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

Ladies and gentlemen, good day, and welcome to the SBI Cards and Payment Services Limited Q3 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Chakravorty, MD and CEO. Thank you, and over to you, sir.

Thank you. Good evening, everyone. I'm pleased to welcome you to the quarter 3 financial year 2024 earnings call along with my senior management team at SBI Card. Indian economy continues its sturdy growth pace. India's GDP is expected to grow at around 7% in financial year 2024 as per the National Statistical Office and RBI's projections and their respective projections for 7.3% and 7%, respectively. One indication of this resilience is the positive consumer confidence. In fact, as per some studies, India has emerged one of the most optimistic markets across the world. The credit card industry has been experiencing robust growth with outstanding cards reaching 97.9 million as on December 2023, witnessing 20% year-on-year increase, as per data published by RBI yesterday. Growing usage and adoption of credit cards can be gauged from strong growth in credit card spends. In October 2023, the industry witnessed the highest-ever monthly credit card spends, reaching the value of INR 1.78 lakh crore with over 23.5% growth year-on-year. As the industry continues to grow, during the past few months, some significant measures have been introduced by the regulators that will be key in shaping the industry's course. Some key measures include: increase in risk weightage for unsecured lending, this will ensure prudent growth and have a positive impact on good quality customer acquisition; enhancement in UPI transaction limits for hospitals and educational institutions as well as increase in limit for recurring payments for specified categories that include mutual fund subscription, insurance premium subscriptions and credit card repayments; rollout of master direction on Internal Ombudsman Mechanism in regulated entities to further strengthen the customer protection and fairness. Indian credit card industry continues to hold potential. SBI Card is well equipped to tap into the opportunities arising out of it and will continue to leverage its extensive network and experience for sustainable and profitable growth. Regarding SBI Card's business overview in quarter 3 of financial year 2024. In quarter 3 of financial year 2024, SBI Card continued its growth track with sturdy business performance. Our cards-in-force have grown 16% year-on-year and are at 1.85 crore as on December '23. We continue on a steady path of account sourcing. SBI Card's market share in cards-in-force stands at 18.9%. We added nearly 11 lakh new accounts in quarter 3 of financial year 2024. We remain focused on continuing the momentum to build a quality portfolio while deprioritizing certain segments. We have seen strong growth in card spends during the quarter 3 of financial year 2024, reaching the highest-ever quarterly spends milestone. Overall spends have grown 41% year-on-year to INR 96,860 crore, with strong performance in retail and corporate spends. Our market share in spend stands at 18.3%. Our retail spends have been strong with 35% year-on-year growth rising to INR 73,519 crore in the quarter, with increase across all key spend categories. Our spends per card for retail spends have grown to INR 1,62,000 in quarter 3 of financial year 2024 from INR 1,42,000 in quarter 3 of financial year 2023. We rolled out around 22,200 -- 2,200 offers across 2,700 cities in the country to enhance festivities of our customers. Reflecting our customer-centricity, these offers were introduced across online and offline merchants at national, regional and hyper-local levels and catered to our millions of customers countywide. The increased festive spends also improved our 30-day spend active rate to 52% in quarter 3 of financial year 2024, indicating the success of our festive campaigns through strong engagement with our cardholders. The UPI functionality on RuPay credit cards is fast becoming popular among our customers with about 25% of all RuPay cardholders already being enrolled for UPI usage. Our monthly average UPI spends per active account has increased to over INR 12,000 with average ticket size being around INR 880. Our receivables have grown to INR 48,850 crore with a 26% year-on-year growth on account of strong spends. Our receivables per card have grown and are at INR 26,438 in quarter 3 of financial year '24 against INR 24,318 in quarter 3 of financial year 2023. Our share of interest-earning receivables is stable at 62% quarter-on-quarter, while increasing from 61% year-on-year. The percentage share of revolvers in the receivables mix has reduced marginally and stands at 23%, however, it has been growing in absolute numbers. The share of term NEA is going strong, has an increase to 38%. EMI volume was also positively impacted that led to 58% growth in quarter 3 of financial year 2024 versus quarter 3 of financial year 2023. Some of our initiatives during the quarter were: we have launched a new co-branded card in partnership with Reliance. This card is available digitally and through all Reliance retail stores. Another important development has been connecting our SPRINT platform with YONO app of SBI. This now enables the YONO customers to get an SBI Card digitally end to end. Further, during the quarter, SBI Card went live on Bharat BillPay under credit card biller category. This adds to the various features that we have provided to our cardholders, delivering them greater convenience and flexibility. Regarding financial performance in quarter 3 of financial year 2024. Our revenue and profit growth remains healthy. Our total revenue in quarter 3 of financial year 2024 has been at INR 4,742 crore, registering a 30% year-on-year growth. Our revenue from operations was INR 4,622 crore with 32% year-on-year growth. Interest income has also grown by 29%, contributing 45% share towards our overall revenue from operations. The profit after tax for quarter 3 of financial year 2024 is INR 549 crore with 8% year-on-year growth. Our cost of funds has increased to 7.6% as against 7.1% of previous quarter. We had indicated last quarter that our cost of funds will be higher. The increase is on account of higher borrowing rates compared to the previous quarter and is also impacted by RBI's action of increase in risk weights for banks on lending to NBFCs. Our cost of borrowing from banks is higher by about 25 to 30 basis points after the RBI circular has come into effect. We will see the impact of this increase for the full quarter in quarter 4. And therefore, we expect cost of fund to increase further in quarter 4. RBI's action on increased risk weight on unsecured lending impacted our capital adequacy ratio, like others in the industry. But after accounting for the RBI's action, our capital adequacy ratio for quarter 3 financial year 2024 is at 18.4%. Our profits will continue to add to the improved capital adequacy ratio in the future. While we are well capitalized and well above the regulatory guideline of 15% capital adequacy ratio, we have further augmented our Tier 2 capital through a bond issue during this week itself. The yield has increased by 82 basis points year-on-year to 17.2% in quarter 3 of financial year 2024. I would like to highlight that we have been reporting all our financial metrics on a quarterly average number. And hence, for a festive quarter such as this, where the NEA book is volatile through the quarter, the quarterly average is not the right representation of the metric. A more accurate presentation of these metrics will be on a monthly average basis. And at that measure, the yield and NIM for the quarter was 16.6% and 11%, respectively. As an annexure to our presentation, we have presented the financial metrics both on quarterly average and monthly average basis. And in future, we would provide all metrics on a monthly average basis. On asset quality, as of quarter 3 of financial year 2024, our gross NPA is at 2.64%. Our gross credit cost is at 7.5% in quarter 3 of financial year 2024. As per our conversations with the credit bureau, there is an increase in 30-plus DPD and 90-plus DPD for credit cards across the industry. Industry data also suggests that there is worsening in delinquency levels for unsecured exposures. This has been recognized by RBI and has been factored into recent regulatory changes, for example, changes in risk weights and their guidance for increased adherence to their prudential norms and regards to unsecured lending. Since we have 19% market share and are part of the ecosystem, these industry and macroeconomic trends also impact us, as was already stated in our last quarter call. We have taken multiple actions over the last few quarters covering underwriting, portfolio and collections to address the stress in certain segments of unsecured advances ecosystem. These actions include reduction in limits, restrictions on cross-sell and spend trigger-based early blocking. As a practice, we keep refining our underwriting policies based on portfolio diagnostics and Bureau information. Our new sourcing continues to be better based on early delinquency trends. We will continue to fine-tune our policies and process across the customer life cycle. While we have taken the actions and the recent portfolio is displaying better quality, the stress in certain accounts in existing portfolio due to multiple trade lines indicates that the credit cost will remain elevated around the current levels over the next 2 quarters. However, our intensive collection and recovery measures will continue. Our ROAA for quarter 3 of financial year 2024 is at 4.1% due to increased cost of funds, increased credit costs and higher festive campaigns. So we expect to maintain a healthy business momentum to continue, owing to positive consumer confidence and the healthy traction in discretionary spends, including travel and entertainment. We remain committed to our shareholders, customers and partners as we continue to create value for our stakeholders through a growing and profitable business. Now we are open to questions.

[Operator Instructions] The first question is from the line of Mahrukh Adajania from Nuvama.

Sir, I just wanted to discuss more on credit costs. So basically, it's a general rise in delinquencies in the system; it's no particular cohort. And why would you think this is happening? It's because of seasoning, it's because of inflation, what do you think? Or it's just because of aggressive lending by the sector, which affects all players then?

This is Shantanu here. So it's difficult to give an attribution, but what is clear is that what we are experiencing is in line with the rest of the industry as well. And although this is not part of the presentation because we don't disclose it because we're not authorized to, there is data from the Bureau that indicates that the stress is widespread throughout the industry in the unsecured assets space. While the overall consumer assets space is somewhat more benign, especially in the secured segment, the unsecured segment isn't doing too well in terms of the delinquency trends, as noted in the 30-day number or the 90-day number, which is measured on a quarterly and half yearly basis by the bureaus. And the quarter-on-quarter and 6-months-on-6-months trends indicate there's been a pickup to the extent of about 80 basis points in the 30-day number and about 40 basis points in the 90-day number, which is an appreciable increase of about 16% in delinquencies at the 30-day mark and the 90-mark both. This is specifically for the cards segment. So what we're experiencing is in line with the rest of the industry. What might be causing it is more difficult to say, but there's enough and more mentioned in the widespread media or the general media around macroeconomic factors and other environmental factors that might be causing it, but we don't have absolute analysis for this.

Got it. And sir, my next question is on margins. So you've given a monthly average of margins where margins seem to have declined by 25 bps. What kind of margin decline would you envisage in the fourth quarter then given that cost of funds would rise even then?

I'll take up that question. See, we've given already and said that we do expect the cost of funds to be higher in quarter 4 and also gave you reasons as to why we think that our cost of funds will be higher. Already 1 month in the quarter, we are seeing the impact of the higher cost of borrowing from the banks. Obviously, our endeavor will be to pass on whatever we can of this increased cost to the customer. So it's difficult to give you a sense on the NIM. We will try and compress, make sure that the compression is as minimal as possible. But at this point in time, the guidance or the note that we can share with you is on the cost of funds. We will try and minimize the compression.

[Operator Instructions] The next question is from the line of Piran Engineer from CLSA.

So sir, you mentioned about some of the steps you all are taking to improve underwriting, but can you just run us through if you have an NPL account, once he pays his overdues, do you then block the limit? Do you restore it back to the original? What sort of actions are you taking here? And in that light, how should we think of credit costs over the next year?

In terms of actions that we are taking, we can give you more color, but the wider projection of credit costs, MD sir has already answered in his speech in terms of what the outlook might be.

No, you wanted to know about how we treat an NPL account, to be specific? Can I -- did I understand it correctly?

Yes. No, I mean like once you -- once the account turns NPL, you're obviously putting in all your collection efforts. Once you collect that, do you block that account, as in do you remove him as a customer? Do you just give him a reduced credit limit? Do you reinstate the entire credit limit? How does that work?

So basically, when an account becomes an NPL and the customer pays all his overdue, so while he gets out of NPL, in order it to be assessed whether we should reinstate the limit, so there is an assessment that happens, there is a policy that we follow and we don't restore the entire credit limit completely. So we follow a graded approach. And we -- it's not that all the customers will get reinstated. We have a specific policy which includes looking at the credit bureau and looking at other factors before reinstating.

So can you give a sense of how many such customers you all would have now just stopped, like fully cut the credit limit? I'm just trying to get a sense of -- because this is eventually a revolving credit, right? It's not a onetime loan. So I want to get a sense of how much of the cleanup, let's say, is done. That's my point.

It's blocked.

It's blocked. So you see, majority of the cleanup is anyway done once an account reaches NPL. Of course, it's a hard block. And as I just mentioned, there is a reinstatement policy and a process that follows. It is not that we open the limit immediately, if that is your question. Or is it that...

So of the -- you can also estimate it from the other side. Of the overall attrition -- because these customers, we take them out of our books, of the overall attrition, close to 40% to 45% is involuntary, which is where we have taken the customer out of our books. So on an annualized basis, that is where you can assess the numbers from.

Okay. Okay, that is very useful, actually. And secondly, now just in terms of you all have been curtailing new card sourcing. How should we think of spends growth next year, that context?

I would just supplement it. We are not curtailing. If we were curtailing, we wouldn't have been done -- we would not have done 11 lakh cards in this quarter.

Yes, we were doing 15 lakh cards 2, 3 quarters back. So I mean relatively, it is curtailing.

That was Q3 December, and we did run various pilots at that time, which we came out of during later stages. So it's not that -- I won't say it is curtailing; it is restricting to certain geographies and to certain segments. So we will continue to have a robust business plan. We'll continue to grow. It's not that we are going to curtail. I would supplement that we have not used the word curtail. We have done certain corrections on certain geographies, certain segments. That, we have done. And compared to the previous years, certain periods when we were running certain pilots, we have come out of those pilots.

The next question is from the line of Shubhranshu Mishra from PhillipCapital.

The first question is on open-sourced customers and SBI-sourced customers. When we onboard both customers, how many of them or what percentage of them already have a credit card or another trade line? That's the first question. And second is, what was the spend for early festive season for the 2,200 schemes that we just discussed? What's the absolute dollar value of the spends? These are my 2 questions.

On the first part, on the open market, 100% of the customers will have a trade line. We don't do new to credit card -- new-to-credit customers through open market. On the Banca piece, on the NTCC, which is what you were asking, which is new to credit card or new to credit, if you take that people who do not have a credit line, that number keeps varying from month to month, but the range is anywhere between -- of the Banca customers, it will be anywhere between 10% to 15%.

10% to 15% will have a credit card?

Will have a credit line -- will not have a credit line. Will not have a credit line. So these will be 10% to 15%. And these customers are assessed through their savings bank account data through which we are able to see their cash flows of the customer, and there are models which are run to be able to assess these guys.

And the relative mix between open market and Banca is about 50-50.

Got it. And the second one?

Okay. On the second one, which is the festival season spending, we have given you the retail spends of the -- for the quarter. The retail spend is close to almost around INR 76,000 crores for the quarter. Because this time, the festival season started from 1st of October itself. And typically, it ends -- ended with 14th November, which was Deepawali, we saw October spending at the peak and then November and December was slightly lower than October. But month-by-month [ data is ] already available on the RBI's website. You can see the...

No, no, I'm asking about the OpEx, I'm not asking about the spends. What is the OpEx that's there, the cost?

We don't disclose that. We don't disclose the line item around the expense that we've incurred for the festive campaign, Shubhranshu.

The next question is from the line of Shweta Daptardar from Elara Capital.

Two questions. Sir, can we attribute NIM compression also because of continued increase in corporate spends? And question number 2, sir, you did guide on elevated credit cost sustaining for next 2 quarters. So do you believe -- I'm referring to gross credit cost. Do you believe there is further spike in this number going forward, if you can give a range?

Your question is that is the NIM compression happening because of corporate spends? The answer is no because the corporate spends do not really add too much of the NEA. So they neither give you any interest nor do they have a cost of funds impact as well. And the credit?

So regarding the credit cost part is we have given a guidance. So -- and we are anticipating that around -- it will prevail around the elevated levels, and it will be around the current levels. So -- and how do we do it? Somewhere we have done our portfolio analysis. We have seen how the stress is building up in specific accounts, how they are saving, their behavior in -- through the Bureau. So all taken together, we have seen there are probability of certain accounts which will add -- which will continue to remain delinquent. And based on that expectation, we are anticipating it around this current level. That's how we are looking at it.

The next question is from the line of Nitin Aggarwal from Motilal Oswal.

Two questions. Like one is on the delinquency side, if you can share some color as to how you compare the delinquency between the EMI and the revolver mix? And then we have incurred a 7.5% credit cost, while the revolve mix is going down. How do you really see this trend? Because if you look back, generally an increase in revolver is something to be correlated with the increase in credit costs, maybe on a lag basis. But here, the revolve rate has been sticky for so long. In fact, it has gone down a bit this quarter, but still credit costs are inching up. So how do you see this disconnected trend? So these two questions.

So the first part of your question was about the relative quality of the revolver base versus the EMI base. So the EMI base is indeed lower yield and also lower risk, as is intuitive and as I think we've spoken about earlier as well. The other part of your question is around why is the credit cost going up and revolver is coming down. One part of the answer is that it's not really established in terms of empirical proof to what extent they are correlated. So we can't really attribute movements in one direction versus movements in the other direction in an empirical sort of way. But yes, it is somewhat anomalous, but the answer lies in the changes in the credit quality as evidenced in our flow rates. And that is part of the reason why we're projecting the elevated credit costs over the next few quarters.

Okay. And one more if I may, like on the capital side because of the risk weight impact, the capital levels have come down. So any plans to support or beef up the capital ratios over the quarters -- coming quarters?

We are actually very comfortably placed on the Tier 1 capital. There, we can augment our overall [ capital ] through Tier 2 issuances. We've done one bond issue this week itself, and we'll continue to explore -- to do more.

The next question is from the line of Amey from Tata Mutual Funds.

Just one question. On the credit cost, is it possible to bifurcate between standard asset provision and LLP?

Sorry, say that again?

Standard assets and the...

Yes. How much of the standard asset provision for the quarter and how much was the loan loss provision for the quarter?

So the breakup that we give you is in terms of write-offs and provisions only. So out of the increase of INR 140-odd crores in the credit cost, there is a breakup between increase in provisions and delta in write-offs as well. That's evident in our presentation deck as well. INR 100 crores and INR 40 crores is the breakup.

Okay. And that increase is -- so because your loan balances also have gone up, so logically, your standard asset provisions also would have been quite high this quarter?

Yes. So in the deck, if you notice, perhaps you did not have tried to see it, that disclosure is made in the deck on the right-hand side of the deck.

Okay. Okay, I will check that. Not a problem. Okay. And just on the margin side, so once this fourth quarter increase in funding cost is done, logically next year onwards, should we see at least stable margins from that point on?

I hope I had a glass where I could foresee where the rates are...

But assuming where the rates -- where are the rates stay as it is?

I would say that even if you see a bit of an increase in the cost of funds in quarter 1 of next financial year, it will be very, very marginal, post which we should definitely see a stable scenario on the cost of funds.

We have the next question from the line of Roshan Chutkey from ICICI Prudential Mutual Fund.

I just wanted to understand if there is any color in terms of vintage curves, which vintage is hurting us or is it broad-based? Any further dissection to this gross credit cost by some cohorts, which is useful to learn, sir?

So we continue on the same lines, which we stated in the previous call also that as of now, there are no cohorts. We see it spread across the portfolio. Specifically, we look at what is happening in their bureau behavior. So what is -- the common thread is that wherever there is a multiple trade line, there is a -- the delinquent -- all the delinquencies, what we are seeing and the probabilities, the common thread is having multiple trade lines.

Just to supplement on that, while we can't call out any particular cohort in the manner that we did 2 or 3 quarters ago, we do continue to monitor our portfolio through various factors like vintages, like geographies, like city tiers, like self-employed versus salaried, like age, like category of employers, et cetera. And we do both univariate as well as multivariate analyses of our portfolio. And wherever that shows up, areas of stress, appropriate portfolio actions are taken.

Sure. One another question here. Basically, how should I get a comfort that we are close to the end? What does it take for one to believe that we're at the bottom of the cycle here? How do we get a comfort that we're at the bottom of the cycle?

It's difficult to say that, and that's also evident and subsumed in the answer we gave around the projection for credit costs. We can't call the top or the bottom.

Understood. Any leading indicators here? I mean anything that you are doing from your end, sourcing, portfolio actions, which will help us get better outcomes later?

Yes. We take actions through the life cycle of the customers, starting from the underwriting stage right through portfolio management, including our marketing efforts, cross-sell efforts. So all of those are informed by the insights that our portfolio insight team comes up with and also offers an honest bureau performance data as well.

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

So the first question is with regards to credit cost. So I think you mentioned it's going to remain elevated for the next 2 quarters or was it few quarters? Do we have the visibility that it can normalize towards the end of next year?

I think -- so we -- everything will depend how the ecosystem improves based on the corrective actions taken by RBI. So somewhere, what we are looking at is our own portfolio that has been impacted by multiple trade lines, where there is a delay in payment by certain accounts. There is a delay -- inability of the payment because of multiple trade lines. So once we have seen it, we are looking at it for the next 2 quarters. It will unfold. It's very difficult to say that how it will come out after 2 quarters or so. But then what we can see as of now, we have shared.

Okay. And the second question, sir, we -- I think we had articulated a target or the sustainable credit cost guidance of 5.8% to 6.2%. Will it be fair to assume that it's likely to be too conservative in the current scenario and this could be a new normal where the credit cost would remain high for an elongated period of time versus that guidance?

Sir, last quarter also, we had stated that if anybody asks me for an aspiration, I will still say my aspiration will be around 6%. Why should I not aspire to be that? But then if in spite of our best of our models and best of our sourcing, if there is multiple borrowing subsequent and inability to pay compounded with various sectors impacting the borrowers, this will continue in the short run. But left to me, I would definitely aspire to be at 6%. But as I said, for next 2 quarters, at least in the near term, we don't see it happening.

Got it. Got it. And lastly, on the UPI credit card customers, the linking has happened. You have shared some good insights there. Is it possible to share something on the asset mix as well? Is the asset mix as similar to what we have on the company level or is it very differentiated there?

So too early for asset mix behavior. If you see, the numbers have actually grown rapidly. It's more than 3x what we were at the end of September quarter. We will, in the next couple of quarters, as we see the asset mix coming across, we will give -- start giving that information also. But as of now, it's too early for that aspect.

The next question is from the line of Rahul Jha from Bay Capital.

My question is regarding credit cost. So at the end of Q1 call, you had given a guidance that H2 credit cost will be around 6%, but we have already breached that at 7.5%. So what has changed in the last 2 quarters that we have breached it with such a large margin?

So somewhere we need to see what has made RBI take these drastic actions too suddenly. When nobody was expecting, RBI came out with their guidelines in November. And even before RBI came out with guidelines, I will again refer to my own earnings call on 27th of October, where we shared that we are seeing a stress -- overall stress in the ecosystem, and that is impacting us. Very clearly, we have stated that. So somewhere, the stress was building up and it started impacting. So as I said, the aspirations will remain and we will continue to work towards that. But unless there is an improvement in the ecosystem and there is a higher ability to repay back to the multiple trade lines, this will continue for a short run.

And how often do we check -- scrub the CIBIL database? Like how do we know whether you have multiple trade lines post him defaulting or before him defaulting? How often do we do that?

We used to do them in a calibrated fashion depending on the nature of the customer. It can be as frequently as once a month.

So I will just supplement that. I think the industry is aware about the services that are provided by the Bureau. So we avail them.

The next question is from the line of Anand Laddha from HDFC Mutual Fund.

I just wanted to understand, so like is it possible for us to categorize customer based on the behavior pattern or based on the multiple lines they are running? How many customer of ours could be such that who have multiple lines running for them and who could have seen delayed payment so that at least we can categorize that this is a pool size which is seeing some stress and probably action can be taken against that pool size? First thing is that. Second, what I understand that bulk of the customer we acquired have a CIBIL score of 725, 750 and above. Despite that CIBIL score, we are seeing such large delinquencies.

Great. So the day he comes for a credit card, he must be at around 730, 750. He merrily goes, creates the credit history, then borrows more and one fine day, he is at 600. So when the credit decision was taken, it was fine with good repayment capability. But then over a period of time, using the same good credit score, the fellow build up a liability, which he is unable to sustain and service. So this is what we have observed when we went through the portfolio.

Perfect. Sir, is there anything we can do on that before that? So before the customer turns 600 score, is there anything we can -- are there any lead indicator that we know that the client has taken multiple line of credit? What action we can take?

Correct. So in our call itself, we have stated that what we have started doing. One is that some of them have -- will definitely flow, and that's where our estimates of credit cost come. Now those we have identified early, we pulled the plug on the limits. And we have been able to take action on almost 3 lakh accounts where we have taken action on the limits. So wherever we have been able to cap, we have capped the limits at the lower level so that we are able to cut cost -- cut the losses. So -- and this is a perpetual process. This is a daily and perpetual process, which is happening for last 5 to 6 years.

Okay. And in which cohorts have we seen the maximum delinquency? Is it the salaried, self-employed? Is it the government employee, cat A, cat B? Any color you can give?

That's where we have been repeatedly saying that this is a malady which is spread across the portfolio. We see 1 here, we see 2 there, it's like that.

Okay. And there is no differentiation in the portfolio, which is sourced outside from SBI and from open market? Is there any stark difference between the 2 portfolio quality?

So I think I answered this question a little while ago. We analyzed our portfolio in multiple ways, across channels, across segments, across city tiers. And wherever we notice pockets of stress, we do take action. But it's difficult to color any one segment or channel with a broad brush.

Okay. And sir, last from my side, sir. Today, credit card in general is a high-risk category, and we used to earn high yield on the revolve. Now bulk of the customers has moved to EMI, whereas the credit risk and the default risk remains the same. So is there any way that you can increase the interest rates on the EMI customer so that at least it get compensated?

So on the installment lending products, the rates have -- if you notice, rates have increased over the last 1, 1.5 years. They have gone up from almost 150 basis points to 250 basis points in certain categories. There is a limit to which we can take it up. But wherever we get an opportunity, and you are right, if the risk weightage increases of the EMI customers or as the cost of fund goes up, we get those opportunities to increase the rates, and we have been increasing the rates in the past. If we see that continuing, for example, as Rashmi was mentioning, if there is a cost of fund increase that we will see in our portfolio, we will try to pass that on to our customers.

Perfect. And sir, last, do you believe that the credit card addition for the industry will slow down and even it will slow down for us also?

Sir, we don't have any reason today to believe that. As we speak, about 100 of my fellows or 1,000 of our fellows will be out in the market sourcing some card or 2 at this moment.

[Operator Instructions] We have the next question from the line of M.B. Mahesh from Kotak Securities.

Sir, this question on this spend growth translating into loan growth, any reason why this quarter has been -- you've seen much lower loan growth as compared to spend despite 1 month of festival season not being there in December?

Can you just repeat that, Mahesh? It was not clear.

So the spend growth has been about 40%. And if you look at the loan growth or the receivables, it's been about mid-20s. In the past, usually, you should see it in the month after the spends have been completed. This time, December was a bit slow. So I just wanted to understand why you've seen the loan growth translation a bit weak?

Yes. So you have to first look at it, rather than year-on-year, look at it from a quarter-to-quarter movement perspective. So from the last quarter, the spend increase is almost close to 20% or so on a quarter-to-quarter basis, just the retail spend I'm talking about because corporate spend does not lead to asset. That increase we saw in most categories in the month of October itself because most of the spending happened in the month of October, and that was the peak. After that, November was slight -- was lesser than October, and December was almost at a similar level compared to November. What has also happened is when you look at the asset buildup is that large -- not only the revolve asset has increased in absolute terms because if the asset has increased by close to around, as you were saying, around 9%, 10%, the revolve asset has also increased broadly at the same rate. It is that the new sale of installment lending has actually increased by far much larger levels. It is because there is a paydown which happens on installment lending, so it is always on a treadmill kind of scenario, but the new sale has actually increased dramatically. This time, we saw installment lending, a large amount of new spends converting into installment lending. Usually, the number used to vary at around close to 9.5% to 10% of the spends. But this quarter, we have seen this number go up to almost 11% of the spends. So -- and most of it is, as you are aware, it happens digitally. Customers do it on their own, on our mobile app itself. So actually, the asset buildup this quarter has been fairly strong. And also, not only the transactor asset, because it remains stable, it is the installment and revolve asset, both have got built up.

Okay, okay. No, because the retail spend growth was up 20%, whereas if you look at the overall loan growth, it's about 8% Q-o-Q. Do you think it's largely explained by the EMI product?

Yes, absolutely. Absolutely. Absolutely.

Okay. Sorry, just one question on the QR codes and the RuPay ecosystem. In your discussion with NPCI, how has been the market opening up at the merchant level on the EMI -- sorry, on the credit card on RuPay products?

As of now, what we have seen is that the transaction data is fairly strong. You can already see that the ticket size is around INR 880 or so for this -- for the quarter, and the average spend is around INR 12,000. So every customer is making -- the transacting customer is making almost close to 14 to 15 transactions on a monthly basis, and that becomes a fairly common routine. 15 transactions, UPI transactions per transacting customers, they're using it in almost every merchant that they can find. Not many complaints we have got. There are few merchants who do not allow specifically credit card transactions to still go through. But most of these merchants are more organized merchants where your -- otherwise also credit card payment was also allowed and they're just trying to save something on the MDR. Smaller merchants, local shops, we have not seen that kind of trend picking up.

So overall, you're saying that the merchant acceptance level has not been too painful?

Yes, yes. There are some merchants -- so if you will see some -- for example, and these are some organized online merchants, certain merchants which manage utility bills for residential colonies, some of those merchants would not -- they would charge us a surcharge or do something when we were paying through credit card and allow only UPI transactions and not through credit card. But the primary purpose of this was to get the smaller departmental stores, tea stalls, barbershops, those are all accepting the card through this UPI transaction.

The next question is from the line of Kaitav Shah from Anand Rathi.

Sir, just one question that's regarding more about the growth on advances next year. Given that what has been happening, a, on the risk weight side; b, a general increase in credit cost at your end, do you think we're going to tighten how we are going to give out credit card next -- for next year? Any sort of thoughts around here?

As of now, we -- for the next 2 quarters, MD sir has already talked about, we would continue to run at this rate for the new customer acquisition at least for 2 quarters. If things start to improve from there, we will enhance our run rate to in the next -- going into next year. Let's see the conditions for next 2 quarters. Hopefully, by Q2 of next financial year, we should be able to get the new customer acquisition at slightly higher rate. The spend is going very strong. And the reason why we say this is that it's not only in this season, you have already seen existing customer is spending higher. So when the existing customer starts to spend more through more categories, through more options and this RuPay UPI thing is still spreading, we've started to scratch the surface as of now, we believe that the more spends will definitely come. Regarding the assets, that's the second-degree buildup on this one, I -- we foresee that the installment lending is going to be fairly strong. Revolve, to a degree, is also dependent on the kind of measures that we take on the underwriting space, on the portfolio management space. As we stated last time that if it remains stable at this 24% plus/minus 1%, we would be very happy. So that is the way that we look at it in the going next year.

The next question is from the line of Anand Dama from Emkay Global.

Sir, is it possible for you to share the breakup between the PLCCs, personal loan, credit card and the EMI portfolio?

We have not declared that earlier, so we would not be able to do it at this stage.

Okay. In terms of the asset quality or the NPA formation that we have seen in the recent past, any breakup that you can share or any thoughts like in terms of whether we are seeing more delinquencies coming in from the EMI pool or it's mainly the revolver customer who is delinquent?

Unfortunately, we don't give that level of disclosure.

Yes. But I mean, if you can just give some qualitative view on that?

That I already mentioned. See, relative to the revolver base, EMI assets are better in terms of asset quality. So they are much lower in terms of the credit cost as well.

Sure. And sir, basically, one disclosure that you can start adding on your presentation is about the PaR book. So basically, a lot of NBFCs, banks usually tend to give out their portfolio-at-risk book. Going forward, if you can start sharing that data as well through the presentation, that will be really appreciated.

Noted. Thank you so much. We'll think about this.

The next question is from the line of Rohan Mandora from Equirus Securities.

Sir, in one of the earlier participant's question, you had explained that when we are onboarding customers, they are at around 720, 730 levels and then subsequently fall to 600. So I just want to understand, sir, is it possible or are we doing something to assess the income of the customer when we are onboarding and the kind of profile? Because one of the credit card journeys that I had with SBI Card, it just took the name of the company where I work and the designation, but no subsequent documents were collected. So is there something where we can -- which I may not be aware of and you may be doing it, to assess the income profile and the quality of income to avoid these kind of scenarios? Just wanted your thoughts on this. And second, if you look at the Stage 2 for -- that were disclosed, it is not increasing despite the jump on delinquencies that we are seeing. So why it's sort of flattish Q-on-Q or year-on-year?

Yes, I'll answer the first part. Please rest assured that we do arrive at the income assessment. There are ways of doing it in the market and we also do it, and we do it to the very fair accuracy. So income assessment is one of the most important pillars of the card assessment. So that is definitely done. The second part, I missed that.

I didn't get the second part. What is it that you were asking about?

On the Stage 2, it's not increasing in the disclosure that you give quarterly. So despite the delinquency that we are seeing and the guidance of higher delinquencies for the next 2 quarters, so why is it still at 6%?

So it's the relative mix you are talking about of Stage 1, 2 and 3 receivables?

Yes, yes, the Stage 2 receivables.

Yes. So there's a bit of a rounding error here as well because we don't publish beyond the round numbers, so the decimals aren't visible. But you can see the pickup in receivables and the mix has remained largely the same at the whole number level, but there are marginal movements in decimal numbers.

For the Stage 2 assets.

For Stage 2 assets.

The next question is from the line of Krishnan ASV from HDFC Securities.

I was just wondering, one, about all the behavioral issues that you mentioned with multi-carded customers. And my query was regarding, if supposing you carded me, you carded me like Krishnan as a multi-card customer in your open-market channel and if you have noticed some behavior already in the December quarter, why wouldn't you be able to switch off a Krishnan outstanding? Why would you need 2 more quarters to see this change, right? I'm saying with all the algos and the science that we do, why would you find it difficult to dial down on customers where you have already identified that this is across pools, across bivariate, multivariate, every cohort way that you can analyze? If you know that there are pools that are likely to give a problem, why wouldn't you be able to dial down or switch off those? That's number one. Number 2, on the -- I mean, borrowing side, I mean you're bank heavy now. Is there -- I mean, is there any thought process around wanting to diversify that a little bit better? Yes, those 2.

So the first part. First of all, it is not multi-carded, it is multi-trade lines at times. And as I said that at the time of -- let's say, for open market, at the time of onboarding, there is a possibility of a trade line. It can be carded or it can be any other trade line. Now having noticed Krishnan's behavior through the Bureau and the spends in December, as I said, I do block the limits wherever possible. So if Mr. Krishnan is having a limit of INR 5 lakhs and I find him on outstanding at the INR 3 lakhs, I will cap it at INR 3 lakhs. And thereafter, I will watch and continue to cap it. But then what happens? The moment if Mr. Krishnan does not want to pay, he will not reduce his outstanding below INR 3 lakhs. So this INR 3 lakhs is going to flow ultimately to NPA and to write-off stage over 180 days.

But wouldn't that already be a part of your -- wouldn't it already be a part of what you have recognized during the December quarter? Because you've been saying this -- I mean, as you mentioned on the 27th of October, also you called this out even before the RBI did anything about this. So...

Yes. Yes, we did notice. But then, as I said, Mr. Krishnan could have been one of the indicators when I started working in August, but he was fine. Suddenly, his behavior started deteriorating in December.

Okay, I understood. And...

So it's not that we have cut a line where all the good borrowers have remained good after August, and they have not deteriorated. It's the perpetual process of identification through the bureau monitoring and the spend behavior that we are perpetually observing. So sitting -- and that exactly answers your question. If we are looking -- sitting in December, we can only look at the behavior up to December and predict up to next 2 quarters. This explains everything.

Understood. And this would be other one around, I mean, bank borrowings versus how you could diversify?

So that's something which we keep doing. We have -- it's not that we've just been borrowing from the banks. Even in this financial year, we have a couple of bond borrowings, opportunistically borrowing from the capital markets wherever we got the rates right. And we will continue to look at that.

Understood. I just have one last question, which is related to the first one. Is there any merit in relooking at your expected credit loss norms, given what you're experiencing from a behavioral thing? And this is not just for you, I'm assuming SBI Cards is not unique in this. It's something which is probably prevalent in the entire credit card industry right now. Is there a reason -- but you being the monoline player, is there a reason for you to relook at your ECL working?

Yes. So our ECL model, like all other Tier 1 models, requires an external validation on an annual basis and also quarterly refresh of all the data, and it's also subject to close scrutiny by the regulators as well. And they have looked at it in their most recent visit. And even our Board and our ACB look at our model and validate it and look at the validation reports of the external validation consultant. So we follow market best practice in this area, and we continue to refresh our model on the specified frequencies.

Ladies and gentlemen, we will take that as our last question. I would now like to hand the conference over to Mr. Abhijit Chakravorty for closing comments. Over to you, sir.

So thank you all of you for joining and looking at us quite closely. And I share my gratitude towards our shareholders, investors, business partners for their continued trust and support and believing in the strength of SBI Card. Thank you.

Thank you. On behalf of SBI Cards and Payment Services Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.