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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the SBI Cards and Payment Services Limited Q2 FY '21 Earnings Conference Call. [Operator Instructions]
I now hand the conference over to Mr. Rama Mohan Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, sir.
Thank you, Faizan. Good evening, everyone. I extend a warm welcome to all of you. Thank you for joining us for the earnings call for Q2 FY '23 today. I hope all of you had a great Diwali. It was pleasing to see the full festive over in the season after 2 years have cautioned restrictions. [ By the fast deal ] and is driven by better sentiments on general economic situation and spending, the consumer confidence in the country has been on the recovery part. While the global economy continues to be turbulent, the Indian economy remains [indiscernible]. Real GDP grew 13.5% year-on-year in Q1 FY '20. Aggregate supply conditions have been improving. All constituents of domestic aggregated demand expanded year-on-year and exceeded the pandemic level. Supported by these factors, credit card industry has also seen increasing overall growth. Credit card spend has been consistently crossing INR 1 crore value for 6 months. Total industry spends were 53% higher year-on-year in September 22. As a matter of fact, September witnessed over INR 1.2 lakh crore of end due to an early start to the fit season.
The total cost in force grew by about 19.5% year-on-year in September, but recorded marginal reduction on a month-on-month basis as the RB now on inactive car sticking. The industry has, in fact, seen interesting changes going to new RV regulations being implemented in 2 phases from July 1 and October 1, '22, respectively. Industry weakness a reduction in numbers as millions of inactive cards got flow. We at SBI Card have always maintained and pursued the strategy of fee-based cards since more than 95% of our portfolio consisted of and our balance active cards that [indiscernible] portfolio due to the new RB regulation has been limited.
Our PB model has helped us in maintaining our 3-day spend active rate at 50% plus consistently. Regulatory change on over-the-limit charges have come into a sector of state, impacting the OBL fees from this quarter onwards. I mean October note December quarter onwards. We have initiated measures to mitigate the impact of this change. In short term, we will see volatility in industry card numbers, which is likely to stabilize in the next couple of months. The growth story of Indian credit card industry is intact and the [ journey ] has just begun. Just to reiterate, credit card market remains largely underpenetrated.
As per some reports, digital payments are accelerating in a big way and will constitute nearly [ 63% ] of all payments by 2026. Also, e-commerce continues to grow. It is expected to grow at the rate of 25% to 30% annually for the next 5 years. Most importantly, linking credit cards, particularly RuPay credit cards with UPI will expand the [ usage ] of credit cards. According to [ SBI ], UPI user base is likely to grow from current INR 250 million crores to up to INR 750 million in the next 5 years, giving a card customers more options to trend.
As we see today, we have many exciting milestones to HU as an industry in the coming years. Let's now look at SBA Gas business overview in Q2 FY '23. I am pleased to share with you that the [ SBI ] Card continues to deliver its healthy business growth and strong financial performance. Our spend growth has been robust. Overall expense has grown by about 40% year-on-year in Q2, breaking INR 62, 364 crores. Our spend market share stands at 18% for the half year, but exited the September month at 19%. Retail spend continued to grow strong at 43% year-on-year and stood at INR 5,893 crores. Corporate expense stood at INR 11,511 crores in Q2 with 34% year-on-year growth.
During the past few months, we had undertaken an exercise to calibrate and review our corporate accounts portfolio basis, which we had exited a few low-margin accounts, resulting in moderation of the corporate card spend volumes. The increased e-commerce activity helps our online spend to grow. These now contribute a 57.8% share in the retail spend as of Q2, partly aided by the increased effective spend during the last 10 days of September month. In Part 2, we have seen a healthy growth, especially in categories such as electronics, portal, restaurant, entertainment and [ furnishing ].
Our revolver balances are rising in absolute numbers. However, the strong festival spends during the last 10 days of the September month has led to a buildup of transaction , resulting in lower percentage share of revolver assets as of September end. We have seen a high conversion of the [indiscernible] into term assets similar to past trend line. We have over 14.8 million cards in posed as of Q2 FY '23, and we added about 1.3 million new accounts during the quarter, the highest level during the quarter. The market share in SiC stood at 19.1%.
Our customer acquisition has also been aided by ninth digital journeys implemented for both our ETB and the NTB customers, enabling customer acquisition at lower cost as compared to traditional channels. Our sustained growth during the quarter has been on the back of some key initiatives. We expanded our core card portfolio and introduced cashback SBI card and industry-first and most comprehensive cash back credit card ever. The card witnessed a high demand from customers, and we see it as a strong addition to our portfolio. We also introduced 1,600 plus set offers at India.
Along the international offers, we had also extended a large number of regional and hyper-local offers across 2,600 cities. Such initiatives have helped us maintain a higher share of active customers portfolio and more engaged customers. Our patient active rate is at 50% plus. Our spend per average store has grown from INR 1.42 lakhs in Q2 to INR 1.7 lakhs in Q2 FY '23. What is happening is the increase in the average retail pane card growing from INR 1.14 lakhs in Q2 FY '22 to INR 1.4 lakhs in Q2 FY '23. At [ Picard ], our customer-centric approach has always given us to keep enhancing our customer experience. And our -- but Sprint is the latest tech rate. This end-to-end digital application platform enables customers to get an SBI great card in less than 5 minutes. All these efforts have led to robust growth in receivables. Our receivables grew significantly by 41% year-on-year, ranging INR 7,730 crores. Receivables Park has grown to INR 2,445 in Q2 FY '23 from INR 21,257 in Q2 FY '22. Smart has been very active on ESG front. I'm extremely happy and proud to share with you that we have seen a significant improvement in Pascal in Dodo sustainability index valuation leading to an improved performance overall by SBI card.
I would like to reiterate that we have always kept a sharp eye on the sustainability of the business, ensuring viable business practices throughout. We are committed to enhance the refers in this direction so that we are able to positively impact more and more lives. Please allow me to now to take you through the financial performance in Q2 FY '22. Our resilient business model embedded on strong fundamentals, have helped us deliver a healthy profitable growth. The company has achieved a PAT of INR 526 crores in Q2 FY '23, a growth of 52% year-on-year. Cost-to-income ratio at 59.4% is driven by investments to drive business growth in terms of higher volume of new accounts and to drive higher spend during past seasons.
The cost income is expected to remain at elevated levels as festive period is continuing in Q3 FY '23 and with our continued focus on increased new customer requisition. In Q2 FY '23, receivables construed INR 37,730 crores with a growth of 41% year-on-year. Total revenue stood at INR 3,452 crores and have grown at 31% year-on-year during the quarter. On asset quality front, our gross credit or percentage for the quarter is at 6.2%, up from 5.6% in Q1 FY '23. The increase is largely driven by the increase in sales as such. Our GNPA has come down to 2.14% as compared to 3.36% at Q2 FY '22 and 2.24% as at Q1 FY '23. Net NPA for the PD is at 0.7% as compared to 9-odd-percent Q3 FY '22 and [ 7% ] at the end of Q1 Return on average assets for the quarter ended September 22 is at 5.4%, which is higher by 41 basis points as compared to 4.9% for Q2 FY '22. Return on average equity is over 24%, which is again higher by 404 basis points as compared to over 20% for Q2 FY '22. Our liquidity position continues to be strong and the capital equity is at 23.2% for the period ended September 22.
We maintained the LCR capital 82% through the quarter. Moving to rising interest rates. The cost of funds has increased from 5.1% in Q1 to 5.4% in Q2 FY '23. The full impact of higher rates will be further size in the subsequent quarter. In conclusion, due to global disturbances, external environment continues to be volatile, though the domestic economy has been able to deal with these disturbances, it will still continue to be watchful. We remain optimistic about the future, and we believe there is plenty of room to expand the company's portfolio, generate consistent profitable outcomes and increase the value to all of our stakeholders. With the effective season and the upcoming holiday season, we hope to also see a good traction in consumer discretionary spend. Having said that, we continue to maintain a cautious approach and take calibrate the measures as the situation calls for in the future. So Faizan, now we are open for questions.
[Operator Instructions]. The first question is from the line of Anuj Singla from Bank of America.
The first question is on the NIM outlook. So when you look at the NIM for this quarter, 12.3%, this is a multi-quarter low, obviously, a reflection of the higher transactor and the higher funding cost as well. So when we look at the drivers for the upcoming quarters, the funding cost is going to rise and probably offset by improvement in the asset mix. Can you guide us how should we be looking at the trend in this number maybe over the next couple of quarters? When can we expect it to maybe increase to 13% or more in the coming quarters?
Yes. You are right, Anuj. Given the profit for funding cost to increase further in the next quarter because the full impact will be felt in the next quarter. During the quarter, of course, there will be an opportunity to I mean, transit increase in the funding cost also to the extent possible. And some correction in the base or normalization of the base will also happen because it sends maximum lasting up to the end of October, some repayments will be based for some base normalization will be there. [ People ], we are confident that it will be more or less maybe we say, 10, 20 basis points herein can be around the same range. That is what we are expecting.
Okay. In terms of cost of funds, is it possible to be what numbers we can see increase we can see in the next quarter?
I did not get you, Anuj, can you repeat?
Is the cost of funding, what increase can we see in the next quarter, sequential increase in the cost of funding?
Cost of fund can increase by up to it is 40 to 50 basis points minimum. But of course, what is shown in the debt perhaps is also colored slightly by the base effect also. -- base also has a waiting while we have actually seen a 50, 60 basis points, as guided in the last quarter, full impact is not felt. It's only like a 5.1% increase in to 5.4%, which is more of a base estate. Some of these effects will fade away. So we are expecting another 40 to 50 basis points increase minimum in the cost of funds.
Okay. Got it. Sir, second question is on the SBI cash-back card. Obviously, a very great product and some of the best cash-back-card available in the market right now. So 2 things there. One, is there a number in mind as on absolute side or as a percentage of outstanding cards where you would like to cap the contribution from this part as a percentage of maybe on number of cards outstanding? And secondly, again, the question to Girish on the economics of this card, that is one of the key concerns that this is going to be ROE dilutive. -- slope? Any color you can provide that?
I think we are in the early stage. Our [ alts is to first to find ] out all the things that are there in the journey and smooth in the process. And of course, we also need to figure out what is the right way of facing potentially to the new customers Tend of customers. I think it's too early to speculate like what is the percentage. But definitely, we would like the volumes to increase. And that's the reason we -- put on a scalable platform like a digital platform. But Girish will update on the [ evaluation ].
First of all, the numbers have just started. It's not -- we already have a base of almost INR 1.48 crore card. So INR 14.8 million is already there. So this number is not even in -- as of now, not even in hundreds of thousands. So it will take its time to grow the portfolio. Second thing is, as we had updated last time also, we have looked -- when we were looking at the overall profitability of the product. So we have put this product purely for customers who come through digital channels only and do straight-through processing. We are seeing the benefits of that also. Almost the active rate, monthly activate, even though this portfolio is very new, is upwards of 70% plus for these customers. These customers are very active. They are using the card. We are seeing better spend per card. So once we build a portfolio of at least 200,000, 300,000, we will be able to see the behavior and accordingly take whatever if there is required any action which is required, we will take. But as of now, as per our plan, whatever we are saving in the cost of acquisition, we are putting it back as a customer value proposition.
The next question is from the line of Nilanjan from Nomura.
I hope I’m audible A couple of questions. So first is on the ECL, while you mentioned about the higher transactor leading to the Stage 1, but there's also a footnote which talks about some impairment. If you could explain that and the quantum of that? The second is, if you can talk about, let's say, the revolver balance on a quarterly average basis, so basically you're trying to exclude the last 10 days of strength? And how would that then compare to, let's say, the 26% that we reported in the first quarter. Also, if you can briefly touch upon how the spending in the September and early October is converting between EMI and revolver? And finally, if you can talk about -- also about the lower employee costs sequentially? And if there has been a change in the headcount numbers.
Yes, I will take this question on the revolver. As we -- as I said initially in my speech also the last 20th of September, which is very good growth in the pain on account of our campaign with [ Avigan ]. If you normalize the -- I mean, if you take over the spent over and above the normal [ Gambettes ], the revolver share will almost be equal to what we had at the end of the June quarter. So that way it is stable. We have seen a growth in the absolute amount also, but obviously, the growth is not in tune with the asset growth, overall growth.
That is the reason for the decline in the share. But some ballpark estimates do indicate like the percentage of customers who are revolving is more or less stable. That's not a concern. But Revolve was seeing slightly stagnant is the industry phenomenon. But in terms of taking [ net debt ], whether we have taken necessary steps or not, we have taken all necessary steps. You would have seen from the investor deal so that we are permitting more of a self-employed in terms of the customers who have better property to revolve, we are hopeful but the pace at which we were expecting, obviously, that's not the case. It's taking a longer time than the entire industry.
If you're referring to the footnote on the asset quality page, that's a small number of INR 2 crores or that relates to other assets, which is not to basically card receivables and some other operational assets that we can. [indiscernible]
Right. There's also derecognition. What will that be...
So these are security deposits...
Other assets where we are provisioned [indiscernible]-- so that's for. If you look at our overall impairment losses of the line of the 96 for the half year, 994 late.
It's a small number are some other operational assets that we can…
Okay. And the final one on the employee cost, please, and the headcount, if you can.
I think the employee cost, if you're comparing quarter-on-quarter, the margin reduction perhaps payout of PLP perhaps in the first quarter like you would have…
I'll just add to what [indiscernible] is saying . There's no change on headcount. In fact, it's marginally higher. The reason we're seeing that a little lower is our SMB cost is largely established. There is a change in external estimates on long-term employee benefits, which is what is causing us to [ hand over veritas quarter ].
Any quantification, is it on possible?
[indiscernible]
The next question is from the line of Dhaval Gada from DSP Mutual Fund.
Two questions. First is relating to revolver book. So it's been like almost 1 month from the quarter end. If you would give initial perspective of conversions into EMI and revolver, and so that would be the first question. The second is on the sourcing. So could you just provide some color on how the September sourcing was? And in terms of contribution of direct sourcing in that since we just break it between Banca and open market, just if you could split that into direct as well, that would be useful. So what run rate we ended the quarter and your commentary around how it's likely to move forward and the sourcing mix between direct and other sources?
Yes. Dhaval, I will take the question on the sourcing. I think we expect the quarter, particularly in September with a gross issuance of more than INR 470, 470,000 crores. It was contributed from [ SCA ] channel around 40% in the month of September. As we said, as we guided in the past, like from the month of July onwards, again, the banker sourcing start improving. We have been seeing improved attraction. Both as an September, we had around 40%. Now it is actually trending at 43%, 44% in terms of share in the overall posting.
Coming to -- of course, with regard to what numbers we are looking at going forward. Our stated stance is, let's say, we wanted to target a net growth of INR 30,000 crores, which we almost achieved in the month of August when we reached around 296,000 net growth. But later, it is colored by some attrition where we ended up reporting roughly minus 3,000 growth in the month of September. But again, October also Atobarai, we are expecting that volumes will continue, and our expectation that we will continue to have a net growth of 300,000 million. That aspiration is rate, and we are confident for reaching that.
Yes. All of the – because this festive even started somewhere around September 23, 24, when the income sales started -- so what we have seen is the expense number is already updated. We have seen very good strength continuing in the month of October. So the case season has been very strong till Diwali. The percentage of spend converting into EMI is higher than normal because earlier, as we have said, we updated that we would see a 10% conversion into the EMI.
This time, it is because it's festival season as well as more discretionary spending and more consumer durable spending happens. So we have seen a higher conversion into the term balances revolve we will get to see in the month of November only because it has to take 40, 45 days and a payment cycle plus payment due date to be able to figure out how the payments have come back. So we will be able to see that in by mid of Norberto be able to report how much of that is going to evolve. And as Erica mentioned, even in absolute terms from June to now, the revolver balances are actually grown. It is because of the denominator impact that the percentages are looking.
The next question is from the line of Ajit Kumar from Goldman Sachs.
A couple of questions. One on the...
Mr. Kumar, sorry to interrupt you. Please use the handset mode. The audio is very low.
Am I audible now?
Yes, sir.
Okay. So first question is on the attrition rate. Your attrition rate in boots at of portfolios, whether it is open market or SBI portfolio has gone up significantly in this quarter. And as you said earlier, impact of RBI circular on inactive cards have been limited for you. So what is driving this higher pressure in the portfolio?
I think during the quarter, you can make out, let for the volumes, what we have given versus what was the cost outstanding between both the quarters, last quarter and the current quarter. We have around more than 7 lakh or attrition is there, out of which around 3.6 lakh fees on a [ condo ] I mean, the cars which are inactive for more than 12 months, we have closed.
Yes, 3.5, 3.6 lines. The remaining is an a BAU attrition what we have on account of both voluntary as well as involuntary.
Okay. And the second one is on the interesting fee. So intense as a patent of spend has marginally gone down in this quarter to 1.38%. It used to be in the range of 1.5 to 1.6 [ pan a mix ]. So when the large tickets are you paying such as travel is back, why is entertain should not going up?
I think interest rate fee at aggregator is also a function of corporate broaden, which typically has a higher interest change. And as you would have seen at a quarter-on-quarter basis, the share of corporate costings have come down. So that majorly explains the...
Yes. But on retail, the interchange has actually gone up because the travel component has is stable in Q1 versus Q2, and e-commerce has grown. So on the retail, the interchange has actually gone up. The impact, as era, is primarily because of the lower profit expense.
Okay. And any reason why corporate spends have come down?
I think we said in the past also that competition intensity is very much there, and it is impacting the margins also. So we are revisiting our strategy for the last few months. So we executed a few low margin now negative regulations, and we are recalibrating our strategy. So in the long term, at least in the medium term, we would like to take the share again back to 22% to 25% of the overall spend, but we really very calibrated manner, we will take -- will improve the share of costs...
The next question is from the line of Abhishek Murarka from HSBC.
So my first question is on Slide 10. If I look at the spend categories, especially the POS spend, category 2, 3, 4 are all lower on a Y-o-Y basis. Also category 4, which is travel agents, hotels airline, again, that is lower 5%. The total spend in that is lower 5% Y-o-Y. So why are these lower? The basic understanding was that spends are picking up across the board and also on -- at the base. So can you explain this?
So first, I'll come on the travel peas. April, May, June is typically where the travel season is there. So the seasonality typically is that you will get higher spend in the April, May, June quarter and then again in the November, December, January 30. So that's a standard seasonality. What we have seen, however, is that the decline in travel has not been what figures used to be 3 cord numbers. So actually, Travel is going fairly strong in terms of both lodging airlines and all these categories. So 5% is hardly is what I would say is more or less stable in this category, on the point of sales trends.
Can I -- sorry, can I to interject. But sir, this is Q2 FY '23 over Q2 FY '22.
So this is not a quarterly comparison. So there would not be a seasonality impact here. So come there is a so there we will have to correct it. It is, I think, over Q1 okay, last quarter. Because overall, this is a total strength of new strategy that we will episodes.
Thank you for pointing too. Okay, sure. And what about post spend, again, that has come down Q-o-Q, if this is QQ data?
So overall, if you look at it, cost spend has gone up in this category, which is consumer durable, apparel and because travel is mostly an online category. But in consumer durables and apparel, most of it has moved to online. So if you look at online growth in consumer durable has been 39% and 21% because a whole lot of e-commerce spend also gets categorized as April. So online spend is increasing there.
Right. And just as a clarification, the interchange between online and ports would be the same because it's on the MCC basis, sir?
Yes, absolutely. MCC as well as the card which is being used.
Yes. Perfect. Okay. So that explains this. The second one, sir, is on yields. Now the drop in yields, partially, it would be explained by the mix of transactor revolver and all of that. But there was also a regulation which said that you can't charge penal fees, late fees, et cetera, from the date of making the purchase, you have to charge it from the date it becomes overdue. Have those regulations also impacted your EBIT overall?
I think the measures relating to -- I mean, which has some potential impact on the revenue, they came into effect only from 1st of October. So SBI has given a slightly extended timeline of 3 months for those measures. So December quarter will not reflect any of those changes, but something could be the capitalization, all that stuff. I think they came into effect from 1st of October. So the full impact -- I mean, September quarter results will not happen. And we are to see like a unless we be comfortable period in the quarter, October, November, December quarter, we will not be able to comment on to what degree this impact will be day. But definitely, there will be marginal impact will be there definitely.
But to what extent that impact quantification will take time, sir? You would have done some analysis or some estimation of the impact? Because if you have to offset it, you would need to know what impact is going to come. So any ballpark indication would be helpful.
Materiality we, we have call it out clearly because the OBL fee is the one where we saw an impact -- in fact, it accounts for just like a 5% to 6% of the overall fee-based income where now there is additional step involved before you farmer the limits of taking an explicit consent from the customer. So initially any such measure, I think unless the customer today contributes era, they will not be able to exercise the option. So that one, we have actually taken note of and call it out very clearly. It will take time to deploy that Rest of the things, it's too early to comment. I mean at least we did not consider them to be very material. While definitely, there will be some marginal impact will be a fact but the one which stands for Oren. Also -- I mean there also we are looking at how do we create a convenient customer journey. We are giving the constraint or taking the consent from the customer becomes easy, we have been exploring. So we are confident deploying back most of the action over a period of time.
Got it. And sir, just one quick question on OpEx. Is there any one-off? Nothing. No one of that -- I think it has an impact of higher sourcing which is there versus last quarter. Our sourcing of new accounts has gone up. However, the impact is on a single range because our utilization of digital channels and overall is trending lower at a...
Mr. Murarka, maybe request a return to the question follow-questions. The next question is from the line of Piran Engineer from CLSA.
Just a couple of ones. Firstly, you mentioned that 10% of your spend converting to EMI. Can you give a similar breakup for how many convert into what percentage of spend eventually revolve? And also what percentage of your customers have ever revolved...
So on a percentage of spend going into revolve that there is no specific way to close that number because there are customers keep changing from transactor to revolver on a month-on-month basis. So the payment is coming back in these days because a lot of EMI options are already available in front of the customers because from a payment due day. So customers evolve as the short-term funding requirements for themselves.
So the movement between customers changing from revolver to transactors, it's -- and transacted to revolver also boots is quite substantial. We have not declared now we internally a we have not declared ever with all customers or fully transact on customers, but there are set of customers who are, let's say, continuously transacts. And there are a whole lot of customers do revolve occasionally. -- you can call it 1 time, 2x, 3x. There are some sloppy players also who will forget to make the payment end up revolving, come back on the -- in the next decade. So some of that continues to happen. It.
Got it. And for the next question, may be a very difficult stupid questions. But now if someone has been a simple or simple pin and then we jump for cash back count. So do you then lower the credit limit on simply sale? Or do you simply have to cancel one of the car? Just want to get a sense of whether a lot of your existing customers itself is, in a way, updated to the cash at card since the economic.
I think customers will have an option of flipping it. If he feels like he's better off actually closing the card and then opting for completely cash back or otherwise, they can split the existing limits or at the time of exercising this option, it's a revisit for a higher line, we will get the incremental limit on the new pad. So it all depends on the customer profile actually.
So [ Rao ], if you could give a sense of the 100,000 or so customers who have given this card, how many are just from our existing base and how we are truly like open market?
No. So we -- we did not -- first of all, there is no 100,000 number at this point of time. So let me clarify, okay? We have not given the numbers out as of now. The point initially was being made was that this cash back card portfolio is not substantial enough at this point of time to make an impact on the overall portfolio. So that is point number one. The second point here is that as far was mentioning, the customers, it is a choice of the customer.
Second, also, you have to note that simply save and simplify currents are at INR 500 annual fee. And cashback is at INR 999. And the spend-based animal reversal is also at a higher value. So there will be customers who will be switching over and taking it. But in our -- whatever trends that we are seeing for the initial lot of customers -- we do not see more than 10% to 15% of the existing customers coming in. Most of the customers are new customers which are coming in. And that was the whole idea. We were targeting customers who have e-commerce specific cards with other banks, and they are taking one card with one bank, another cabinet bank and third party third bank. It is to that population, younger segment that we have targeted this can that with one card, you should be able to utilize this benefit across the e-commerce platforms.
Mr. Engineer, may we request that return for follow-up questions. We'll take the next question from the line of from [ Tar Chellapa from BonaVista Fund Management ].
Late Diwali, which is management team, 2 questions from my side. The first one on the revolvers, assuming we online for and said it is stable quarter-on-quarter. Could you give us some qualitative on when you look at the cohort of revolver because who...
[indiscernible] on your line, sir, please [indiscernible] check.
Sure. Is this any better?
It's still low.
Okay. Give me a minute. Is this any better? I'm actually in the volume most portfolio. Okay. Great. Sir, my question is basically on the rule even if you normalize for the spend increase towards the end of the quarter and you look at the cohort of the revolvers, those who revolve once years or 3 year or 5, 6 a year, at which cohort do you think the deterioration has been the steepest... Even across all. I don't -- there's no one particular category where tests still in line with the overall distribution.
There's no particular one that we call out and we've seen any more than normal decrease or increase in...
Okay. Got it. And to the point on the new sourcing mix where you're actually seeing category B riding as well as self-employed rising. If I couple that with, let's say, your 2.15% gross NPA and a provision coverage north of 60%, can we say that your credit risk appetite is actually improving at the margin?
So that -- if you recollect that this is something we've been saying now for the last 1 or 2 quarters or whatever cushion that we have based up on the credit cost, we are using that to test a few segments. And that is evident with the increased self-employed or the category sourcing. That's a conscious decision. However, I think it's important to note, like you said earlier, this will always be calibrated because get the segment to see how it does and only then expect it. We are not going to do anything in a very rational.
Mr. [ Shamay ] request that return to the question for follow-up questions. The next question is from the line of Pankaj Sagawa from AMBIT Capital.
Yes. So what explains these mandates or done in operating expenses on POCs roughly 19% -- can effect, any other parameter, whether you spend or whether your new card origination or loan book, that's not increased by the same margin. So from where we take OpEx has come in this quote...
So as I said earlier, it's driven by 2 things. One is our new account sourcing has gone up. It's up about 44% versus last quarter. And second is our expanded cost is running higher because we partner in the [indiscernible] partners. So those 2 other factors which are driving the cost to be higher as poor...
And right now, we are -- I think your update 9% cost to income in this quarter? So once, let's say, your new additions comes down and all these offers are over, do you think you can manage your cost income at roughly 35% to 36% or like condos. So I think, sir, undertreat initially that the first year period this year is continuing from Q2 and extending to CC.
So the cost income will be inertia's what was initially mentioned However, as the castigate comes down, our cost income should come down because our spend is cost to come down. However, our focus on new account sourcing will continue and those part comments, we'll see efficiencies coming in because our new accounts so some lower cost for day to past due to our focus on digital resources.
Okay. And one more question about your credit cost, it has gone up by roughly INR 50 crores, INR 55 crores Q-on-Q. So though your overall mix of revolvers or still down it's up on excellent pace, but as a percent downtown. So what explains this extra credit cost during the quarter?
You have to look at 3 numbers together. So credit cost is only one of the indicators. And yes, the site cost has gone up quarter-on-quarter. The way to look at it is 2 things. One, the new book that comes in the Stage 1, we will obviously provide for it. And the repayments will obviously take a few -- some of it has come only over a period of time. However, we will be looking up the Stage 1 provision. The other piece is that as we have recalibrated our risk appetite, we have seen some degree of increase on the Phase II also. However, please read that number in conjunction with the number as well as the ECL.
If you look at our ECL stake, which is a better indicator of what we are expecting in the future or the quality of the portfolio, the ACL rate has been stable at 3.3x now, free over that number used to be in the range of 3.5% to 3.7% in -- so like I said, we have been taking a bet in terms of expanding our risk capital. However, nothing has yet impacted the quality to that extent. The way to look at credit cost is more on a gram basis and not at a number at a particular quarter. That is what we've been making. We used to operate at 6.5 prove. We will see the number move in a particular range over the next 2 quarters.
Mr. Agarwal, may we request that return to the question. for follow-up questions. The next question is from the line of Param Subramanian from Macquarie.
My question is actually an extension of the last question that was asked. So on provisioning, so on a percentage basis, why has the credit cost increase quarter-on-quarter? Basically, I picked up some explanation on Page 1 assets, but that has inflated your denominator as well. So I didn't understand why the 5.6% has moved to 6.2% quarter-on-quarter. And also 6.5% of precoded credit cost, but that was on a record base of the question, 28%. Considering it's at 24% now, so this below, that's my first question. I'll come back to it.
I think Param, the age 1 is provided at 1.7%. -- even though the Stage 1 is a transitory, which may either revolve, some part of it may [indiscernible] may come into some [ plexity ] based loan. Most quota part of it may get repaid during the quarter, during October, December, still we provided 1.7%, which in annualized returns has an effect of almost 8 6.8% over a base rate of 5.6%, whatever was there in the previous quarter. So this has an effect of -- I mean, momentarily increasing the percentage cost...
So sir, if I understood correctly, this should reverse over the next quarter because we've seen a very abnormal last 10 days. Is that the right?
Absolutely. So to the extent an NEA comes from, tease automatically get released.
Sir, my next question is on the overlimit fee. You touched upon that, saying it's 5% to 6% of the fee income. But any analysis you've done on how much could be the EPS impact that you could see or because of this coming into effect from Q3 or me? And also on the OpEx trajectory, how much of the increase in the OpEx ratio that we are seeing is more structural, considering we have gone to a higher than rate of net is...
Yes, those are makes I think we have not completed anything on the EPS rate you were talking about the impact on the EPS. I gave a quantification based on the current [indiscernible] see as a monthly, which we did not disclose earlier. So that's the reason we wanted to clarify that 5% to 6% in OBLs there. This is not permanently lost I mean, as I said earlier, we are figuring out what is the right way of -- I mean right creating – the right journey, which is convenient for the customer to express his convey his mandate.
So we are confident of playing in that. But of course, we will also be constantly looking for opportunities to realign our pricing in line with the competition, wherever opportunities are there, already would have seen like we have already come out and communicated to the customers around charging some fee income for the rental, which is in line with other players also. So those opportunities will explore. So overall, we don't feel it is a complete loss or anything, but it will take some time for a complete program.
[Operator Instructions]. The next question is from the line of Nitin Aggarwal from Motilal Oswal.
Sir, I have a question around the revolver at on the self-employed segment. Now as a strategy, we have been increasing the mix of self-employed. This segment share is at 30% for the quarter versus 17% in the portfolio level. So just curious to know what is the proportion of revolve rate in this segment?
So better us understand how this approach can help. So, the health employ portfolio tends to revolve higher. And that's something that we've noticed and that generally they came. So whether it is the second tier canary or the self-implementation is higher, and that's continuing. And that's part of the reason why we said we've gone back and recalibrated the risk capital. We brought some of these in just to be able to see how they perform. I just want to understand that.
But sorry, if you can just indicate some range as to what is the typical revolve rate in the self-employed category that you have seen in the last couple of years?
We haven't given the segment levels of all at. Like I said, it is higher than the satellite. And again, even with the salaries, obviously, the government is lower and the second tier abate is higher, self-employed is higher than that. So we haven't really given the segment level to a…
Okay. And secondly, a very small question is on the economics of were newly launched [ cash by card ], how do you really see that? Will this product take longer time to scale up on the profitability curve? Any thoughts around that?
So as we had stated earlier, when we looked at the economics of coming out with a card like this, we -- in the present scenario, we look at the cost which had to be incurred -- so for example, cost of participating with the co-brand partner payout to the co-brand partner, cost of acquisition, we took all that and decided to convert into a customer value proposition. So that is why the start is only available when the customer applies on their own through digital channels. So thereby, we save a majority of our cost of acquisition.
We are also saving monies, which could have been a potential partner payout, which is quite substantial in these ways. The third part is that it also gives us strategic freedom to be able to tinker with the product at some days, looking at the way the consumer behavior is happening. Given these 3 parameters, we came out with this product. When we look at internal parameters, we see that the profitability is similar to what we see on a simply stay or a simply click cut. Now you have to also note that simply seen simply is care INR 500 product. This product is though is available at this point of time, first year 3 till March 31, but it has an annual fee of INR 999.
Next question is from the line of Rohan Mandora from Equirus Securities.
You share what was your fresh delinquencies in this quarter? And also the provision number you expect with stage So if you take over the asset quality phase, we've actually given the provision number also on that.
So I'm not sure I understand the question.
The question is on what is the selling point Fresh [ integration ] during the quarter. slippage.
So the increase in Stage 3 would is largely made up of mostly fresh slippages only. We've not given the split. If your question is on the slippages that we'll get back to you with the specific number, it's not part of this. However, overall, if you look at the GMP, the number is at 2.14%, which is down slightly from last quarter. Sure separately for the fresh [ delimber ].
And the provision that we have done in this quarter, how was it split between Stage 1, Stage 2 and Stage...
So I think that given the rate if you look at it, the Page 1 book, we normally provided 1.7%. And Stage 2 is about 5.2% and Stage 3 at 64%. So that's the breakup. And it's already available. If you look at even you the breakup of the stage of the receivables as well as the provision rate. So that breakup should be very easy calculated.
The next question is from the line of Shweta Daptardar from Elara Capital.
My question is on subscription-based fee share, which is standing statement if I compare both Y-on-Y Q-on-Q basis. So any color on this is the new account sourced also, if we could actually test an expense-based reversals that what happened with was offsetted this annual marginal at this one?
The question is not clear if you can [ repeat ].
Sir, my question is on subscription base share, which is standing statement. If I compare both expansions as well as an annual basis. So any color on this vis-a-vis your new account company sourcing or should we attribute this to any spend-based reversals that might have happened?
So [ Sheratons ] this earlier also in last quarter. So this is linked to the higher share of language reversals, which is coming in due to which the subscription base fee is marginally lower...
Sure. And sir, my squeezing second question. You mentioned because of the new RBI norms, 95% is where you're standing in terms of active portfolio. So do we see some year on the CIS improving one-on-one basis and that the impact is almost behind...
Yes. So in the month of September, we have taken -- if you'll notice that our -- we reported a ship decline of almost around 3,000 cars. So while we did as Anita mentioned, 70,000-plus new cards. So in the month of September, it sell, we have taken the complete impact of the RBI guideline and close to all those cards from now onwards, October, we should see an increase. And we are targeting at least 300,000 net growth on a monthly basis.
The next question is from the line of [ Subrata Mishra ] from PhillipCapital.
Out the revolvers into accident to alter revolvers and formation then lost? And the second question is around the category for where your tray hotel airlines has come off even on a Q-o-Q basis. So all these rates have actually gone up. And if you look at the airport authority data, the domestic arrivals and national deals departures have all increased on a volume basis. All these hotel mass across travelator peak. So it seems quite out of that, that the category for spend should come off even on a Q-o-Q basis crude has also gone up. So the capital tickets have escalated even on a Q-on-Q basis. So if you could throw light on these 2 questions.
So I'll first answer the travel category. So the category for here is travel agent, hotels, airlines, railways, entertainment and restaurants. We club this all together or as a travel and entertainment as a category. However, travel itself and lodging itself are the large components of these. Now while in April, May, June quarter, the travel bookings, a whole lot of travel bookings happen, at least 30 to 45 days to when the people are traveling. So this seasonality what we have seen is what you see actually on the ground, the bookings happen slightly earlier on that one.
So in the past, what we have seen is [ pre-COVID ] that May, June and November, December are the high seasons of ticket booking. -- ticket booking starts on April also. And by the end of May and early June, most of the ticket bookings were done. Similar trends you see by the November also. Regular travel emergency travel all that stuff will continue, but children holidays and the leisure travel typically follows these factors. The first question, we've not really shared that split of revolvers into those categories in the past also. I think you will share it on a total basis.
The next question is from the line of Mohit from BOB Capital Markets.
My first question is on if you look at the active rate for the quarter was 15%, which was the same as the previous quarter.
So because of the festival season, we haven't seen any increase in active at any expectations on that, which would not have been met. So active rate in September has gone up, but because we have given us this quarterly number. And we saw higher activity in the last 7, 8 days in the quarter -- in the last quarter. But between -- if I talk about July, August and September, August was better than July and September was better than August. So that has been the trend line.
Okay. Just using one more if I look at the retail and corporate spend. So earlier, it used to be around 7% to 77% retail and profit. And as you said that you…
Mr. Mohit, please repeat your question. The audio is not clear from your line, sir.
Is this better?
Yes, sir, please proceed.
Yes. So saying that the share of retail and corporate effect talk in terms of spends, it used to be around 75%, 76% retail and the balance 23%, 24% corporate. But now that your certain corporate spends have come off, the ratio looks very skewed at 82% retail and 18% corporate. So going forward, should we expect that this ratio will continue?
So as I said earlier, we are targeting a entrain, improvement and we're taking it back to the area level, but it is calibrated fashion. -- because as I said, because of the complete intensity, some relationships are not working more like they all become more lay cash burn, and we don't want to be in the game. So that's the reason we have actually exited some relationships. But at the same time, we are building the pipeline. So we are confident of taking the share back to the area level over proof.
The next question is from the line of Jai Mundhra from B&K Securities.
I wanted to check, sir, on your cost of funds, which we had said that you are expecting 40 to 50 basis point rise. Is this your total cost of funds? Or you are saying about the cost of funds from banks? So -- and specifically, sir, would it be fair to assume that all your bank loan would be on I mean would this be on MCLR or you would be drawing from table or any EBLR. I think...
Our sourcing, particularly, we have given the profile 35%, 34% is from long term, and the remaining the short term. Short term is the bank lines, which are linked to external benchmarks. I mean, it can be travel or it can be [ refund ] of rate or so. But short term, mostly linked to the rest rate. So it depends on the movement and depending on the tenor at which they're away, they will get reset. With regard to your other question on the cost of funds, which we have given at 5.4%, that is the cost of borrowing on an average. Do you want to add something?
Yes. I think to add what I said initially was at 5.4% also is a little color because of the base effect of the last -- or in the last week, as we said in the last quarter, it should [ Appletiser ] 5.7% for this quarter. And for next quarter, [ Saras ] already said that it will be higher than the 63 basis points.
The next question is from the line of Mohit Surana from CLSA.
Sir, I just have one question is how has -- in your open market working, what is the percentage of customers that are new to credit. And if you can also comment in terms of how it has trended over time…
Yes, it will be very low because generally, we get more of NTC and NTC from the [ banker channel ] where we have the comfort of looking at the financial transaction profile, et cetera. In the case of open market, it is neglect. Mostly, it will be to some extent will be PCB t predominantly, it will be, let's say, credit tines. We'll take the last question from the line of Dhaval Garam from DSP Mutual Fund. Just 2 clarifications. One, relating to the full-year cost to income. So I remember in the fourth quarter call, you mentioned that this 57% zone is where we target and then there could be quarterly volatility in the cost to income.
Is that the same thought process that you have at the moment of give or take some percentage point? Or it could be meaningfully higher, just some clarification around that. And the second one is just on cost of price, again, a little -- just to be mid-force. In terms of where we ended this quarter, we should see another 50-odd basis points, 5 to 6 basis point increase in the next quarter. Is that correct?
Yes. Coming to cost to income. I mean when we guided in the past, maybe a couple of quarters, that obviously, the increases that we have seen in the interest rate scenario and the NIM compression, and that was not even made in the retuning at the time. So we are confident the good rig, but it will have an upward by us. I think 58% perhaps 57.5to58.5% range, perhaps we can think of. That was period for 12 months. I'm not talking about quarter-to-quarter because as I said, it patent again are spilling over to the month of October, October now, December quarter as well. So obviously, we said like it will continue to remain elevated, but that will not be the case on Q4, then it will be lower. So over a period of 12 months, when you average it out -- it will be over around maybe 50 basis points here and there around 58%.
Understood. And on the question of cost of funds, 50, 60 bps Q-o-Q increase. Is that correct?
No. I think what said was that 5.4%, which we are seeing is a little fuller. The actual number taking on the last weeks borrowing and the namely 5.7%. So on top of that, it will be 60.
Okay. So sir, sequentially, you could see like around anywhere between 80 to 90 basis point increase Q-o-Q, that's the magnitude we could see?
Yes. [ So ], you have to think from the perspective that in Q4, we were at 4.9%. What you're seeing right now is it is just a 50 bp point higher in 6 months. However, the rates have gone up by 190 basis points already. So the impact is not visible. And it's cornered, as we are saying because of the last seats borrowing the full borrowing cost impact has not come in the quarter. That's the reason it's 5.4%. However, it should have in the range of 5.7% for the quarter. And this -- the next quarter will go for the high.
Understood. And you're saying NIM to be stable because of the optimization on the mix to offset the cost of fund impact, Hence, NIM could be plus or minus 10, 20 bps on a sequential basis.
Yes, yes. What I alluded to is more, let's say, we are confident of managing it around 12%. It is we're confident of keeping it around 12%. But definitely, it will be lower than 12.3%, given the pressure that we have…
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Rao, MD and CEO of SBI Card for closing comments...
Yes,. I would like to thank the colleagues at the SBI part for their continued commitment, hard work and support that has contributed greatly to our continued success. I'm also grateful to our shareholders, investors and business partners who have believed in us and supported his role. Lastly, I would like to reiterate our confidence in our ability and adaptiveness, which has helped us ensure sustainable and profitable growth. Wishing you all a wonderful gas season. Yes. Thank you, and good night.
Ladies and gentlemen, on behalf of SBI Cards and Payment Services Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.