tier 2, Tier 3, the penetration of those machines is still not there. Tier 1, we still see a lot of those transactions.

And one last question. A lot of banks have started offering EMIs on debit cards. So do you see any [ stabilization ] from these kind of projects to your credit card EMIs?

So EMI on debit card actually started 3 years back. I remember at one point of time, Flipkart also advertised it in -- on television. However, the issue with debit card EMI is that, a, it's not been able to scale up that much. We can -- we watch that -- the kind of potential that it showed, it has not been able to scale up that much. The -- we believe that the reason is that the customer always has to go back and check whether he's eligible for those offers or not. That would seem to be the only reason at this point of time. Whereas in case of credit card, he's always sure that whatever is -- credit limit is available, that can be converted into EMI.

The next question is from the line of [ Anand Laddha ] from SBI Life.

A couple of data keeping questions from my side. Just want to understand on the RBI RE book, what could be the rate of interest we would be charging to the customer? Also, on the floating provision, we did this quarter of INR 200 crores. Is this a part of the already provision coverage of 77% which you are having? Or is it -- or is this floating provision lying idle, which we can use it if there's any slippages next year? And third, if you can disclose the movement of NPA of Q4 as well as for FY '21 in terms of fresh slippages, recovery upgrades and write-off?

So the first 2 questions. And third one, you can repeat. The first one was relating to the RBI RE yields. It will be somewhere around 15% to 16%. Second is about the floating provision, which you mentioned. We had explained that -- how the provision has been built. The INR 297 crores of management overlay is actually comprises of the higher provision on RBI RE 90-plus book, which is provided at 80%. Supreme Court standstill provided at 100%. So the difference between the normal NPA and the 100%, that is the management overlay. And also the RBI RE book, which is delinquent, which is between 30 to 90 days and providing at NPA. So all these together is the floating provision, as you refer to it, is the management overlay as we're calling it. You can repeat the...

Your third question was on the GNPA walk, correct?

Yes, ma'am.

So we don't give out -- yes, we don't give out the walk. But like I mentioned earlier, the way to look at the current NPA, like I said, was that INR 685 crore is obviously on account of the RBI RE, which was not NPA, provided as NPA but not NPA. And we had -- the rest of it is made up between the Supreme Court standstill and the BAU. We do not -- so majority is coming from Supreme Court standstill and RBI RE, okay? You now -- I mean we were discussing that number about INR 1,100-odd crore that I think somebody addressed earlier. So to calculate the percentage, majority is coming from here. We don't, however, give the specific walk. But the point to note, like I said earlier, is that our BAU book, whether in terms of collection effectiveness or all of our flow rates, we are running it pre-COVID level.

Okay. And then lastly, I see a lot of ads on SBI cards saying that you can convert your transaction into normal simple EMI at a lower rate of interest of 13%. Is this a flat 13% or a reducing 13% interest?

It is 14%. And that is from SBI card it is 14%. It is a reducing balance, 14%.

The next question is from the line of Jaimin Shah from RWC Partners.

Yes. My question was more on the RBI RE book. Could you talk a bit on the geographical coverage of this book, both paying and nonpaying, given the lockdown this time around is more concentrated in Mumbai, Delhi and major cities?

Okay. So I think we've mentioned that even earlier. The RBI RE book is fairly equally distributed in terms of our portfolio. I think the one piece that is different this time, and I think your question is, in terms of how we are handling the second wave of lockdown. Last time around in March, there was a lot of it, and I think sir had covered it in his opening speech. We were trying to put in place a lot of things, whether it was about our full-time staff, our collection people being able to work from home, call from home and all of that. Most of those things are already available with us. So this time around, we are not really having to spec it up first time around. So the minute the lockdown happens, our ability to dynamically move people from field to telecalling or even to start moving them to just sending SMSs and doing a lot of other things, that ability is there a lot more. Our infrastructure is increased. The other big difference is our digital collections capabilities. Last time, in March and April, we were still in the process of setting it up. Today, especially on the RBI RE book, we have a very robust digital collection capability. We leverage SMS, we leverage WhatsApp. There are close to 40 to 50 interactions we do in each of these customers on a regular basis. So whether lockdown or not, it's not like we are relying just on field. So there are advantages and disadvantages in this partial lockdown. What actually happens is that earlier, the whole country was in a lockdown. Today since there are partial lockdowns, if 1 location is locked down, we have the ability to make that effort from some other location. So in a way, this partial thing helps us manage the load much better.

Right. That's -- okay, that's helpful. And the other question was just on the online spends. Right now, it's 51%. This -- so for this year, we do not have travel included in that one, right? So if travel does come back and large part of travel is online, this number could be well in excess of 51% on a normalized basis?

You are right, that would be a tailwind. However, what happens is as more point of sale opens up, you get departmental stores and grocery also -- and some of those categories also getting picked up from point of sale also. So there will be plus and minus. But on an overall basis, what you're saying is right.

The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.

Most of my questions have been answered. Just 1 point that I wanted to dwell upon and wanted your thoughts are, the RBI talking more and more about the safety of credit card from a customer perspective and not sharing or storing data on the online website, that create a bit of inconvenience from a customer angle, right? So -- and especially when the online journey is where we are focusing on a 51% expense coming from there. If you could just talk about it. Are you thinking something out of the box to help the customer have a better -- convenient journey so that the 16 digits that he might have to remember just to do a transaction, which he is not allowed to store his data on the website, are we doing anything on that? Have you seen any impact of that coming through or is it too early days? If you could just talk about this.

You are right. This particular RBI guideline is applicable from December onwards. What we see here is that there are some solutions which are already available, which are both secure and save the card in terms of -- in a tokenized format. So both Visa as well as Mastercard, all the -- both these networks provide a kind of a wallet in which you can store your card and that can be used at all merchants. So it's called Visa Checkout or Mastercard's Masterpass. So there are a lot of these solutions which are already available. They were not popular with large merchants because the customer would store the card number directly there and would pay. But otherwise, these solutions are already there. And as -- I think with passage of time now that we know that this is going to happen and online spend is a large portion, it would -- people would move in that direction. In a way, it is a good step because not all merchants are PCI DSS compliant and some customers are storing the numbers -- card numbers at various places. And you have heard of various data leakages. So it should put stop to that particular thing and ensure safety of customers.

Sure. And sir, 1 more related question is these days, when you look at RBI, they're coming hard on a lot of card players, right, on the banning of incremental addition of cards. Honestly, we don't understand what exactly is going wrong on the audit front where RBI is not very satisfied with the kind of operations that are getting run at even the best of the banks. From our end, when RBI looks at us, are we reasonably confident that RBI is happy with the way operationally things are run at SBI Card when we have interactions with them? Any flavor that you could give us?

We have a very strong IT setup. And of course, information security setup is also there, where they constantly look at the performance of these vendors because, obviously, the data centers, et cetera, are always -- performance is monitored real time. So far, there are no concerns from regulator.

Sure. And last question is, if you could just give some data on the AURUM card that we have launched a quarter back. Anything to share -- any data that you can share on that? Like how many cards, what are the kind of spends? Anything on that or it's too early?

It's too early. It was the kind of -- pilot testing or beta testing has already been done. Now obviously, we have to chop out strategy once the things open up. So I think the initial proposition, whatever we had, I think that it will give higher spends, et cetera. I think they are -- to some extent, they are validated, so -- but it's too early to comment.

The next question is from the line of Ravi Singh from Motilal Oswal.

Sir, my question again on SBI Card's approach towards medium segment. What is your current positioning, maybe pre COVID, in terms of share in the transaction in the customer fees? And how are you going to approach it? There would be some cyclical and structural headwinds on the revolver and the EMI side. So to raise the profitability of the transaction business, what can you aspire? And when you benchmark the other peers in the market, where has been the key CAS? And how are you approaching that entire market segment?

So on the premium side, we are moving in that direction now. The highest value product that we were offering in the market was INR 5,000, as sir mentioned. Now AURUM is our new offering in that space, in INR 10,000 key point. We have, at this point of time, launched it only for CXOs. It is by invitation only. And the early benchmarks and results are very, very positive and very strong. Portfolio to portfolio, it -- or segment to segment, when you look at mass affluent, affluent and premium, you see the number of people revolving can vary. However, customers using offers of Flexipay or merchant -- or by EMI at the point of sale are broadly similar. So it is -- if I have a capacity to buy INR 10,000 product, I will buy a INR 15,000 product at the -- in the mass segment on EMI. In the super affluent space, one will buy a 75-inch television on EMI because both of them are available and the capacity to pay each individual is there. So the asset building is -- happens in both segments. So that is not an issue at all. We have been focusing towards getting more premiumized. So in last 1 year, as was mentioned in sir's opening remarks, we did our BPCL OCTANE premium card. We have come out with -- premium version of IRCTC card. We have also come out with AURUM in the Q1. So we are -- we look at premiumizing our portfolio on a continuous basis because it goes well with the customer life cycle also.

Okay. But, sir, from strategy point of view, do you have to do anything differently? I mean creating a separate setup to raise the service standards for meeting expectation of that customer segment? How have your past experience been in the launches of products for the same segment?

Typically, I mean, even for our elite customers, VIP customers, we have a separate servicing channel, what we call premium servicing kind of channel. So definitely, AURUM card kind of segment will demand that. And as and when we ramp up the numbers, et cetera, we would also look at this back end kind of channels that are to be there.

[Operator Instructions] We will take the last question from the line of [indiscernible] from Point72.

I have 3 quick questions. First one is on total receivable growth. So for reform, our loan -- all good customers are getting back and then it takes some time for the new customers to ramp up. So what kind of ballpark range are we expecting for FY '22 total receivable growth?

So you were asking for a time frame in which they will mature?

No, no. I'm asking what the -- what kind of total loan growth or receivable growth are we expecting for FY '22?

So we've not given forecast for the future from our receivable growth or even spends perspective. So we've never given the future outlook. However, as you can see that receivables have been growing even in this difficult year, so we believe that it's going to continue grow. So the growth is going to be there. It is the quantum of growth, which we'll have to -- we won't be able to give a comment around.

Got it. I understand that. My second question is on credit cost. So if the second wave doesn't worsen and there's no further lockdown from here, can we reasonably expect our FY '22 gross credit cost to somewhat go back to our normalized level, let's say, 600-plus 700 bps?

While we cannot commit to a particular number, we can say like we are better prepared to handle the current situation. As my colleague has said, we are able to leverage the digital channels, we are able to redeploy the manpower. When field visits are not possible, we are able to switch over to tele, et cetera. So we are better prepared. And another thing is as RBI RE portfolio's contribution in the overall assets comes down, to that extent, it is reasonable to expect moderation in the credit cost. But it happens over a period of time. You have seen the run rate -- runoff kind of thing in the portfolio. If the lockdown doesn't continue, if COVID doesn't become a kind of -- external environment doesn't become too complicated, we are expecting the runoff to continue.

Got it. Understand. And my last question, just to clarify, I think you were mentioning that the collection efficiency was as pre-COVID level. Is that as of end of March or you're referring to like current like mid to end of April?

Is your question on the comment that we made about our business as usual NPA?

Right. Business as usual, you were saying that -- if I hear it correct, you're saying that collection efficiency is back to pre-COVID level. Just want to clarify the time that you're referring to is as of 31st March or as of right now?

March.

Okay. Are you able to provide some color on the collection efficiency in April so far?

So like I mentioned, we are -- obviously, April, we're not -- we will not be in a position to give you any data about what's in April. But I think it just goes back to the comment that I made earlier, that we are much better prepared this time. And also, it is no longer a national lockdown. It is happening in location by location. We have the ability to leverage our other locations to be able to handle even if one is -- say Maharashtra is under lockdown. We have the ability to leverage other locations to collect from there. And we have digital collection capability, we are able to leverage WhatsApp. So in general, even from an infrastructure and ability -- capability point of view, we are in a much better shape this year than last year's impact.

Thank you very much. Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to Mr. Rao for closing comments.

Thank you. I think let me take this opportunity to reiterate some key facts about SBI Card, its business and the environment. Business fundamentals continue to be robust. We follow healthy financial and corporate governance principles, which form our core strength. While the external environment continues to be volatile and uncertain, we are closely monitoring it to manage challenges and leverage opportunities. So on the personal front, all of us must take necessary precautions, including social distancing, wearing masks, frequent hand sanitation, et cetera. On business front, we continue to closely monitor the situation and we'll take all possible measures to minimize the risk and ensuring sustainable growth. Thank you, and stay safe.