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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 SBI Cards and Payment Services Limited Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, sir.
Yes. Thank you, Stanford. Good evening, everyone. I extend a warm welcome to all of you. Thank you for attending the earnings call for Q4 FY '22 and financial year 2022 today. We are grateful for your presence and continuous support. I hope you and your loved ones are safe and healthy.
As you are aware, India's GDP grew at 8.9% in FY '22, which points towards the sharp economic rebound. It is also important to note that RBI's Consumer Confidence Survey for March '22 shows continued recovery with contact-intensive activities, including travel regaining tractions. Domestic consumption also improved over the previous year.
Owing to many factors, digital payments have been a substantial growth and, along with growing digital payments, credit card adoption and usage have also increased. This is evident from healthy growth witnessed by the industry in credit cards volume and spends over the past 1 year with some new miles stones seen. In February '22, credit card base for the industry reached 71.7 million.
The month marked the highest growth in the past 21 months on a year-on-year basis 16.3% when it comes to new card additions. Card spend also saw healthy growth, crossing the pre-COVID-19 levels during FY '22. In October '21 itself, spent crossed the 1 billion mark, which was a first in terms of monthly spend.
As for RBI, in February '22, card spent stood at over INR 86,000 crores. Despite the strong growth shown in the credit card industry, the credit card in the country is still -- has immense growth potential knowing fully well it is still low penetrated as of now.
In fact, the year was marked by several progressive steps introduced by the regulators to further increase the penetration of digital payments and enhance the safety for users. For example, extending digital payments to feature phones and permitting card tokenization to enhance security and convenience. Now let me take you to the business overview in FY '22. I'm happy to share with everyone that even amid uncertain environment, SBI Card was able to emerge with a robust business performance and stronger financial health in FY '22. Please allow me to take you through just 3 important aspects of our business to corroborate this.
In terms of consistent performance, I will read out a few which will corroborate the consistence in the performance. Our new accounts registered 33% year-on-year growth in FY '22, as we added over 3.5 million new accounts. In Q4 FY '22, we added 1 million new accounts with over 27% growth over the corresponding period last year. SBI Cards card in force has grown to over 13.7 million after having crossed the 12 million mark and 13 million mark during FY '22. The market share in terms of cards in force stood at 18.9% as of the February data. Overall card spend reached INR 186,353 crores, having seen increase of 52% year-on-year. In Q4 FY '22, card spend grew by over 50% versus Q4 FY '21, standing at INR 54,124 crores. Retail spend at INR 146,457 crores have seen a growth of 43% year-on-year in the financial year FY '22. Last quarter, retail spends reached INR 41,872 crores with a growth of over 40% versus Q4 in FY '21. Corporate spend have also grown by 99% year-on-year, standing at INR 39,895 crores in FY '22. Last quarter, corporate spend stood at INR 12,263 crores, which is a 100% growth over the corresponding period previous financial year.
Online spend have also shown -- grown significantly in FY '22, and its proportion in the overall spend is well over 54%. Some of the following things will demonstrate that the growth in SBI Card is sustainable. Our profitability has consistently grown in each quarter throughout the financial year.
In FY '22, our receivables have grown by 25%. GNPA, gross NPA remained low at 2.22% as at the end of March '22. With sustainable growth as a goal, we have been calibrating our credit filters for new customer acquisition to address the uncertainties of the time. In terms of leverage in the changing consumer trends to strengthen our product portfolio, we have undertaken several initiative. So our customer-centric approach has always been our guiding light. In line with this approach, during the year, we introduced products like SBI Card Pulse and Fabindia SBI Cards that has been designed keeping in mind consumers' change in lifestyle spends requirement and interest.
We also partnered with Nature's Basket to roll out first of its kind credit cards for gourmet lovers, a segment fast growing in India. Further, I'm pleased to inform you that we have also strengthened our presence on the RuPay platform with the rollout of our popular cards JCB SBI Cards and Yatra SBI Card in FY '22. Lastly, as a responsible company, we ensure to be compliant with the new regulatory changes during the year. A couple of major changes are like we have successfully switched to the new mechanism for recurring payments as per the deadline mandated by RBI. We are also ready with Paytm tokenization implementation and will roll out the same as per RBI's deadline of 30 June '22. So now a few core financial performance highlights. The company has achieved net profit of INR 1,616 crores in FY '22, a growth of 64% over previous year.
For Q4, the PAT stood at INR 581 crores, which is a 231% higher than the Q4 of previous financial year. Similarly, receivables stood at INR 31,281 crores with a growth of 25%. The revolver balance as of March '22 is at 25% of overall. Partly, it is also on account of elevated spend what we have seen in the month of March to the extent of around INR 3,000 crores over February '22, which haven't got the opportunity to get down into revolver.
Our total revenue stood at INR 11,302 crores and has grown at 16% in FY '22 over the previous year. In Q4, our total revenue stood at INR 3,016 crores with 22% year-on-year growth. On asset quality, the gross NPA has come down to 2.22% as compared to 2.4% sequentially as compared to the previous quarter and 4.99% as of March 2021.
Net NPA for the period is at 0.78% as compared to 0.83% in Q3 and 1.15% in Q4 FY '21. Overall, RBI RE book stand at less than 1% of the total receivables as against 2% in the previous quarter. Return on average asset for the quarter is at 7%, which is higher by 192 basis points as compared to 5% for Q3 in FY '22. ROAE is over 30%, which is higher by 914 basis points as compared to over 21% for Q3 in FY '22.
Our liquidity position continues to be strong. Capital adequacy is at 23.8% for the period ended March '22. On the way further, the Indian economy seems to be in a gradual recovery path as of now. The road has not been without [ hurting stone ] and the situation remains volatile with several external and geopolitical factors coming into play now.
We continue to closely track the prevailing environment and fine-tune our strategic [ recurring. ] One of the key regulatory changes that will be -- that we'll see, we will see starting 1 July 2022 is the implementation of master direction of RBI on credit cards. It is a welcome move in the direction of ensuring customer protection and transparency.
And as a prudent in progress to our organization, we are well covered with most of the effects. Let me reiterate that at SBI Cards, we have built a robust, reliable and resilient business that has stood the test of times over the past 2 decades. Going forward, too, we are committed to keep creating value for our shareholders, employees and customers as we pursue sustainable growth.
So now we are open for questions. Stanford?
[Operator Instructions] The first question is from Anuj Singla from Bank of America.
Sir, the first question relates to the asset mix. We have seen revolver declining to 25%. Every quarter, we believe that the revolver has bottomed out, and we see a decline in the next quarter. So -- how should we see this number? Is this more structural in nature?
And secondly, is this an SBI Card specific phenomenon? Or do you have any feedback, other portfolio or maybe the bank side, they are seeing the same thing happening in their portfolio as well?
Yes. I think you are right. I mean the revolver -- this was a 27% as of December, came down to 25%. But when we look at the internal analysis when we did, the revolver rate has been marginally increasing from October '21 to February '22, that is the amount of expense that come into revolver.
Of course, you have payments in revolvers, et cetera. Overall, that rate is either stagnant in some of the months or otherwise slightly increasing a couple of months. But when it comes to March '22, we did run some special campaigns which has resulted in around INR 3,500 crores of incremental expense as compared to February, and these tend to take some time. Some part of it may convert -- gets converted into the revolver.
But it's an industry phenomenon, we know like a lot of customers who have evolved in the past, I'm talking about the maintained customers. Banca got restructured and then that portfolio, most of it is resolved and our portfolio is hardly at 1%. Only a few of them have actually interest to take the card and again start using the card.
Banca has been very circumspect in terms of again activating the card. And the last 2 years -- of course, the first year, I mean, 2020-'21 if I talk about, it was more of a containment. '21-'22, obviously, we have recalibrated the trade centers. We have been slowly allowing the kind of segments like self-employed and active kind of customers in a calibrated manner, as and when we are confident about the rates of declining, we were doing it.
And this, we are not again doing it blindly. We are also considering some alternate data and with that benefit only we are doing. In fact, in terms of the sourcing, when we look at, I think the self-employed sourcing has increased at least by 2 percentage points quarter-on-quarter, which shows our increased appetite for this segment. But it will take some time. It will definitely take the -- taking longer times than what we have expected. But it's an industry phenomena. Everyone is looking at it and making attempts to improve the work.
I get it, sir. The second question relates to OpEx, there was a sequential decline in OpEx. Is it more seasonal in later? Or we have taken some steps consciously to cut back? And if I may, the third question is on master direction of credit cards. Is there any impact on the -- our relationship with the co-brand partners given the new maybe stricter data sharing regulations around that?
I will answer your last question, the master direction. As I reiterated this is more in terms of improving the -- enhancing the consumer protection, et cetera. And our internal scalability analysis indicates that we are largely compliant. Obviously, some changes will be required in the system to exactly comply with it. And anyway we'll be complying by the deadline.
In terms of co-branded partnerships, our partnerships are exactly in compliance with the guidelines. So we don't anticipate any impact or anything because there is no sharing of data in a reverse -- with the co-branding partner.
Second one, in terms of OpEx, yes, you are correct. Typically, Q3 OpEx is higher because when we launched a lot of marketing campaigns during the Q3, the spend-based cost will be higher, marketing costs, cash-back kind of component will be higher, that has reduced in Q4.
Nalin, would you like to add any other comments?
Yes. So Anuj, as Rao said, one is obviously the end base cost on a quarter-on-quarter basis has come down. And that is typically the seasonality factor and associated with the cost, which is effective -- during the festival time, this cost tends to be on the higher side. But we've also been taking steps on the other side.
We're looking at our acquisition costs and other costs. And sequentially, all other cost basis per card are coming down. And there is greater focus on the acquisition cost side as well. And going forward as well, we'll be focusing a lot more on the digital initiative to improve our cost of acquisition. So yes, it's both business. One is the seasonal factor, and company is also taking steps to ensure that costs are [ maintained.]
The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.
Sir, couple of questions. One is similar to the previous participant. On the cost of acquisition, rate, and when we see newer players cost of acquisition wherein they go full digital is almost half or 60%, 70% of our cost.
How do we -- is there a line of sight that we can improve our cost of acquisition materially over a period of next 3 -- 2 to 3 quarters or a year, wherein we become equally competitive in terms of cost of acquisition? That is question number one.
Question number two is, sir, on the active -- 30-day active card rates where we were at 52, now it's 50, what is changing here? How do we make it like back to that -- somewhere around 53%, 54% where we were before COVID? How do we reach there? What are the steps that we are taking to keep the customer more active? That is the question -- the question number 2.
And the last question is, sir, on the Tier 3 customer segment where we -- we've added like reasonably higher number of cards in that geography, if you could explain how the economics was there. Like how does the spend behavior pan out, how much time does it take to maybe breakeven or when does the inflection point come into our customers under the spend front? Those are the 3 questions.
With regard to cost of acquisition, we have been taking a number of initiatives. Particularly, we have shared during the last earnings call also around having an end-to-end digital journey for existing customers, where somebody wants to opt for a upgrade or somebody is asking for an additional cards that journey is completely end-to-end. And that's only just a fraction of cost.
And we also showed, like, we are also working on the creating the digital journey for new to SBI field customer, and the pilot has been completed. So we are actually rolling out a full-blown way in the production. But it will be calibrated. Only a few product types will be available initially, and then they will [ enhance it ] because we need to fine-tune the configuration, et cetera. But this is expected to stabilize by the end of the current quarter, that is the June quarter.
And that will get the acquisition cost, like, down reasonably, like...
Yes, yes. I think we have -- in fact, as compared to a completely manual process, as and when we digitize a certain journey -- actually a part of the journey, we were actually able to get the benefit. So the moment it's completely end-to-end digital and that's originated by the customer, definitely the cost of acquisition will be much lower.
In terms of Tier 3 customers, I think broadly this segment, we acquired through the Banca channel and mostly to the kind of program, which you are aware, like it's a preapproved and a prequalified kind of program, where the cost of acquisition of the Banca is generally lower than the open market.
But I think nowadays, when we look at the customer behavior, et cetera, I think Tier 3, Tier 4 customers are also equally on par with the Tier 1, Tier 2. We are also online, the share of baseline online is actually more than 50%. That's where I think they are more different. Slightly, yes.
If you're giving a card to an entity kind of customer or entity customer, it will take longer time for them to start using the card and accelerate the spends. So that expense there can be a kind of a delta in terms of the breakeven period et cetera. But otherwise, not a very great difference between the Tier 1 and Tier 2 customer or the Tier 3 customers.
Correct. And on the activation rates? Yes.
Yes. Girish.
Yes. On the activation rate, what you see here is the number is the average of January, February and March. January was impacted minorly for some period of time by Omicron. February is the 28 days a month, but by March, the number is around 51% plus against that again on an exit basis. Because March spends, if you see the total retail spends were almost INR 15,800 crores-plus, which essentially means that this was the highest that we have done during the -- in the lifetime of the organization. So it was even higher than October. So March was a very strong month coming back. A couple of reasons further were that travel, which was picking up in Q3 was suddenly got activated and impacted in the month of January and again came back in the month of March.
While the 30-day active rate is at 52%, so some steps that we do essentially in 3 buckets: reiterating the product value propositions to people who are not using the card; giving them the right credit line or the right product as per the requirement; thirdly, the kind of offers that we do, which is either in terms of cashback offer or segmented offer to the customers in their categories where they are spending or where we want them to spend, we get special offers. So these are some 4, 5 steps broadly that we take for keeping the customers active.
So for example, if a customer is inactive with us for 90 days, we would give him an offer after looking at his last period so that the customers start spending on the card. If I look at a 365-day period, more than 90% of our customers are either spend- or balance-active.
Sure. Sorry, this is one last question, is when we give out the card and there is this RBI guideline which talks about activating the customer within 30 days, how do you think about that clause in that guideline for us? Because we have like cards, where we are taking an annual fee, how do we incentivize them to start activating?
Or is that an area that you need to work on or do you think that it doesn't matter because we've already -- the customer generally start activating the card online or in -- how would you think about it?
So you are right, we will have to do certain set of changes. First point is in terms of the definition of activation, which we will have to work with them because that is not defined because acquisition can be when the customer comes online and switches on online spending switches or international switches or does some other activity, okay? However, and you are right because typically, from the date of the issue, on an average, it takes anywhere between 5 to 10 days for the customers to receive the cards. It takes less period of time at this -- however -- so we will have to -- and this is across the industry.
So from a definition perspective, work is required. I think RBI here is looking at the safety and security of the customer that it should not happen that the customer is even where the customer has not -- does not have any intent of using the card. So that means we work with RBI in that sense.
If even in present state, what we do is that we are giving the customer as soon as the card is approved, to a certain set of segments where we see paper we give send e-cards to the customer, which are utilizable from in itself. So that is one initiative, which is very much in progress. And there, we have seen that the activation rates are very high because customers is either there. But you can't do it to all. You have to do it with safety and keeping certain...
What percentage? What percentage of 1 million, if you could, the gross additions that we have per month -- sorry, per quarter? What percentage of it would be the e-cards? Rough or a broad range.
So e-card we issue for all the customers now. So the only check that we do is whether the mobile and the e-mail is validated. So by default, an e-card is sent as soon as the card is generated on the -- link is sent and using that, the customer can generate the e-card online. And then subsequently on physical, we also give the card. So we do this as another way.
The next question is from Dhaval Gada from DSP.
Congratulations on the good set of numbers. I had 3 questions. The first one is for Aparna. So on credit costs, this quarter, we've seen that reversal of INR 76 crore provision that we created last quarter. And if you look at the annualized credit cost, it's around 6.5%, give or take few percentage point. So should we expect this level to sustain and improve in FY '23? This is a similar level that we used pre-COVID, so just trying to confirm that part.
The second question is for Girish. So on the revolver book, I mean, if I look at the incremental sourcing in the last 2 quarters, directionally, it's moving towards more customer segment where the revolver rates should be much better compared to the store and even the self-employed segment share is increasing. So just trying to understand when one should expect this incremental sourcing to get reflected in a better revolver rate and revolver book growth being much higher. So any, like, 2 quarters down the line, 3 quarters just when -- I mean indicatively, how much time it could take?
And last question is for Rao, sir. In terms of ROE for the year, we've ended at about 23-odd percent ROE in FY '22. Do you think 25%-plus ROE for the next couple of years on a sustainable basis is doable or any challenges that one should be cognizant of? Yes, those were the 3 questions.
So let's start with credit card funds, first. So specifically, the INR 76 crore was a discretionary provision we had taken last quarter just to be able to see that there was any impact of base fee. Since we did not see any deterioration in our collectability of floor rates or whatever, we've decreased that provision.
Now as far as the overall credit card goes, so if you see the number for this quarter, the number is 5.2% on the quarter. On a full year basis, we are at 8.3%. And like we've been saying in the past, you are seeing a sequential decline of that number. And even with, like I said, it's not really an impact.
So as far as the credit cost issue is, the majority of that is gone. If you look at our ECL rate also, we are -- if we remove even the existing INR 51 crores of management that we still carry, we are at 3.3%, which is broadly in the range of where we used to be pre-COVID, in fact, slightly lower than the pre-COVID level.
Dhaval, on the revolver, as MD, sir, was mentioning, we have seen from October in the month of November, December, January, February, both the revolver rate as well as the percentage of assets returning at around close to 27%. In the month of March, we did a program with Flipkart and we have done some other -- we've seen very good spends coming back in the month of March. And that, too, in the nature of discretionary spends, which is essentially travel, lodging, restaurants coming back.
This spend was -- so February versus March, the difference was almost INR 3,500 crores, which has got added into the denominator, but that spend has not got an opportunity to decide whether to evolve or to pay back or to get -- some part of it has already got converted to EMIs and that trend we are already able to see.
Regarding the new customer sourcing, yes, you're right, we have already started moving towards some of those segments where we have seen better revolver rates in the past. Those segment percentage in the new acquisition mix has increased. However, these segments take, as we have mentioned earlier also, anywhere between 9 to 12 to 15 months to mature. And some of these segments are only 3 to 6 months because the RBI data that we have is from November month onwards. We see a slight uptick compared to what we were doing earlier in those segments, which is a very minor thing, but it has to be on a weighted average basis, we will have to see the total as to how much impact it will have on the overall asset -- revolver asset balance. So that is where the state is as of now. We will -- as we see more data and information around these segments and how they are behaving now, we will keep everyone posted.
Yes, Dhaval, with regard to your query around ROE what will be the level in a year or so, I will not be able to give a number. But the philosophy-wise, we will be looking to sustaining the core performance. I mean by core performance, what I mean is nothing more for any extraordinary items like you were -- liabilities, what we got during the year or otherwise the kind of credit cost reverse what we have seen.
Whatever is a core operating performance, the attempt is to continue and sustain that operating performance. But one thing, 1 or 2 things we need to really look at as things pan out, funding cost-wise, we have seen the bottom. No way it can go down further, rather the bias is upward, actually, like given the kind of interest rate environment what we are seeing and the kind of inflation going up, the funding cost is likely to increase, particularly when we are also increasing our share of long-term sourcing -- sorry, long-term resources to reduce our assets, kind of interest rate sensitivity, obviously, that will also elevate funding cost, et cetera.
But we will be -- like the way we have increased the share of EMI loans or loans quarter-on-quarter, the attempt will be to improve it further to the extent possible. I'm not factoring in any positive benefit on account of revolver or anything, but these things actually, overall, will help us.
And of course, the second lever will be the acquisition cost. As I said earlier, definitely increasing the percentage of digital sourcing, is the target area. And in that initiative, we have a couple of second initiatives that are already there. We are hopeful of actually reducing the cost of reposition which can compensate for any other headwinds. So at minimum, we will be attentive to sustain the core operating performance.
The next question is from Nitin Aggarwal from Motilal Oswal Securities.
A couple of questions. Firstly [Technical Difficulty]
Mr. Aggarwal, your voice is not very clear.
Okay. Is it better now? Am I audible?
Yes, now you are.
Yes.
Okay. So sir, the question is around the composition of spends. If I look at Slide 11, across apparel and jewelry, there is a decline, sharp decline and probably due to the volatility in gold prices. And at the same time, the revolver rate has also dipped. So just trying to understand if there's a correlation here as in the customers who spend on jewelry, typically has a higher propensity to revolve, is that the case?
No. No correlation.
Okay. And sir, secondly, on the ECL provisioning now for Stage 2, we are seeing a decline in ECL provisioning for last 2 quarters. And while it seems to have settled down for state financing, so where do you see this now and trending into FY '23? And how do you see the gap between the credit costs now?
Stage 2 decline to a large extent is driven by the runoff of the RBI RE, so that's why you're seeing that shift. All of RBI RE, less than 90 days was all put in Stage 2, that's why you're seeing the decline. I think the number to look at, like I mentioned earlier, is the overall ECL stage. And on that slide, you actually see on Slide 18, see how the ECL rate has dropped.
We are now at a 3.3% overall ECL rate. And the distribution also is now pretty much close to 89% of the -- in Stage 1. So both of these trends are actually pointing towards increase in the asset quality. So if you look at how it's going, it's much better. We're back at pre-COVID level.
Right. And lastly, any thoughts on change in MDR, is that still in process? Any discussion with the regulator on this?
We haven't heard anything from the regulator because the announcement was more around coming over with a discussion paper by RBI. So we haven't seen any discussion paper in the public domain.
Okay. But that possibility is still open despite these recent circular that has come around the credit card, that possibility is still open?
We don't know. I cannot comment. It was announcement in December. So we don't know the thought process of RBI. We don't know.
The next question is from Param Subramanian from Macquarie Capital.
Yes, my question is again on the revolver. So I wanted to ask if there is any change there. Like, you're seeing behaviorally in the customer base compared to pre-COVID for this decline and revolver because this is clearly a bit of a issue? Is it that there are more alternative products in flexi loans, for example? Or are customers getting more from, say, digital medium to make repayments? Is there any particular change you are seeing behaviorally from customers? So that's my first question. I'll come back for a second.
So Param, you are right. There is some changes that we see. That is why even in our last commentary that we stated, that we would not, in the near term, foresee going into 33%, 33%, 33%, which we used to be pre-COVID. So that change is there. There is definitely a preference towards land purchases moving to EMI, because that growth we are already seeing in our portfolio also and that has become more popular. However, the revolve, as the stability remains, it has been seen across the world in all places. And we have also seen over a period of the last 20 years that as the stability continues and the people continue to spend on the card, over a period of time, when they have some amount of comfort with respect to their income spending patterns, the short-term lending needs of the customer, they fulfill through revolve. So that can be viewed that, that does come back over a period of time. It does take time. This is our -- as we said, we are also having more self-employed, some of those segments which we saw earlier had higher potency to revolve. So both the mix is now moving in that favor as well as the existing customers, once they see the stable environment, they also change some of it.
All right. Is this being led, say, by the availability of alternative products, say, for example, in the flexi personal loans, for example, which are a cheaper way to revolve than revolvers? Or is it, say, prompts from digital media, say, [indiscernible], for example, for making repayments on time? Are all these playing a part or is there any sense that this is a bit of a structural or a sticky issue? Or do you think that they should bounce back quickly?
See, some of these payment options were always available to the customer. So it is -- credit card customer has -- since 1990s has been the most premium customer in the industry. So people were always had options of PL and other kind of loans and they were taking all of these options. So it is not that those options were not available. Yes, more proliferation has happened as of now, so ease of availability is also there. So some of that might have an impact. But basic consumer behavior does not change that fast.
Perfect, perfect. Yes. And my second question was on the credit cards. Now that the revolvers are low, the NPAs are also very low and restructuring is also very low, does it mean credit cards were under-issued given the pre-COVID sort of levels. Any sort of guidance that you are giving over them? Yes, those are my 2 questions.
Param, I don't think we are in a position to give you the guidance for the credit cards. Well, actually, you have seen number falling down quarter-on-quarter. For this quarter, we are actually at 5.2%. And for the full year, we are down to 8.9%. The idea, like we said last time, is to -- we are in the business of taking risk. I don't think the plan is to keep bringing that down. There used to be a brand that was used to operate pre-COVID. And the idea is we will optimize the credit cards. We are not in the -- we are not saying targeting to bring it down absolutely. The number to look at is, if you look at our ECL rate, we are now at 3.3% ex management result, which is largely on account of the RBI RE. That is a good number to look at because that's the kind of number that we still will be operating at in the future.
The next question is from Nilang Mehta from HSBC.
Most of my questions has been answered. Just one quick one on landscape. And while you've seen some marginal dip in the market share and we've seen revival of few of the banks also at the margin, improving their market share and one large bank gaining a lot. So could you give a context on how does management think about market share? And is that a relevant metric to focus on? Or we are -- do you think that's definitely just an outcome and not something we are targeting?
Yes. Yes, you are right. There is a kind of action by the existing players. And there is also, I mean, entry of new players, which has expanded the card issuance -- on a monthly basis, when we look at it, it has expanded almost to 80%, 90% from a stable scenario what we used to see. Like a 0.8 to 0.9 million we used to see per month kind of issuance, but now it has increased to 1.9 million or so.
Yes, I mean, in terms of retaining the market share, that will also -- players will have to increase their issuing. But one has to look at the what's the kind of customer segment we are looking at, what is the opportunity, what is the cost of acquisition, what is the [indiscernible] or what is the value of the customer life cycle, et cetera, and what are the internal profitability metrics? So that way, our approach has always been a kind of calibrated approach. You would have seen like we have ramped up our issuance. In fact, for a large part of the time, we have been the largest issuer, but we had some kind of attrition. Let's say, the net growth is a cycle lower than the overall issuance.
So I think our aim will be to look at the opportunity. Of course, we have a good partnership with parent bank like SBI through the Shikhar kind of programs where we acquire the customers of even Tier 3, Tier 4 kind of accounts without having a physical infra. It's a much cheaper cost that we'll continue to leverage through the digital, YouTube, SBIC, that channel will also -- is expected to be fully operational very soon, and that will also help us. And partnerships, of course. We had, had very good partnerships. We continuously look for opportunities. So the overall approach is to ramp up but in a prudent way and which can give us a kind of sustainable growth.
Sure, sir. And then last quick question. So how are we doing on YONO app of SBI, so in terms of market share there or trend? If you could give some color there, it would help.
Market share on YONO.
Yes. So basically, you've given 2 sets of servicing on the YONO app. So we are, as a business, tightly integrated with the YONO app. What it means is that existing customers of the bank who come on to YONO can seamlessly apply for the SBI card. So that's on the acquisition side. Now one other set of features that we've given on YONO is around the servicing part. So what it means is that once you've onboarded and you've gotten a card from us through the YONO route or even, I would say, outside of the YONO route, any of our existing customers can go on to YONO and avail a set of services on the YONO app, which includes seamless ability to pay. So from your bank account, you can see that you view your credit card statement, you can view the bill and you can make a payment.
So in terms of integrating and embedding ourselves in the YONO ecosystem, we do already have a very, very strong integration. I think, sir, we also mentioned previously that our focus for the coming year is going to be on digital. We have put a digital journey, which -- so this pilot has been completed. A couple of products on our website are already there for an end-to-end digital acquisition. A similar road map, we reported on one of our digital transformation slides in the Investor Day, is being thought for the YONO route also, so an end-to-end digital journey via YONO is also -- so that's our play on YONO.
The next question is from Mahesh M.B. from Kotak Securities.
An add-on question to what the previous party highlighted. This year, you've grown the overall target over 17%. In your assessment, how are you looking at for the year '23?
Mahesh, we couldn't really understand the question. Can you repeat that?
Sir, just trying to understand what is, in your assessment, target growth that you're looking at in terms of cards for next year?
I think more than the top line, what we're looking at is, I said, like we also have a kind of attrition. So the determining factor will be targeting the -- improving the net addition. So that, we have been improving over a period of time. We used to be on 180,000, 190,000 kind of net growth per month. Now we have -- even in the month of March, we have taken it to around 240,000 approximately. So idea is to increase it to at least the kind of 300,000 over a period of time.
Okay. Sir, just one additional question. We were looking at your spending of your customers. Are you seeing more traction where existing customers are increasing limits and increasing spend? Or are you seeing more traction with new customers coming in and increasing the effects?
So good question. We -- this year was very interesting. We have seen both coming in, okay? So the average spend per customer, if you see, and that is declared, which is there on, I think, Slide #9, the average spend per customer in last year's Q4 was around INR 123. That has gone up to INR 161. So not only existing customers have started spending more, and this is what we have been stating in earlier discussions, that a lot of new categories have come in for the customer to spend the existing categories which had gone out. So travel is slowly coming back, not fully; restaurants is slowly coming back; railways is coming back. So there is still a whole lot of room to catch up on these ones. So both have happened in this year.
Okay. Perfect. And one last question. How many -- of your total card base, about 15-odd million, how much would be today's tap-and-pay cards?
Tap-and-pay.
So close to, say, 100% of our issuance that we do, they can do tap-and-pay transactions, okay? So all cards issued by SBI Cards can be used for tap-and-pay. Of the point-of-sale transactions, we see 1/4 of the transactions are coming as tap-and-pay.
Okay. And the customer is -- I mean, for you, are tap-and-pay customer is lot more active as compared to a customer who [ beeps ] the card?
You are absolutely right. It is that customer is more active and that customer's number of transactions in a month is higher.
Okay. And why not use [indiscernible] all of the card is tap and pay? Sorry, just a follow-on question to this. That's my last one.
Mahesh, we couldn't get that.
Yes.
No, just trying to understand, is there any -- if the success of a tap-and-pay card is much larger, is there any -- is it possible for you to kind of increase penetration by replacing existing cards with the tap-and-pay?
So -- okay. What happens is that with the tap-and-pay customer, a lot many more low-value transactions also start to come in because tap-and-pay typically now works with less than INR 5,000. Earlier, the limit was INR 2,000. So the customer -- what we have seen is that the tap-and-pay ticket size is less than 4-digit number, okay? So it remains in that degree. So you will have more transactions. But spend-wise, the business is there but not very high.
[Operator Instructions] The next question is from Karthik Chellappa from Buena Vista Fund Management.
My question is basically on the competitive intensity, per se. Do you feel that the competitive intensity of the industry relative to the last 4 or 5 years is possibly now at its highest level? And the context in which I ask this question is the #1 player is now back in the game. The #2 player in spend continues to be very aggressive. And the #4 player just did an acquisition, and if I look at their last quarter net adds it's almost equal to us in terms of number of cards. So none of these happened together anytime in the last 4 or 5 years. So is it fair to say that the competitive intensity is probably at its highest? And in that context, what is then a spend market share aspiration that we can have?
So you are right. Competitive intensity is amongst the highest that we have seen. And it is not only within the players within the industry. It is from some of those prepaid players giving OD limits on the card. So that is also -- whether you call it neo banks or a low-ticket size BNPL kind of a player. So there is competitive density from within the industry and outside the industry. As was stated earlier, we will continue to follow profitable growth. We have been in this business for more than 25, 23, 24 years. So more than 2 decades. We know how to play this. Even amongst all these changes, we have continued to sustain our market share. We will strive to grow it, but we will want to do it in a profitable fashion.
For example, we have increased our corporate card spends but we have not taken it to a level where -- which was possible, but has an impact of either a cost to income or in terms of profitability. So we will look at growth but also keep looking at profitability and sustainability in the long run. Competition is good. It gives us more opportunities. It also enables us to be nimbler. It also enables us to cut costs at places where we can do it. It will -- we will also go more digital, as was stated earlier. So all these actions, we will continue to do and stay sharper in the market.
Got it. Sir, one clarification, sir. The Q-on-Q decline in the income from fees despite the strong growth in spend, is that due to the March promotion campaigns?
In terms of fee, if you look at it, so spend have -- on a quarter-on-quarter basis is kind of low. So that impacts the interchange fees. However, our membership fees are higher because we've been sourcing now 1 million cards on a quarter-on-quarter basis, those have gone up. The interchange fees, purely because, first of all, spend were higher, so interchange accordingly was also higher.
Our next question is from Ravi Singh from Motilal Oswal Asset Management.
Sir, my question is about co-branded cards. Are we expecting any major impact because of the certification from the RBI in their recent Master Directions on the cards businesses? How are you expecting industry practices to change? Or any impact on your co-branded card? And can you also use this opportunity to just share some numbers on co-branded cards? I mean, how -- what percentage of your open source cards are co-branded card, assuming bank cards are mainly core cards or maybe as a percentage of spend? And how is the industry evolving, assuming that bulk of the major merchants would already be having some partnership. So how do you expect this product to evolve, and what role SBI Card will play?
So 3 parts to your question. First is co-branded cards as per the new regulation can only be -- a distribution partner can sell those products to their customers. But there has to be no data around those customers' spending patterns and other things to be kept with, somehow, with these co-branded partners. In the industry, this practice of some co-branded partners having the data started with some of these online co-brands. Before that, with off-line co-brands or fuel co-brands, this kind of practice was never there because there the co-brand was used as a tool for building loyalty. But however, with some of these online players, they use some of this data for further cross-selling their own products to some of these customers.
So that practice will have to stop as per the neo guideline, that data cannot be shared. Co-branded partners will remain very, very key, especially in going further in the digital environment as more new customer acquisition will go digital. Having those partners so that customer purchases the card in the path of purchase journey is very critical. Some of these partners also have lot of data which can be used as alternate data for underwriting at all stages. So co-branding will continue. I think it will continue to grow. It is -- already with some players, they either do their bank cards or some of these programs, while we do co-brands, time cards as well as open market. Yes. So this how it's going to continue.
The next question is from Prakhar Agarwal from Edelweiss.
Just a couple of data-keeping questions and then probably I have a follow-up. Sir, what was the revolve provision for this full year FY '22? If you could declare that number.
Are you looking at the quarter number? Or...
Full year number, full year number.
So full year, well, we have -- I'll give you the specific number. But in the beginning of the year, there was hardly any approvals because the spend had not started coming in. During the course of the year, we've made a provision of something like INR 100-odd crores accrual provision. But this is increasing on a quarter-on-quarter basis. So do not go by what has happened during the course of the year. But over a period of time, this will increase. And this is a good cost because this means that the customers are doing the spend and are using the cards and are also redeeming the reward points.
Okay. Just in terms of your fee income, sir, while I understand the fact that you said that your spends have increased, that's why your [ spend date ] even increased. But when I look at from a year-on-year perspective and I look at that MDR as a percentage of adjustment, that number seems to have gone up and substantially. What explains this fact? So MDR or intercharge fees that we probably charge on an average spend basis for FY '22, that number seems to have gone up.
You're saying the interchange fees has gone up? Sorry, I didn't...
Yes. So if I look at your spend base fees, which is as a percentage of our average spend, that number has gone up from FY '21 to FY '22. What explains -- and that's quite materially. So what explains that?
So because the spends have gone up, so the number has also gone up because interchange fee is earned on the spends. And a little bit of ForEx markup is also coming back, and since we are having higher spend, the network incentives, et cetera, some of the milestones have also risen. And that's the reason why the interchange fees or the spend-based income was going up.
Got it. And just one last data-keeping question. What was the write-offs that you did for the full year FY '22 gross number?
So it will be in the region of INR 2,400 crores, INR 2,500 crores, I'll give you the exact numbers.
INR 2,800 -- INR 2,800-odd.
Yes. INR 2,800-odd crores, including the settlement losses. Yes.
The next question is from Piran Engineer from CLSA.
My first question is that the share of new card sourcing from Tier 3 locations has gone up from 19% to 30% Q-on-Q. So what really explains that? And corresponding with the share of SBI Bank in the sourcing has gone down, and this seems a bit counterintuitive because I thought SBI was more for the Tier 2, 3 locations. So have we started open market sourcing in Tier 3 to get more revolver type of customer?
Besides the SBI, we also have partnership with some of the banks. So that will also give us actually a foothold into Tier 3, Tier 4. Yes, you are right. Slightly -- during the month of January, I think our SBI sourcing has slightly come down, that got reflected in the lower numbers for the month of January. But that was partly compensated by the sourcing of the partner brands.
No. But in that case, the Banca share should go up, right? It's gone down 300 bps or so.
So Banca is pure SBI sourcing. Other co-brand banking includes part of the open market.
Okay, okay, okay. Got it, got it. And just one other question, and this may be a bit silly, but through credit bureaus, would you come to know if your customer is using another credit card more often?
So yes, we do get. And if you see the -- some people's report limit, we do our quarterly bureau pull for most of our customers, for some we do monthly also. So you do figure out whether they have other cards, whether they are building balance in the other card. And all of that information is actually you can use not just on credit perspective. That information is also used by the marketing team to design appropriate offers, run activation offers and things like that.
The next question is from Shubhranshu Mishra from Systematix.
Just a couple of questions. One is, how do we look at the collections...
Ransh, we can't hear you. If you can be a little bit louder?
Am I audible?
You're audible, but the voice is slightly on the lower side. But go ahead, maybe we can hear it.
Sure. Sir, just wanted to check, what was the cost of collections in FY '22? And how do we look at the cost of collections as a proportion of OpEx going forward as the situation normalizes in FY '23 and '24? First one. Second is that we offer Encash -- I just wanted to clarify. We offer cash-only to the transactors or is it offered across the board to revolvers as well? And what is the terms of proportion of the receivables?
So I'll answer the second question first. Yes, we offer Encash to transactors primarily. Some revolvers, low infrequent revolvers, we do offer Encash. We do not offer Encash to continuous revolver or people who have been sustainably revolving. The rates are different. This is the way that we look at risk profiling of some of these customers. We have not declared the Encash number separately in our term balances. But as you can see, that the term balance on an overall basis is now almost 35%, 34% of the total overall asset. So there is a growth -- substantial growth that we are doing on the Encash asset.
So the cost of collection is around about 2% of the rupee collected and rupee recovered. And we don't see that this cost is going to go up now that we are stabilizing and we are out of the COVID period. So it should be around this number or maybe improve. That's we see this.
2% of what, sir? I couldn't hear...
That's the rupee recovered and rupee collected.
Right. And that remains same and business as usual?
Yes.
Right. Sir, one last question, if I can squeeze in, just a data-keeping question. What is the NUNP, never used, never paid proportion of our cards?
So we don't have a number at this point of time. But what we do is that if a customer is an NUNP customer and it goes into 90 days, we automatically reverse all the charges of that customer and block those customers. And over a period of time, period of 12 months, we exit them out of our portfolio. So it is not that we will continue to keep NUNP customers with us forever on a constant basis.
The next question is from Rahul Jha from Bay Capital.
So my question is the employee cost number has come down significantly this year, so what is that related to and how can we build it going forward?
Yes. So employee cost is more or less stable and we had answered...
No, as a percentage of income, I'm saying.
No, that's the beauty of it, that we don't have to employ that many people to increase as the business increases. But on a year-on-year basis, one thing that you have to keep in mind is that we have the eased-up costs, which is always front-loaded. So in the initial year, the cost is higher and then because also the fixed options that were given at the time of IPO, so those in the subsequent years come down. And that is also impacting this. We do use a lot of outsourced staff also for certain specific activities. And as the volume of business grows, it's not necessary that we have to hire employees. We use technology as well as outsourced staff manage the operations.
Okay. Second thing I have noted that over the years, from Q3 to Q4, generally the receivables will go down. But this year, that has not been the case despite revolvers being lower as a percentage of total receivables. So why is that happening this year, some spending differentials or something else?
So actually, that is what I was trying to explain. In the month of March, the spends came back very strongly. If you see month-on-month movement, March had close to almost INR 15,800 crores-plus spend on retail, which was higher than even the steep October season month. So a whole lot of that has not added it to the denominator. So that, you see as an asset at this point of time in the denominator on the balance. The asset does increase. The increase is not that high. So in the month -- J-F-M quarter compared to O-N-D, there is usually an increase, it doesn't go down, but it's a marginal increase.
Ladies and gentlemen, we take the last question from the line of Rohan Mandora from Equirus.
Just 2 data-keeping questions. One, sir, on the revolve, how are the average quarterly balance move Q-on-Q within Q3 and Q4?
So on an absolute basis, the revolver balance has actually increased although in the percentage terms you see it has declined. It is more, as was explained earlier, that last week we had a campaign which led to increase in spend. And that's why percentage-wise, it has dropped. But however, in absolute terms, the revolver balance has actually increased from Q3 to Q4.
Sir, can you quantify the increase, average, quarterly average?
Quarterly average in the sense -- are you asking about the revolve rate?
Yes -- no, no, revolve balances for October, November, December average?
Yes. Q3 to Q4, the revolve rate has been stable. It has not moved. It's the same.
Okay. [ Remained the same ]. Okay. And the second one, if we look at the slide, there's a sharp dip in the cost of funds by around 50 basis points. So...
Cost of what?
Funds.
So see, there's a little bit of play of averages. We've always stated that our cost of -- daily cost of funds have been around 5.3%, 5.4%. As -- towards the end of the quarter, if you increase the spend and increase the EMI, the cost of borrowing seems to be on the lower side. So that's the reason why you've seen it a 4.9%. However, on a daily cost of fund basis, between somewhere around 5.3%, 5.4%. And throughout the year, that has been stable. Having said that, as pointed out earlier, the interest rate have -- the environment has changed. The costs have started increasing. And so would be the case for us also, the cost of funds would go up. The numbers that are presented here are averages of receivables. So that's sometimes what's misleading.
Sure, sir. And sir, just lastly, increase -- as interest rates are likely to go up, will we look to increase the yields that we charge on the EMI portfolio? Or will that remain a function of the competition?
So at this point of time, we look at both the cost of funds as well as what is the competitive rate. Whatever we give to our customers is at fixed rate. We are not issuing, giving loans on variable or floating rates. It's only on fixed rate, as Rao have said. So we review this every quarter. And if it is required, we will increase. But I'm looking at both the scenarios. Competitive scenario is also as critical. While it has to be above the benchmark rates, we will look at competitive scene also to build the balances.
Sure, sir. But hypothetically, in case the competition doesn't move, then we will also not move. That will be a fair assumption to take?
Yes.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Rao, MD and CEO of SBI Cards, for closing comments.
Thank you, Stanford. I must thank all my colleagues at SBI Cards, who have worked spiritedly and tirelessly while helping SBI Cards to navigate with a volatile environment. I would also like to thank our shareholders and business partners who showcase continued faith on us and they supported us throughout our journey. I would like to reiterate that as an agile and adaptive organization, we will take all measures to safeguard our business while pursuing sustainable and profitable growth.
As I conclude, I will request everyone not to lower their guard and continue to take all measures to stay healthy and safe. Thank you all, and have a good evening.
Thank you very much. Ladies and gentlemen, on behalf of SBI Cards and Payment Services, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.