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 Q1 FY '25 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.

Good evening, everyone. I'm pleased to welcome you to the SBI Cards Q1 FY 2024-25 earnings call, along with my senior management team. India continues to be fastest-growing major economies across the world. As per estimates, India's real GDP growth forecast for FY '25 is likely to be around 7.2%. India's credit card market has already crossed 100 million outstanding credit cards as of June 2024. Monthly card expense have also reached INR 1.58 lakh crore in June 2024. As the credit card industry exhibits promising growth path, SBI Card continues to be a beneficiary as well as one of the key contributors. Let us now look at SBI Cards business overview in Q1 FY '25. Our resilient and sustainable business model built over the year helps us in achieving profitable business growth. Our cards-in-force are at 1.92 crores with 11% year-on-year growth. We continue to be the second largest credit card issuer in the country, and our cards-in-force market share is at 18.5%. During Q1 FY '25 our new account acquisition was at 9.04 lakhs. This enabled net new card addition to be at 3.5 lakhs, which is 17.4% of the industry. Banca contributed 42% of new accounts and the balance coming from open market and co-brands. There is seasonality factors associated with Banca acquisition in Q1. While customer interest continues to stay strong in terms of applicants, we have been further selective in acquiring new customers. These incremental selection parameters have been implemented to further improve our new customer acquisition credit quality. We have gone live with our instant card issuance journey on SBI's digital platforms such as YONO and Internet Banking. We will be focusing more on growing and acquiring new customers by leveraging these digital journeys. Our total card spend during Q1 FY '25 stands at INR 77,129 crores, with a 4% year-on-year growth despite degrowth of around 66% in the corporate spends. Retail spends remained strong at INR 71,880 crores with a 23% year-on-year increase in Q1 FY '25. SBI Card spend market share in Q1 FY '25 is at 15.9%. During Q1 FY '25, we have seen strong growth across all key discretionary and nondiscretionary spend. Jewelry segment has seen strong spend growth rate at 11% year-on-year in Q1 FY '25, influenced by Akshaya Tritiya during the quarter. The consumer durables category witnessed a strong 85% year-on-year growth during the quarter with high sale of appliances and mobiles. Online spends continue to contribute to around 57% of total retail spends. 50% of our customers make new purchases every month.

Ladies and gentlemen, the line for the management has been disconnected. Please stay connected while we reconnect the management line. Ladies and gentlemen, the line for the management has been reconnected. Sir, you may please go ahead.

Yes. Apologies for disconnect. So I'll repeat, 50% of our customers make new purchases every month. Installment-based transactions have grown 37% year-on-year, indicating customers comfort with affordability options. Corporate spends during the quarter have ended at INR 5,249 crores. It has been increasing consistently month by month with June month contribution at 45%. In Q1 FY '25 as well as -- as well, we rolled out many new customer-centric initiatives. A key initiative has been the introduction of our travel-centric credit card, SBI Card MILES. With increasing popularity of travel amongst Indians, we have introduced this card with an aim to bringing holistic travel benefits to travelers of all kinds, travel aspirers to frequent flyers, to travel aficionados. Since its launch, it has already seen an extremely positive response from consumers. RuPay card spends at UPI terminals have grown by 50% this quarter also. Our monthly average UPI spends per active account has been stable at around INR 12,800 in Q1 FY '25. Department stores and grocery, restaurants, sale, utilities and apparel have been among the top 5 categories for UPI spends. Tier 2 plus customers continue to utilize this facility as this facility increases the number of acceptance outlets for RuPay cards. RuPay card spends on UPI terminals has crossed INR 1,000 crores plus per month on a regular basis. During Q1 FY '25, SBI Card partnered Apple to launch an offer wherein our cardholders could avail up to INR 6,000 instant discount across different Apple products, applicable for both EMI and non-EMI transactions. This offer is being extensively advertised across airports, television, print ads and social media. We have continued with varied ESG initiatives during the quarter, including celebrating environment month with employees in June, featuring impactful initiatives, including seed ball making and awareness campaign on bio diversity, waste, water and renewable energy. Initiating 3 impactful CSR endeavors by investing INR 11.51 crores for elderly care, children with cancer assistance and climate smart agriculture. We are extremely pleased to share that SBI Card has been recognized and awarded 2 coveted awards including, Media Abbys 2024, Silver Award in innovative use of radio category for the radio campaign on its 25th anniversary celebrations. Coming to financial parameters in Q1 FY '25. Our focused business momentum has also helped us in registering healthy financial growth in Q1 FY '25. Let me share some key ones. Total revenue has grown to INR 4,483 crores with an 11% year-on-year growth during Q1 FY '25. In Q1 FY '25, SBI Card has registered a PAT of INR 594 crores versus INR 593 crore in Q1 FY '24. In line with strong spends growth rate, our receivables have seen strong growth, too. Receivables have grown by 22% year-on-year in Q1 FY '25 to INR 52,705 crores. Receivables per card have grown by around 8% year-on-year to INR 27,395 in Q1 FY '25. Our initiatives and focus to increase the earning receivables have begun to reflect positively. The share of receivables is at 62% in Q1 FY '25. Our cost of funds has increased by 13 basis points, 1-3 basis points to 7.5% for Q1 FY '25. We expect cost of fund to remain around -- at around current levels going forward until we see any rate cut action. However, net interest margin during the quarter has remained stable at 10.9%. Our cost to income for Q1 FY '25 is at 49.1%. The decrease is going to lower corporate spend during Q1 FY '25. Now a comment on asset quality for the company. You may recall in our last earnings call, we had indicated that we expected credit costs to remain elevated in the near future with variations during the year. Our credit cost for Q1 FY '25 has increased to 8.5% as compared to 7.5% in Q4 FY '24. GNPA is at 3.06% as compared to 2.9% in Q4 FY '24. Incremental provisions are up by INR 51 crores quarter-on-quarter. Write-offs have increased quarter-on-quarter by INR 105 crores. The primary reason for increase in credit costs, as have been explained earlier, is that customers obtaining multiple trade lines from other lenders after taking a card, and this over-leveraging has impacted their repayment capacity. Reduced payment capacity has also been seen in customers where life events have led to delinquency. This has been seen with vintage customers having good repayment behavior until now. We continue to review portfolio and score cards across a wide range of vectors to identify accounts requiring special attention. Accordingly, multiple actions have been taken based on portfolio diagnostics and bureau information and triggers. These include refinement in new account sourcing, reduction in limits, restrictions on cross-sell and spend trigger-based early blocking, enhancements in scorecards and enrichment of predictive models for portfolio management, customer payment assist programs, and augmentation of collection infrastructure. Our new sourcing continues to perform better on early delinquency trends. The credit cost continues to stay elevated despite actions taken, as mentioned earlier. The impact has somewhat been offset by prevailing environmental factors and industry challenges. Therefore, in response, we have further intensified our collection efforts and scope of our portfolio actions. For example, during last 3 months, we have reduced limits across 500,000 accounts in comparison to the 500,000 done over the previous full financial year. Similarly, in collections, we have significantly increased the capacity across all channels. Given the present market scenario, we expect credit costs to remain elevated, a reducing trend is likely only towards the later part of the financial year. Our capital adequacy ratio is at 20.6% for Q1 FY '25. In Q1 FY '25, our ROAA is 4.1%. Our ROAE is at 19.1% during the quarter. In conclusion, the Indian credit card industry is at an exciting interception of increasing discretionary consumption, growing digital payments, along with evolving customer credit behavior towards EMIs, and greater awareness around credit profile. In the prevailing environment, our top most priority is to be agile and take portfolio actions with speed, and ensure that credit costs come under control. At the same time, we are committed to build and grow our business for the long term. Now we are open to the questions.

[Operator Instructions] The first question comes from the line of Piran Engineer from CLSA.

Am I audible?

Yes, please.

So firstly, I just wanted to understand what are -- like what are the levers we can take to offset credit costs? So I understand the collections part of it. But anything on the top line front, for example, increasing the revolver charge from 3.5% to 4%, something like that. So many things I understand are regulated like interchange, et cetera, you can't do much. But what are the levers we can take apart from, say, collections, et cetera, to offset the impact of credit cost?

So the lever that you mentioned, which is interest rate with respect to revolvers, that specifically, we would not like to take at this point of time, take action in terms of increasing the interest rate because over a period of time, we have seen that good customer revenue, which is coming, is coming from installment lending customer. So if the customer takes installment lending, gives us fee, gives us interest income and does not default, that is a better way rather than getting a higher interest and even increasing that, we are already at 3.5% per month, which is almost 42% APR. So increasing that is not a good idea. That is point one. Second thing is that, yes, there are other places where you can increase -- take actions. But there are more with respect to the fee income with where the customer you are providing a service and the customer utilizes. For example, we did that with respect to putting a fee on the rental side of it. We would be looking at certain set of fees over a period of time to defray some of that. However, we have to get the credit cost in control. And that is what our MD sir was saying that, that is the first primary action. While from a revenue perspective, the action steps will continue to be taken.

Okay. Okay. Fair enough. Secondly, just trying to understand on your new underwriting measures. Now we've acquired 900,000 new customers this quarter. Now can you just give us a sense, say, for example, how many are new to credit, how many are new to credit cards?

While we will give you specific breakup of how many are new to credit and new to credit cards, however, I want to detail out that the interest of new customers is consistent. People are applying for the card. We have been more selective about this. 60% of the customers are carded customers, 42 -- 40% customers are new to credit or new to credit card but we acquire most of these customers only through our Banca channel.

Okay. The carded one -- the non-carded ones will be through your Banca channel?

Correct, correct. So new to credit and new to credit card is through Banca channel.

Okay. But then, sir, if I may just ask like the problem essentially is over-leveraging. Now someone has a card, he or she is coming to you for a second card, maybe third card, I don't know. Then why are we giving such customers a card?

So we have data with us and our portfolio, we have seen that we have -- when we onboard a customer, even an NTC or a customer having 0 active trade lines at the time of on-boarding, over a period of time, and we have analyzed our return of portfolio, we find that at the time of write-off, they carry a minimum of 1 to 5 going up to 10 trade lines. So one is the acquisition, how many trade lines were there, minimal, Bureau score, Prime, all taken together, onboarding, not an issue, but post-onboarding, the behavior changes.

Okay. And then in such a case, could this be a possibility? I don't know if it will be an appeal to the customer or not, but in the terms and conditions you have that if that customer takes another credit card, then his limit will be reduced by, whatever, 25%, 40%, something like that. Can we have a rule-based engine out here, which makes the credit exposure for you more flexible depending on the leverage of the customer, which is somewhat similar to what microfinance companies are doing in a way? Could something like that be a possibility because there does not seem to be an end in sight for the credit cost problem for the industry.

You're right, Piran. What is done is that, first of all, if we have given a card to the customer and if there is a second financial institution, which wants to give a card or a loan, they should be looking at debt to income and already whatever has been given to the customer. We also continue to monitor even, let's say, after years customer has come to us over a period of time, how the -- if more trade lines are getting added, more debt is getting taken. And you're right, action is taken. if we believe that the customer debt repayment capacity keeps going down. And hence, all the credit line decreases, which has been done over a period of time. The good part is after last September, October, RBI's decision of increasing capital adequacy. So funding -- there were players who are not looking at some of these metrics. I think now all the large banks and all the large institutions look at that, and this problem should not be continuing over a period of time. This will get -- this is going to get addressed. So that is where we are at this point of time. It is monitored continuously. Models are being run on a regular basis, which is the regular scorecards for your portfolio management. And basis, the -- if you see a high risk or movement of scores, immediate action is being taken rather than waiting for the default to occur.

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

So in the last con call, we had discussed that there are no cohorts in terms of vintage that are contributing to higher delinquencies of costs, right? They are kind of cohort of entire agnostic. So -- I mean, is it that customers or process cohorts are multi-leveraging as in that even customers that you may have on-boarded, say, 1 year or 1.5 years ago, is it happening across cohorts? And is there culture early deteriorating? Or how do we look at it?

Yes. So we find that the delinquency is moving across the segment. There is still no cohort identifiable. While if we talk about vintage, we have seen accounts which have been doing well for last 4 to 5 years also suddenly become delinquent. And the behavior part is very unique. Once this account becomes delinquent, PDD, there not a single penny comes. And that's where when we go for collection efforts, we largely find that there has been a lifetime event that has happened. That is one. Another is that -- if you leave aside vintage, we have found the delinquencies going across salary, going across self-employed, going across tiers of cities. So we have not found any specific behavior happening with any specific cohort that could have led us to do some analysis and introduce certain actions. Having said that, only one indication that was found earlier last year and we have implemented was a geography-based delinquency pattern. When we found that a specific geography was largely behaving abnormally, we took actions and we stopped sourcing from those geographies based on the pin code identification. Except that, we have not largely found any specific cohort. The delinquency is more on the customer behavior or the inability to pay.

Got it. And in terms of OpEx wave, how long do you see it remaining subdued?

CFO?

So the OpEx -- earlier commentary is lower this quarter because of the lower corporate spends and also because of the lower card compared to previous quarter. As we build our corporate card spend business again and the cards come back to the range of about 9 lakh to 1 million cards a quarter. This should, as we've been saying earlier, stabilized around that mid-50s level. Obviously the cyclicality, seasonality is there, depending upon the months when we run the campaign.

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

I just wanted to understand, based on the bureau scrubs that we have been doing for the existing customers, what is the watchlist pool of customers that we have identified for the -- based on the current portfolio, where we can potentially expect some stairs or some action that we would like to take?

Chief Credit Officer.

Basically, we do the regular bureau scrub. We also subscribe to bureau triggers. So we get real-time updates on the customer situation and interest. So we -- you're right, we do create a kind of a watchlist, this is our scorecard, and this is what we've seen. And we take actions accordingly.

Actually sir -- Ma'am, what I wanted to understand was, if you can give some indication of what could be the poll size to get a flavor on how long can this credit cost continue?

So while we can't tell you the number. The thing is that it is a regular activity. It is conducted as soon as we get the triggers. So it is as real time as we can do it. But of course, we are -- the good part is that we do see an impact in terms of the included delinquency has stabilized. In fact, it has gone down marginally. So we are going to continue this activity.

And secondly, the 5 lakh customers where we have reduced the limit, if you can give some sense on what was the exposure that was there to these customers before the reduction of limit. And where does it stand now?

So that is something we would like to -- not like to speculate upon. But what we can tell you is that the reduction of limits sits to around 25% of their limits.

Correct. And the average limit have been around close to INR 1 lakh. So you can estimate.

Sure. Because I was trying to understand when we are reducing the limits on these customers, because it would have been in watchlist. So if there were no balances, which were worth reducing like 25% reduction does not impact the balances for these customers, right, balances outstanding. So just want to understand the nature of this reduction. Like how -- because the earlier comment that management has given that the delinquencies that we are seeing, the customers for 4 to 5 years, they were performing well and certainly, they default and it's difficult to recover anything. So just trying to understand these actions that we are taking to cut the limits or anything else? Like how do we get ourselves assured that this will have some impact in terms of reduced delinquencies incrementally?

Yes. So how it works is that these customers who are getting identified as high risk or on a watchlist, definitely, these customers would have utilized their limits. Any customer who has not utilized the limits will not be on the watchlist. So we wait for -- we categorize them, we look for wait for that opportunity when there is a headroom available. And then we reduce the limits at the appropriate time. So we -- I mean, we have an operational mechanism for that. So we do it. Now does it prevent the customer from becoming delinquent? No. If some of them, not all, some of them do this, then at least there will be creating a loss less 25% or more the limit that has been cut. So that is the best option -- that is the best step that can be taken by us, considering that we are already committed to the limit. The limit has been utilized. We wait for an opportunity to reduce that limit. And if the account becomes delinquent and does not pay at all, somewhere we have cut our losses.

Sure. Sure. And sir, lastly, if you look at the share of interest earning assets, despite all the efforts that we are taking to increase the share of term lending, it has not moved up in the last 1 year. So should we continue to expect that it would remain at the similar level?

CSMO?

Yes. It will -- so revolver is now stable at 24% and as we have stated earlier, if it stays between 23%, 24%, 25%, it is a great thing at this point of time. Second thing is on the assets because our installment asset whatever is customer spends and converts into installment is usually runs off between 9 to 12 months and more installment asset is getting filled, and we are seeing that growth. This as a percentage share, a good mix would be 38%, 39%. Best case scenario, it can reach up to 40% but we would -- 38% to 40% is the range that we will -- we foresee in the next 3 to 4 quarters.

The next question is from the line of Roshan Chutkey from ICICI Prudential Mutual Funds.

Just wanted to understand, if you can talk about the delinquency numbers in terms of number of accounts, how has that moved over the past 4 quarters? Just wanted to understand whether -- is it that there are some chronic cases and the amounts in these chronic cases are increasing? Or you can ultimately talk about the bounce rates as well. How are the bounce rates doing? And is the bounce rate that you are seeing stable maybe a those numbers?

CRO?

I can give some broad indications of the trends. We don't disclose that level of granular information. So in terms of delinquencies, our experience has been in line with the industry. So if you look at the Fed Bureau data, we have also been witnessing the same sort of trends, which are rising delinquencies over the last 2 years. Generally, we are below the average in terms of the both 30 day as well as the 90 day. So that's what I can tell you about the trends. In terms of the absolute numbers in terms of floor rates, et cetera, we don't disclose that. But since we've seen a rising trend in credit costs, they are caused by worsening of floor rates over the past 2 quarters that we can certainly say, that's what has caused the changes in credit cost numbers. And also, it increases the write-offs, and you can see the declared numbers. So they also indicate similar trends in the floor rates that are contributing to write-off and NPL both.

Okay. How about your guidance, I mean, in December quarter, I remember distinctly, you said 2 quarters and things should be alright. Where are we now?

So we did say that we were anticipating for 2 quarters. But then look at the market, which has behaved -- the way the market has behaved. What happens is that we create a watchlist, we look for the trends. We find that there will be certain accounts, which may have a tendency to flow. Now what happens to the certain accounts, which further get impacted out of those watch lists itself and add to the delinquent. While our expectations and our actions are based on our models, everything is an indicator, we can only expect the best coming out of the customer behavior. Having a larger impact in the ecosystem if some more customers are unable to pay. This will add to the delinquencies.

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

Yes. Am I audible?

Yes, please go ahead.

Yes. okay. So I have 2 questions. First question. Sir, you mentioned that you have added 9 lakh-odd customers or card additions this particular quarter. You also mentioned that we have been selective and the number of new card additions are also declining each quarter. But then you -- we saw that last quarter, we reduced limits for 1.5 lakh customers. And this quarter, in the past 3 months, like you mentioned in your opening remarks, that number has gone up to 5 lakhs. So what were the triggers or observations or signals that you observed in past 3 months that suddenly, from 1.5 lakh, this number has to go to 5 lakh despite the fact that your new card additions incrementally have been coming down. You also mentioned vintage customers having -- and still showing slightly good behavior and also you being selective. That's my first question.

Yes. Our Credit Officer?

So basically, we have been doing limit decreases for our existing portfolio, marketing new vintages. In the new vintages, we say the performance is satisfactory. So it's not where we are actually onboarding the customer and over a short period of time, reducing the limit, that's not the case. For our existing portfolio, like we had mentioned earlier, we have only system, which includes looking at the bureau triggers, updates, looking at repayment with us. Over time, we have defined and we have created predictive models, looking at further attributes to the customer with us could be his spending pattern, et cetera, basis which we have identified a watchlist, which we would like to take action earlier. We're also taking actions early compared to the last quarter. And the reason behind that is that we would like to address this problem early on in this financial year itself.

Okay. Sir, just a related question, sir, how do we perceive this 8.5% credit cost going ahead. So basically, we are just trying to figure out trend or any sort of parameter or factor, which will help us forecast what we could foresee going forward? So what could be that parameter? Or what could be that, say, maybe new account addition coming down? Or this reduced limit towards customers that number? I mean, what is it that we should be factoring in to sort of get some sense on credit cost movement ahead?

The credit costs cannot be related to the new accounts. New accounts, strategy, acquisition strategy has been formed up and will continue based on our experience and whatever actions we have taken on the acquisition front, that is already on record we have stated how we have not -- we have stopped sourcing from certain geographies and all. But so far as the credit cost is concerned, as we stated, that we had expected based on our own analysis and the behavior of the customers on us, offers, spread lines, all taken together, the -- when we have created can categorize them. We have expected certain delinquency patterns. Now what happens is that over a period of time, we are looking at overall impact of their total borrowings and the lifetime events and those taken together, there is an incremental impact, which is increasing the customers. So somewhere, while we definitely have our own analysis and expectations, these get delayed by the environmental impact on some larger accounts. So unless the ecosystem improves further, somewhere these incremental additions, we are seeing to continue for a shorter period.

Okay. Okay. So my second observation is...

Sorry to interrupt, Shweta ma'am, maybe request you return to the question queue for following question.

That second question -- that second question was very much related to first one.

There are several other participants waiting for their turn. The next question is from the line of Jignesh Shial from InCred Research.

Am I audible?

Yes, please.

Yes. Just 2 questions quickly. One, since you indicated that 60% of your customers are existing credit customers and 40% is noncredit -- new to credit or non-cardholders and all. So where are basically we are seeing more of defers happening from 60% or 40%, just rough cut? And secondly, this existing credit card customers, as you say, that balance what is basically coming from Banca churn. So how the sourcing happens for the earlier the card customers? And is it through more -- through internally or externally, is it how the commission fixer plays out? Because we have to understand how the occurrence or the basically issuances are happening. So these would be my 2 questions.

Yes, Chief Credit Officer.

So with respect to the sourcing of -- from the Banca channel, I'll take your second question first. So the Banca channel, we basically look at the sales account and their relationship with the bank. And basis that, we give them a credit facility. Of course, we have our core cards in place for new to credit and new to card customers. And we look at the cash flow information. And in case of that, we basically take an underwriting decision. So that is on the Banca channel. On the target customers, they can come from the open market channel or the Banca channel. We have specific scorecards for existing carded customers where we take into account their card behavior outside, and accordingly, we take a decision. I mean do you want to know the process? Or do you want to know...

No, no. Understood. This is really helpful. But the 60%, what will be the channels to which you're -- so 40% I'm assuming is fully Banca then -- majorly Banca, I'd say. So this 60% will be then through what sources. How much will be Banca, how much will be others and all? Can you give us some color on that?

So 60%, out of that 60%, close to 10% would be Banca, balance 50% would be -- close 45% to 50% would be open market, and when we say open market, out of that, close to around 40% would be our co-brand partners because we work with -- there are a lot of co-brand partners that we work with. We have digital acquisitions through Paytm. We have Reliance as our co-brand partner where we position our people, so -- on the Reliance stores. So that is there. There are some 30%, 40% comes from our own stalls and kiosks that we put up in the market. So it is different sources that it comes.

Understood. Understood. And default should be from 60-40, how the default should be playing out? Rough cut, not exact numbers.

No, defaults are spread around.

Okay. So it's noncredit -- I mean, the new to credit and old credit, you are seeing the response across everyone the same.

Defaults are spread around, as I said. It does not indicate any particular group cohort, it's spread around.

The next question is from the line of Punit from Macquarie.

Sir, just on the OpEx data, I understand you said it's low on because of lower card additions and your corporate spends have also been low. You expect this to recover going forward?

Yes. Corporate spend, we expect to recover. We expect it to -- as we stated in our last call also that this quarter, we are expecting it to go up. And Q3, we expect it to be on close to original numbers but we expect it to recover and hence, the OpEx would increase accordingly.

Okay. Okay. And another thing, your last quarter, I remember your credit cost guidance was around 7%, based on the current trends that you're seeing, would you revise it? Or would you expect any comment on that?

No. We had given a guidance of upwards of 7%. So we do see a downward trend during the latter part of the year. And as of now, we can only assume it to remain between 7% and 8%. We will continue to hold on to that to be between 7% and 8%.

The next question is from the line of Ajit Kumar from Nomura.

Just wanted to check on your ECL coverage and method to calculate it. If you look at a stage-wise PCR on stage 1 and stage 2 asset coverage has been coming down from past few quarters, even on a stage 3, right, our coverage has come down in this quarter versus last quarter. So why is coverage going down especially on the stage 1 and 2 assets when it has been going down from a fairly long period of time by some last 8 to 9 quarters? And will you consider ramping up coverage ratios going forward?

So I'll take that one. So the ECL model consumes it over a long period of time. And this time compared to the previous quarter, we've seen for all 3 stages 1, 2, 3, the rates have come down, and this is driven by a long-term rate quarter or thereabouts worth of data. Certain elements of the model are reflected on a quarterly basis. And 1 quarter data then gets added on and another quarter data from previous 2 years gets dropped off. And that is what is causing the change in the ECL rates. This is in line with the Ind AS guidelines, and this model is reviewed annually by an external expert and is audited by multiple auditors. So the model itself is sound. And we've also done a back testing of the model and that satisfies our auditors and regulators. So that's on the model.

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

Just one question. When you are seeing the recovery efforts on the ground and you see borrowers with multiple defaults on the on the bureau, is how easy or difficult has been to put SBI Cards as a first point of repayment from a customer's perspective?

So how does one predict? So what do we do it? We try to find out as to the best of the possibilities of trying to find the source of income, if any, if any. If we try to -- if we get that and if we find a pattern on that, then definitely, we identify and we try to be there on the doorstep on the date of the cash flow. But that is for the customers who are going to pay. What we are finding is that customers are unable to pay at all. In case of multiple delinquencies also, we -- if we look at the Bureau data, we find that a high percentage of our delinquent customers are offers delinquent too. So it's not a question of how I get my payment first. The fellow doesn't have money to pay. And wherever there are cash flows available, wherever we find that there is a possibility of payment, we have a promise to pay scenario, we are there on the door step on the cash flow. So we do have those mechanisms in our collection efficiency. But as I said, there are customers who are beyond that.

Okay. And one clarification on this. Incrementally, are you seeing the slightly larger ticket size cards also showing delinquency or there is no trends in that as well?

Yes. So I mean, I saw this discussion around 2, 3 quarters [indiscernible] also in the domain that the delinquencies probably were happening in the low digits ones. So we stated earlier also that we found it spread across, and we still find it spread across. We find delinquencies at the lower limits as well as the mid to -- when we say higher limits, say, up to going up to, say, INR 300,000 to INR 400,000 also.

And there's no change in this trend?

No. It's absolutely, as per our analysis, as per our reverse feedback from the ground based on the collection teams feedback, we find that this has more to do with the inability to pay, irrespective of the vintage or the limit or the tier. I mean, it happens -- it's happening across the portfolio.

The next question is from the line of Yash Agarwal from UBS.

Vishal here. Sir, 2 questions from my side. One, you yourself indicated that there is more default in the industry and the segment is facing some stent. Now how comfortable you are growing your book at 20% plus if you are seeing strength in the industry? That's question first.

Yes. You're right. We are very careful while growing the book. So if you have noticed, we have already stated that we are not looking at increasing revolve. We are not increasing the revolve book. The book, which is getting increased is the installment lending book where the customer has already spent on the card, which is -- which we have always stated that, that is a very good book that we have built. Second thing is, if you look at the number of customers or the self-growth, that is in the range of around close to 11% or so. Asset growth is more. So we are not looking at adding more customers and growing from those more customers. We are looking at our existing customers and trying to get more engagement with those customers, and building the book there. So these are the here things that we are doing.

So do we not expect like the receivable growth to slow down there in the near term?

Slowdown in?

Basically your loan book, should we not expect it to slow down to more like mid-teens also if you're trying to be conservative here?

No, no. So we have always stated that our -- in fact, even in earlier calls, we have also stated that we expect the card growth to be around 15% to 17% and another 5% to 7% coming from our -- when you're looking at spend growth from a spend per account, usually between sort of 22% to 23% -- 20% to 23% is the spend growth that we have always been stating. And the asset growth lags that by a bit. So around anywhere between 15% to 18% is the asset growth. So we will continue to deliver those growth numbers, and that is what we have indicated. The only thing is that we are looking at delivering these growth numbers from low-risk segment categories, spends, which are more converted into installment lending because they give us interest and the credit cost also has to be monitored accordingly.

Okay. And the second question is actually on the Banca or the SBI channel. Now when I look at your delinquency, it's basically 20% -- 19%, 20% lower for SBI customers. But that also appears pretty high when we look at the SBI data. SBI has been reporting very good asset quality, even on the unsecured segment. So how are you getting this adverse selection from their book? So what is going wrong there?

We -- always, we can see card behavior will be slightly different from an unsecured loan behavior, number one. Another thing is that for SBI, every unsecured loan may not be an NTC for them. And as I said, across -- not only SBI, for across the industry, if we find -- if you look at the unsecured loans, specifically the personal loan segment, they will definitely be doing better even from interstate between the bank itself, wherever the card is -- card business is part of the bank. Between the same bank, personal loans will be -- they will be behaving better than the card. So you yourself can analyze it and you will see the change.

Yes, I think the gap here is generally lesser, but that's okay.

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

Yes. So this is partly continuing from what the previous 2 queries by both Vishal and M.B. Are we reaching a stage now where you necessarily need to prioritize asset quality stability over growth? Is it reaching a stage where it is becoming difficult to manage both because that's the perception that now seems to have, I mean, big taken swing purely in terms of our inability to manage the credit cost. I mean these are getting elevated almost in the each quarter. So if you did take the kind of product actions and interventions that you mentioned, it's very difficult to imagine why this should continue to stay limited. Why the credit cost should continue to stay almost record highs almost every quarter, right? And plus, we are still saying it will remain between 7% and 8%. It's not like a onetime. So there is obviously something with the behavior of customers, which I understand. But does that necessarily mean that now you need to take a step back to take a pause, as maybe prioritize quality stability because I'm sure the regulator is also looking at these things? We don't want to give an impression to the regulator that it's becoming difficult to manage asset quality, right?

I will not exactly agree with you. Asset quality can be a cyclical event also. While asset quality will need to be managed, it doesn't mean that one has to fold and hold up the shop and not do business at all. But it is definitely important how do we do business, what business do we do? So when we do the new business, new acquisitions, expand our loan book, how we do it is more important. So that's what we have been doing, and we'll continue to do that. Simultaneously, work on the delinquencies, work on the credit cost, that is a separate thing to be handled and that we will continue to handle that. And the business will continue the way it is. There is no stepping back.

Like I mean the only reason I'm probably harping upon this is, we have gone from about 6% credit cost nearly 2 years back. I'm sure that itself was a bit elevated at the time. We have been actually doing a lot of these portfolio intervention, right? Despite that, these trade costs are not coming off. I mean, I understand what you're saying that there is a system-wide issue around some of these things and you can't be oblivious to that. You can't be new to that completely. But my only point was does it reach a stage where you then say, okay, fine instead of us trying to manage both the engines now, can we focus on one over the other? And you're saying that's not necessarily yet.

No. So as I stated, I already made myself very clear. And another thing is we have just -- we did not start the portfolio actions 2 years back. We started doing it during last financial year when the signal started coming off. It's not that for 2 years, we have been doing portfolio actions, and then we are at this stage. The delinquency started somewhere previous financial year, and they have continued and overflow to this financial year also and somewhere we find that we are not the only one to have seen this kind of a behavior. Now my data is in public, stand-alone data is available. So that's why I'm subjected to most prudently. But beyond that, -- it doesn't mean that I should not be doing business. I will be doing good prudent, good business, continue to do business while working on the collections and recovery efficiencies also.

Understood. So I completely take your point. I think these credit card delinquencies are beginning to show up in a lot of other lenders. So you are obviously not alone there. I mean I take your point. You...

Mr. Krishnan, may we request you return to the question queue for any follow-up questions. The next question is from the line of Hardik Shah from Goldman Sachs.

My -- I have only one question, which is can you explain how this index 30-plus delinquency are computed? Just wanted to get some sense.

CRO, please.

Yes. So the index delinquencies are a point of time indication. So for example, if you look at the chart on the bottom left, which is our open market to SBI posting. The overall number is taken as 1 and the relative difference of SBI to that number is then 10 index likewise for open market. So in this example, when it say 1.07% that means that SBI is -- the open market channel is 1.07% more than the overall average. And the SBI channel is 19% better.

We will take the last question from the line of Shubhranshu Mishra from PhillipCapital.

Two questions. The first one is, what is the treatment of GST recovery. Do we add GST to the principal outstanding on the NPA form or we excluded it? That's the first. And what is the NUNP as of this quarter versus last quarter this year -- sorry, this quarter last year?

So I'll answer the NUNP question first, okay? So NUNP numbers now after the RBI guidelines of 37 days inactive, you have to close is almost same. Those numbers, which used to be at one point of time in the industry with pre-card floating around very high with this RBI guideline, and we are charging fee base card, that's hardly anything. What we see is that almost close to anywhere between 95% to 97% of the cards, we are able to, within 37 days, get them active in one way or the other and engage with us. So an NUNP problem after last [indiscernible] circular is not there. On the GST treatment on NPA accounts...

So Shubhranshu, on any account, there is a certain hierarchy that we follow whatever amount that we collect from the customer get applied in a certain hierarchy. And of course, the statutory payments are definitely prioritized over the other payments.

So do we add the GST to the principal, plus the fees that we charge? And how do we -- what is the hierarchy for GST?

Yes, yes. absolutely. When we calculate the total outstanding, all of the dues, including the statutory dues, interest payment, et cetera, is calculated. And then based on whatever we recover from the customer, the application is made as per the hierarchy.

And in the -- as per the latest regulation, the minimum amount due, full GST is included in that.

The GST are included.

Understood. And if I could just squeeze in one last question. What percentage of our customers pay MAD on a quarterly basis?

So Shubhranshu, we have not declared that number, okay? Whereas what you can look at is at almost 24% of our assets is a revolving asset, wherein the customer pays between 5% to 100%, not 100% but 5% to 100%. And usually -- the revolving balance per customer is usually 2x to 2.5x of a normal balance. So if you calculate, you will get the numbers.

Thank you. Ladies and gentlemen, we would take that as a last question for today. I would now like to hand the conference over to Mr. Abhijit Chakravorty for closing comments.

Yes. Thank you, everyone, for being with us and having the fruitful discussion. So we have experienced so far as business and financial part is concerned. We definitely have seen a good positive start. We would like -- as I stated during the call also, we would like to see both separately. So when we say the good positive start, definitely, business has been good. Credit costs, yes, definitely. It remains a concern. We keep on working on it. So SBI Card will continue with its journey of achieving sustainable and profitable growth. SBI Card is committed to higher standard of governance, ethics and integrity for insurance business sustainability. I would like to share my gratitude towards our shareholders, investors and business partners for their continued trust and support to SBI Card. Thank you, and have a very good weekend.

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