Ladies and gentlemen, good day, welcome to SBI Card's third quarter FY 2021 earnings conference call. As a reminder, all participant lines will be in the listen- only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwini Kumar Tewari, Managing Director and Chief Executive Officer of SBI Card. Thank you, over to you, sir.
Thank you. Good evening, everyone. On behalf our company, SBI Cards and Payment Services, I extend a very warm welcome to you and thank you for joining us today for the investor call on third quarter results of FY 2021. I'm also joined by all my senior management here who are there to answer your questions after the call. Hope you're all keeping safe. To start with, I wish you a very happy and prosperous 2021. The initiation of vaccination with the start of this fresh year has brought new hope along with the learnings of 2020. 2021 indeed is a special year, a year of new hope and aspirations. Before going any further, we would like to extend profound gratitude towards everyone, especially our employees, who helped us sail through this unprecedented situation and the challenges of 2020 through their commitment and relentless effort.
I also wish to thank all of our customers for supporting us and continuing their patronage with us during this difficult time. The business trends in Q3 have been encouraging. The credit card industry has registered a positive growth YoY for the first time in November 2020, after the COVID-19 disruptions in terms of spend. It is significant to note that SBI Card achieved this milestone of higher spend YoY a month earlier than the industry. The overall retail spends surpassed the pre-COVID-19 levels. Q3 FY 2021 daily average spend was higher by 125% sequentially over Q2 and 117% versus Q4 FY 2020. Spends have grown by 8% year-on-year to INR 37,797 crores for Q3 FY 2021. Our average retail spends have improved across most of the categories apart from travel and entertainment. Especially, the online spends have shown a significant growth.
The online spend proportion in the overall spend has increased to 53.4% for the nine months of this financial year, compared to 44.2% for FY 2020. What's heartening to note that with unlock measures well underway during Q3, even the offline spends have gained momentum, therefore, if you would note, about a quarter back our online spend proportion was 54%. It has come down, not in absolute terms, but in percentage terms because offline has picked up. We have steadily been growing our market share in terms of cards in force and spend. I'm happy to share that our market share for cards in force has grown to 18.8% as of November 2020 from 18.1% in Q3 of last year. This is as per the last RBI data available.
For spend from a YoY basis, as of November 2020, it has grown to 20.1% from 17.8% in the nine months of the previous year. The cards in force has witnessed a healthy 15% growth. The cards in force currently stands at 11.5 million as of Q3 FY 2021 from 10 million in Q3 FY 2020. This improvement paves the path towards recovery of the business environment. In Q3, our new account sourcing was at 918,000 accounts, which was 134% sequentially over Q2 and at 107% versus Q4 FY 2020. In fact, in the month of December, we did almost 340,000 accounts, which is the highest run rate since beginning till date. Q3 also witnessed some significant partnerships which we inked. For instance, the partnership with Paytm, which is India's leading digital financial services platform, aims to cater the rise of next generation credit cards.
Another significant partnership was with BPCL for the launch of BPCL SBI Card Octane, which is a premium version of the existing card to offer a vastly differentiated and enhanced value to the mass affluent customer segment. Before I get to the financial performance of Q3 FY 2021, let me take this opportunity to reiterate some key facts about SBI Card's business and the environment. Our business fundamentals are robust. We have in place healthy and compliant financial and corporate governance principles, and this forms our core strength. We have continued to grow the business by leveraging on our strengths. The support of the parent is one of them, capitalizing on India's favorable economic and demographic changes, including its strong macroeconomic performance, rising affluence, increasing consumer demand, rapid urbanization, and the growth of e-commerce platforms. These are secular factors and would not change in the near term.
We are continuously monitoring the external environment. 2021 has started on a positive note with launch of COVID-19 vaccine, which may have favorable socioeconomic impact. While this indicates a positive future outlook, we remain cautious and observant of the opportunities and challenges. Let me now take you through our financial performance for quarter three FY 2021. On profitability, while the business environment continues to be uncertain and challenging, the company has performed steadily and delivered profit after tax of INR 210 crores for quarter three FY 2021 and INR 809 crores nine months ending FY 2021. The receivables have grown by 4% year-on-year to INR 25,749 crores in Q3 FY 2021 from INR 24,776 crores in Q3 FY 2020. This is the first time that the receivables base has outgrown the pre-COVID level.
Total income for the quarter is at INR 2,540 crore, which is largely flat compared to Q3 last year. On a YoY basis, total income is at INR 7,235 crore. Increased business uptake in terms of new accounts and spends in quarter three required higher investment in terms of acquisition costs and cashback expenses. While the festival period of FY 2021 fell completely in Q3, it is to be noted that festival period in the last year overlapped between Q2 and Q3. Therefore, all the cashback expenses were taken in Q3 this time. We believe that the benefit of business growth may follow later, consistent with our business model. We are already seeing this happen in Q3. Our enhanced focus on collections also required higher outlays.
For quarter three FY 2021, while our net revenue grew by 3%, the operating expenditure was higher by 7%, driven by the factors mentioned earlier, which is the higher cashback costs and the higher collection costs, which led to contraction of earnings before credit costs by 3%. However, for the nine months of FY 2021, we have a positive leverage of 8%, leading to higher earnings before credit costs at 13% YoY. The credit risk situation continues to be impacted by macroeconomic variables surrounding us. Post-COVID-19, the assessment of credit risk in the financial services has become complex, and it is also influenced by the RBI moratorium and the Supreme Court orders on NPA standstill, effective August 31. To cover ourselves for future credit risk, the overall management overlay stands at ₹1,113 crores as from December 20. This is over and above the base provisions of ₹940 crores.
Our GNPA is at 1.61% compared to 4.3% at Q2, and proforma GNPA, including the SC as Supreme Court standstill is at 4.5% compared to 7.5% in Q2 FY 2021. Net NPA for the period, therefore, is at 0.56%, and proforma net NPA is at 1.6%. The performance of RBI resolution book was not available in the previous quarter. In this quarter, we have better information on that book and as of December 20, 33% of RBI book is delinquent between 30 days and 90 days. On this book, which is not yet NPA, from a provisioning perspective, we have provided the same Stage 3 ECL levels. Further, NPA standstill matter is still at the Supreme Court and is ongoing, and from a provisioning perspective, we continue to provide it at Stage 3 ECL levels.
The SC standstill book has caused a portion of our book not getting aged and being included in the proforma GNPA. If this situation remains the same, the SC standstill book will continue to adversely impact other proforma GNPA numbers for the next quarter. As in the normal course of business, this book would have been written off and moved out of GNPA. For the quarter ended December 2020, the return on average assets is at 3.3%, and the ROAE at 30 is 13.8%. For the nine months ended FY 2021, the ROAA is at 4.3% and ROAE is 13.5%. On liquidity and capital adequacy, our liquidity position continues to be strong during quarter three.
Our capital adequacy ratio for the period ended December 2020 is 23.7% as compared to 19.2% at Q3 FY 2020. In FY including Q3 FY 2021, our T1 ratio has moved to 19.8% from 15.4% at Q3 FY 2020.
Our credit ratings remain excellent with A1+ and AAA ratings by CRISIL and ICRA for both short-term and long-term borrowings. The strong credit ratings have been recently reaffirmed by the rating agencies and reflect our robust business and financial fundamentals. Our recently implemented sustainability policy continues to strengthen our commitment towards a better society. Our digital interventions through paperless communications enabled the saving of over 1.96 lakh trees as part of ESG initiatives during the year. Our social interventions for community development remain strong. I would like to reiterate our business operations have continued during COVID-19 lockdown and have steadily started generating growth. We remain committed towards supporting our colleagues and customers for remaining financially robust. Today, SBI Card is the largest co-brand credit card issuer in India.
Based on our reports, SBI Card continues to be the second largest credit card issuer in India, both in terms of number of cards outstanding and amount of credit card spends. We are also the largest co-brand credit card issuer in India. Our availability of products and services supported by a strong technological background, advanced risk management and data analytic capabilities, customer centricity, values of trust and transparency, and strong lineage will continue to drive our growth. Thank you very much for your time. I will request the operator to please open the line up for any questions you may have on the performance of the company. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question, you may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. We request the participants to restrict to two questions per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wishes to ask a question, you may press star and one. The first question is from the line of Dipan Mehta from Elixir. Please go ahead.
Yes, sir. My question relates to the surprising drop in the NPA, which is quite impressive. Can you give us some flavor as to how we managed to reduce the proforma NPA so sharply in just three months' time? That's the first question, sir. Hello?
Okay. On the NPA piece, actually, this is a mix of both. We have written off almost INR 652 crores during this quarter three, and also we have managed to recover and resolve through the RBI resolution plan and other schemes, a sum of almost more than INR 400 crores. That is the reason why you see this sharp fall in the proforma NPAs, including the Supreme Court standstill. I would, however, point out to the fact that RBI books, which have much clearer visibility, those not NPA, but in the next quarter, some portion of that might turn delinquent. Therefore, we have already provided for that. If you include all of that, then we are still better than what we were at previous quarter. Dipan, would you like to add anything?
Right, sir. My second question relates to operating costs, which have increased significantly quarter-on-quarter. If you can just throw some light on that, sir. From INR 11 billion to INR 1,348, sir.
Yeah. There are two elements to the operating cost, which I alluded to in my earlier comments. The first one is that we had the festival season in this period, and we had two or three big campaigns. One was the Flipkart campaign, Big Billion Days campaign, which was a six-day campaign, and we also had other campaigns around the festival season. A lot of those cashback offers, which last year were split between Q2 and Q3, this year were all in the Q3 period. You will see as part of the operating cost, marketing cost, and the cashback cost have gone up significantly. That is one. This will help us going forward when these spend, which have gone up significantly, will convert to EMIs and will deliver the interest income. That's the first part.
The second part is the collection cost, which have gone up significantly in both Q2 and Q3 because the collection machinery is all geared up and working on the account. In the coming quarters, this collection cost is also likely to come down because for those accounts which we have been trying earlier and which we have not succeeded in recovering, we are tapering away and we are not assigning it both to all channels. It is only limited and focused teams which will work on these assets. Therefore, these costs are both likely to come down to the normal levels in the quarter four and going forward. Nalin, anything else you want to add?
No, sir. I think you've covered.
Right, sir. Thank you, and all the best.
Thank you.
Thank you very much. The next question is from the line of Nishant Shah from Macquarie. Please go ahead.
Hi, sir. Congrats on the good set of numbers, the sharp improvement in asset quality. I had a few questions on the asset quality front itself. In the RBI RE book, just so I understand this correctly, no RBI restructurings are INR 100 crore or INR 613 crore this quarter, and INR 377 crore is the EMI payments received from the accounts which were earlier restructured. Is that correct?
Yes. given the book here,
Yes.
That book is slide 17. I'll just repeat it for the benefit of everyone, and then I'll answer your question. If you recall, we were at INR 2,108 crore as of September. We had a fresh booking of 613, so that took us to 2,721. We recovered, because these are being paid, not everything is closed. Some are closed, but others are paying, and that number is 377, and that brought us to 2,344. That's the RBI work through. The 377 number if you see is people who have paid their balances and some have even closed it. That is the number.
Okay. This 777 number, which is 33%, I assume, of the INR 2,300 crore.
Yes.
These are the accounts within the 2,300 which are in 30 or 90 day debt. They have not slipped yet but have exhibited some stress. On that you've already provided for 65 odd percent provision coverage. Correct?
That is as we provide on our NPS, the same proportion we provided. Yes.
Perfect. Could I press you for the one to 30-day number within this 2344?
We have not declared this one to 30-day number. What I would only like to point out is that a significant portion of the book, which is close to half the book has paid all our installments. Now, we have not declared this number, so for me to disclose it in the call wouldn't be in order.
Okay.
I can tell you that 50% of books have paid almost all the installments, three or four, whatever due.
Perfect. Yes. A separate Sorry?
Nishant, technically, everything other than the 777 is paid once. Okay? It is all less than 30 days past due.
Yeah. Oh, okay. No, I was just hoping to see how many of them have paid each and every installment so far. Fair enough. That's helpful. Second one question on your yields. There's now kind of a sharp decline in the yields this quarter. Is the assumption right that this is largely because although the has been broadly same, it's because of the period versus daily average kind of differential in the loan points?
The yields have come down actually for two or three reasons.
Okay.
One is that in Q2, we still had a large proportion of the revolver book. Though they were delinquent, but the interests were still accruing. Therefore, we had a higher yield. Now, a large portion of that is converted to the RBI resolution, which is at a much lower rate of interest. As this book runs off, and you have seen this run-off of close to INR 375 crore in the quarter three, and we hope similar number we'll have going forward as well. Therefore, as this book runs off and our EMI book, which is typically at 18%-20%, that goes up and the revolver behavior returns. We have to remember, 9% of the book, which was largely revolver, suddenly went off and at a much lower yield.
Therefore, that is the reason. We hope that this will come back as this ratio reverts back to our usual ratio of transactors and revolvers and EMI. Currently, the transactors are at a slightly higher percentage of almost 33%, which in the usual run used to be around 27%-28%.
Got it. Perfect. Just one last question. One of our competitors has been barred from acquiring new cards. Is that a material benefit or is that nothing to bother ourselves with?
While we never comment on what the competitors are doing or what they've been exposed to, there's a very logical way to look at this, which is that if somebody who's a leading market player is not sourcing anything, those customers who need those cards will go to the alternatives, which could be us or could be the other players as well. In that indirect sense, maybe there could be some gain, but we don't look at the competition to decide our strategy. We do it independently.
Perfect, sir. Thank you so much. Congrats with the results. I'll come back in the queue for more. Thank you.
Thank you, Nishant.
Thank you very much. The next question is from the line of Jaimin Shah from RWC Partners. Please go ahead.
Thanks for your time and great improvement in asset quality. A good surprise from you. Two questions on my end is, could you talk a bit on how these RBI restructured or the pro forma NPAs, in terms of behavioral change, what you see when you go for collection? Why were they not paying in September and suddenly they started to pay? I'm not undermining your effort, I'm just trying to understand, at their level, how was the indebtedness and they were able to now repay? That's question one. I'll go to question two in a minute.
Yeah. Jaimin, thank you for that question. Actually, this is a very nuanced question. Before September, what was happening is, one, that the RBI, we did not have a tool, basically. We only had the easy payment plan which are in-house paying. The other tool was restructuring, which would have let the account become NPA and therefore colored the credit bureau score of a person. People were really very wary of whether to go in for a restructuring which would qualify them as NPA. Once we got this rule, we restored these people. We told them that this is the proper way in which your credit bureau profile would stay protected, those are restructured live will be up, and you get to pay at a very lower rate of interest, which is a fixed rate of interest, 14% and 16%.
We pushed it very much. That really helped to bring around a lot of people who initially also had the thought that maybe they will get a significant relief from the court and that thankfully also came during October, November. Whatever relief had to come, did come. Our maximum sourcing of RBI, if you ask me, happened in September. Therefore, November, December was very tapered. All the bulk of it happened in September and October. Many of these people who are sitting on the sidelines and maybe thinking that they would get a large waiver from the courts or from the government realized that it was not going to happen. Secondly, some of the people at least got time to resolve their cash flows while they got this time. Mix of those two, I guess.
We have no clear answers because when we talk to the customer, they always ask for whatever concessions we can get them.
Okay, fine. This is helpful because, as in given the September quarter, there were question marks on our sourcing and we had probably gone too far to get the customers and which is showing up in numbers. This kind of allays that concern, so that's very helpful. The other question was more on the growth and the spend. Just wanted to understand how the behavioral changes have happened on spends. Last time we spoke that once you give the card, it takes about nine to 12 months to get activated. Is that changed? Are people more inclined to start to spend now given that this is trend in terms of digital payments, et cetera? Also wanted to get a sense on this Google Pay linkage we got.
What are the metrics we have seen since the linkage and any thoughts how we can push the spends even on the lower ticket items?
On the spend side, we have told in the last quarter and many other calls that we saw a secular shift happening, which is the online spends increasing. Online spends had gone up to as high as 54% of the overall spends and 114% higher than pre-COVID. We are seeing this trend sustaining. The number for Q3, as I mentioned in my comments earlier, was 53.5%. That is not because the spends have come down. This is only because the POS has started going up. The offline spends have also started going up and overall the spends are back to pre-COVID levels. What has changed is in between categories.
While I'll give Girish the opportunity to explain, but I can high-level tell you that categories like apparel, which was not a very popular online purchase, has gone up by as high as 539%. That's a massive YOY shift. Similarly, there are other categories. On the activation, et cetera, I'll ask Girish to respond. Girish, you go ahead.
Yes. Thank you, sir. There are three key trends as has been mentioned. One is that the online spends continue to be above 50% +. Secondly, as you see from Q2 to Q3, the movement in point of sale was down 67% and now is down only 42%. That's a very positive movement in the point of sale. This is despite the travel agent and that category is still down at 42%. Overall, we see a much POS coming up as close to what pre-COVID level than it was earlier. The other piece which is very heartening to note is that the EMI conversion remains very strong.
We see a lot of conversion which we were seeing earlier from spends to EMI, even though the departmental stores as a category and fuel as a category has seen a larger growth. As a percentage of spends, we see that the EMI conversion remains very strong. The last piece is around contactless and consumer behavior for online. More than now, one-fourth of our transactions are contactless, and with INR 2,000 going up to INR 5,000 as per RBI guideline as a minimum, we believe that should be very helpful because almost 100% of our cards that we subscribe with are contactless cards. We also, as you were mentioning, the Google Pay partnership and host card emulation technology that we have for our customers. We believe that's going to give a flip. Online, very strong. POS coming up. It has already picked up quite well.
Travel, still not there. Once travel comes up, we will see further more growth in that category. On the Google Pay piece, that's the question you asked. We are seeing a very good traction. We've seen more than now 50,000 plus transactions on a monthly basis on the Google Pay platform. Good small ticket size, which is the category that we wanted to enter. Even as of now, not all merchants are accepting card there, because some merchants still accept only UPI as a platform benefit. Hopefully, as it grows, we will see the traction there, and it's growing month-on-month.
Great. I'll go back in the queue.
Thank you, Jaimin.
Thank you very much. The next question is from the line of Mahesh M.B. from Kotak Securities. Please go ahead.
Good afternoon, sir. I have a slightly long question, so just bear with me as I highlight this. If I go to slide number 17, I'm just trying to understand how have you broken up this management overlay provision. I'm just trying to understand if we are right on this or not.
If I minus pro forma gross NPAs minus pro forma net NPAs, I get a number of 2.9%. If I minus the gross NPAs and net NPAs on a reported basis, I get roughly about 1% which is sitting there. The difference between the two essentially is the provisions which you may have created for the management overlay, plus the seven-seven-seven which is there in the 30 -9 0 day for which you make 55% provision. That also is in the management overlay. Is that understanding correct?
Yeah. Anything other than the NPA, which is a declared NPA, everything else is a pro forma. Whether it's a Supreme Court standstill or the RBI RE which we have provided, which is not yet NPA also. That is how it is. Aparna?
That's correct. His understanding is correct.
If I go with that line of thought, then essentially, you have made roughly about, let's say, INR 480 odd crores pertaining to the revised gross and net NPA and about INR 500 crores for the RBI RE-related provisions. Is that right?
Yeah. 65% of 777. That comes to around that same number.
Mahesh, the only thing is 10% in any case, one had to provide, so 55% will be the overlay. Around about INR 430 odd additional correct.
Okay. That essentially means that what extra you have in valuation is nothing. You just have a little over INR 100 crores. Is that understanding correct?
After covering the SC standstill and RBI RE, there is still some provision available.
It's not much, right? It will be over INR 100 crore?
It'll be somewhere around INR +200 crores.
INR + 200 crores. Okay. That's clear as well. Just one last question. I just wanted to check, is there any possibility that you could start disclosing what is your profile of utilization based on various customer segments at a later date? Just kind of a brief, because we still are struggling as to which part of the portfolio is seeing the maximum stress. Just either from a credit score perspective or from a utilization of card perspective, some incremental data would have been helpful.
Yeah, Mahesh, we don't disclose that, but on a generic level, we have been disclosing in the calls that the self-employed and the category C, which is basically MSME and smaller companies, that is the segment which has seen the maximum stress. In addition to this, there are certain sectors like airlines and hotels and entertainment. Those sectors continue to be stressed. Whether they were in salaried category or any other category, if they have a jobs problem, that category is showing some stress. Large stress pools are self-employed and category C. We call it category D now, but earlier we used to call it category C. Those are the sectors.
Thanks a lot. Aparna, just one clarification from Aparna. This INR 777 crores which is there, you started off with a restructuring exercise and the customers did not even pay even one installment or did they attempt to make some installments and they kind of completely given up? How should we read it?
No, it's not that the entire book, they have not paid anything. Some of them have paid one installment, some two. They are delinquent for more than 30 - 90, that's all. It's not that this book has not paid at all. That's not the case.
Okay. There is some evidence of an interest to pay.
Correct.
Okay. Perfect. Thank you, sir.
Thank you.
Thank you very much. The next question is from the line of Anuj Singla from Bank of America. Please go ahead.
Thank you very much. Good evening, sir. First question, again, on slide number 17. When I talk about the RBI RE book. Can you confirm how many payment cycles we have seen in this book till date? Will it be fair to assume the X of the INR 777 crores of book, which is kind of delinquent, the rest of the book is kind of seasoned, and we can expect that payment trend to continue. Is that a fair assessment?
That is largely a fair assessment because while we have not disclosed these numbers, cycling numbers, but the bulk of the enrollments happened towards the end of August, September, and sometimes something in November. I mean October. About, as you see the INR 613 crore which happened after 30th August, that number was largely done in October. That has seen only about maybe November and December, two cycles. Just prior to that, up till 30th September, whatever was booked has already seen three cycles. Of course, September and all has seen four cycles. Therefore, those who have paid three to four installments together, and as I mentioned earlier without giving a number, that's close to 50%.
Therefore, we can safely say that if somebody has paid three to four installments and many of these have only a term of six months, in the next couple of months they would actually have paid the full thing. From that perspective, it does seem that the book will continue to behave in a similar manner. However, since the economy outside is still a little uncertain, we cannot give a firm guidance as to this will continue. Our initial observation is good and hopefully this will continue like this.
Okay. Understood. Second question is again, this 9% of book. What is the tenure on a maybe weighted average basis? We offer two plans, 24 months and 12 months. What is our weighted average tenure for this book?
Do we have that number?
I don't think we have the weighted average, because we offered only 12 and 24 months.
Somewhere in between.
Somewhere in between. We don't have it readily available.
What I'm trying to get at the drag on the NIMs or the yields, when can we expect that to normalize? That was the key intention.
Actually, a couple of things are happening. One is that a lot of people that enrolled for, let's say, 12 or rather 24 months, they are paying upfront, and we have no penalty for paying more or earlier. Some of them are coming back and saying that you reopen a line once we pay upfront, et cetera. We are seeing all shades. I think we will have a much clearer picture by quarter four, by which time most of these people who have the money would have either paid up or settled and we would have clarity on that. At this point, a weighted average number would still be a little early in my view.
Okay. Understood. Sir, you also talked about the receivables mix. The revolver has gone to a multi-quarter low of 29%. How should we look at this number and the corresponding yield trajectory when we look at maybe in FY 2022? What kind of maybe uptick in this number should we be expecting?
Two things. One is that, as I mentioned earlier, that we had lot of spend from the festival side in the quarter three, especially around Diwali and that festival between Durga Puja and Diwali. That has converted to assets in the usual way that we have, and that is converting to EMIs. The effects of that we'll see in quarter four. Again, during this time, the Republic Day sale, we are again partnering with Amazon and we are seeing fantastic results, actually much more than what we had budgeted for. All of this is giving us hope that this spend will convert to the EMI. EMI should trend back to the normal level, which was around 30% or thereabouts. What was it number? It might be 32%.
We are hoping that from 29 it should trend back to maybe 30% + in Q4, and going forward it should trend back to that original number. On the revolver side, actually, again, right now it's very low. What our hope is that as these RBI RE people continue to pay up, and many of them actually have paid, let's say, six months installment, we will start to reopen their line. These are the people who used to revolve periodically, not always. Hopefully all of these actions together and the new customers which we are getting, which will start to get seasoned, all of that will start to trend back the revolver number. If you add the RBI RE book, large portion of which was revolver earlier, plus the revolver today, we are back to 38%.
Our hope is that as the RBI RE book trends down, we reopen cards, we get more customers, we will have that number. The revolver book will probably get back to where it was sometime in the next year. Not going to happen very quickly.
Anuj. Are you here?
Yeah. Anuj, are you there?
Yeah. Sorry, I was on mute. Sorry. Can you hear me?
Now we can hear you.
Sorry, last question. Recoveries, INR 135 crore is again very significantly higher YoY, QoQ. Is this a function of the front loading of credit cost we have done and write-offs we have taken? Should we expect this number to remain elevated given our focus on collection and our write-offs we have taken, maybe in FY 2022 we can see an elevated number on this? Is that a fair assumption given that we have already taken the write-offs early in this cycle?
It is a mix of both actually. One is that the write-offs are higher, therefore the pool itself is higher. You have to look at that in the business as usual. We never had a 1% recovery rate. It used to be much lower than that. Therefore, the 1%, which is an improvement over the previous quarter, actually tells us that the focus on recovery and the collection efforts have also played a significant role. Both these things together, and our hope is to continue with this number till we have a significant pool of written-off accounts to continue to extract and continue to focus on these customers. Anup, would you like to say something else?
Sorry, ma'am, your voice is not audible.
Yeah, just hold on a minute. We have the collection head here, so I would ask her to actually pitch in. Yes, ma'am. Go ahead, please.
Sir, the recovery efficiency has gone up on account of collection efforts as well as the fact that there was a write-off also that happened in quarter one. Quarter one, since the lockdown was there, and that write-off actually happened because of. When the write-offs have come, we have begun to actually extract from that and can extract better, in fact. Both have added to the recovery efficiency to go up, and we hope that since the write-off has been taken quarter three little higher, the fact that we'll try to maintain this consistency in quarter four as well.
Thank you. Thank you very much, sir. All the best.
Thank you, Anuj.
Thank you very much. The next question is from the line of Anand Laddha from HDFC Mutual Fund. Please go ahead.
Hello, sir.
Yeah, Anand. Please go ahead.
Sir, if you can give some color on your RBI RE book or what the learnings we had in terms of what was the sort of category of customer who didn't pay, who took the restructuring, were they self-employed customer or salaried? What was the utilization level on their cards? Were there any early signs that you could have noticed that these customers are a borderline customer or are risky customers? All this should, the learning what we have, if you can share that. What's the outlook on credit cost for next year? Given that this year will be closer to 10%-12% of credit cost, should it go back to our normalized level of 6%, 6.5% credit cost next year?
Anand, see subject to the economy, because that is something we cannot predict. Hopefully, it will continue to improve and continue to be better than what it has been. Subject to that, the credit cost should be lower because we are cleaning up this year whatever was there. If the Supreme Court hopefully lifts the stay, we will be able to clear up the book also as well. That's one. Second is in terms of whether these customers were border customers or whether they had any inclinations. I think I mentioned in my earlier calls that almost 54%-55% of these customers in the previous 24 months had not missed anything, maybe missed a couple one installment at the most. They were largely good customers.
The surprising thing is that while on a whole, the self-employed segment and the category segment did see more delinquencies, there is no pattern to this that these kind of customers were likely to default. We don't see that pattern at all. In fact, in the last week, I mean last 15 days of December, most of the senior management team, full-time employees, they were all out on the street trying to meet all the customers who were not paying up, whether they are in RE or any other segment. We heard different stories. People had lost jobs, they were struggling with education, struggling with paying fees for their children. I mean, good people who are middle-class people and people had gone to their villages, I mean all kinds of shades.
We really don't have a visibility as to what the signals could have been on particular kind of customers. The learning is that we need to continuously be in touch with customers, continuously monitor them and the portfolio basis, look at all the alternate data, and that is the models we are building now to incorporate all the alternate data which could be leading indicators rather than the default occurs and then we get to know. I think lot of learning in terms of what to do to monitor things. In terms of if we could have guessed these were the customer who had to default, no, because the credit scores were good. They were all paying well for the last two years and we always consider them to be good customers. They still are. I mean, they're not shying away. They're not running away.
They just have a situation.
Our LGD assumption are 65%-66%, sir.
Sorry to interrupt you. Sir, may I request you to speak a little louder?
Yeah. Hello. Sir, our LGD assumption are 65%-66%. Despite this customer being good customer, good credit score customer, we still believe we will have an LGD of a certain percentage? Do you think this LGD will come down for us?
As I mentioned, this 777, it is not that all this entire book has not paid anything. No. Some have paid one installment, some have paid half installment, some have paid two installments also. Just that as on 31st December, they were overdue by 30 days or more and below 90 days. Therefore, we don't expect this book to all become delinquent and be written off. No. We do believe that we will be able to recover a part of this book. However, as a matter of caution, we have provided just 65%. It doesn't mean that we believe that it will be 65% delinquent going forward. No, just a caution and just to comfort that we have provided extra. If we are able to recover, well, we'll use that provision elsewhere. We have done that in Q2 and Q3.
Whatever we have written off, whatever provision was released from recovery, we have not written it back. We have used it and kept it as an overlay, I said.
Lastly, sir, this time the other income was higher, could be because of recovery from written off asset. If you can give any color of what sort of recovery can we expect going forward or this quarter what we saw it was a one-off?
You saw the RE book. INR 377 crores was recovered and resolved from that book. Therefore, the recovery is something we will continue to see going forward, especially from the RE book. Only SC standstill is a little tricky because that is already a seasoned book and people have not been paying. There possibly we'll have to have more of settlements and more of extraction or legal rather than actually a recovery. Nalin?
I'll just add to what Mr. Tewari said. INR 377 crore is the normal collection that we received from our RE. The other income that you see is the recovery from the written off account that we have collected, Anup had spoken about it quite well earlier about this.
Okay. That's all, Nalin. Thank you.
Thank you, Anand.
Thank you very much. The next question is from the line of Ajith Kumar from Ambit. Please go ahead.
Hello, sir. Thank you for taking my question. Just one question. In one of the earlier calls, you had highlighted that you have tightened the credit criteria for self-employed segments and sourcing from external channels. The share of self-employed segment in new sourcing has been consistently increasing in the last three quarters. It was 21% in 1Q, 22% in 2Q, and 24% in 3Q. Further, even within salaried, the share of government and PSU segment in new sourcing has been coming down consistently in the last three quarters. Similarly, sourcing from external channels have also increased from last quarter. Why is this happening, actually?
You're right, the self-employed proportion in the new sourcing has gone up from 21, 22% to 24%. Out of this 24%, the open market is just 4%. 20% is from SC. SC, as we have been explaining time and again, that SC is all pre-qualified through the Shikhar program which we run, where the data, based on certain qualifying criteria like, let's say, the liability balances or personal loan account, et cetera, from the bank, goes to the bureau, and after pre-qualification, then it comes to our executive and the bank executive who together market it. The performance of this segment in SC is known for the delinquency levels. The SC delinquency levels overall and also within the segment are far lower than what they are for open market.
While the proportion is going up, it is only in SC, not in open market, where we have cut down this segment significantly. Whatever tightenings we have done and those tightenings remain in place as of now.
Okay. The share of government or PSU segment in the new sourcing within the salaried part, that has also been coming down in the last three quarters.
I think that's marginal. That's not very significant. In fact, what is also happening is that we are actually engaged with a lot of government agencies or government ministries, et cetera. This is an ongoing program, so we hope to have this back on, not as a conscious policy. Just because the self-employed has gone up a little bit, it has fallen. Absolute numbers is going up.
Okay. In terms of share, in 1Q it was 47%, in 2Q it was 42%, in 3Q it is 38%, actually.
I think this number, because the first quarter one and quarter two, the sourcing itself was so low. Since the approaches to various marketplaces et cetera, were all closed. Therefore, all we were sourcing was from government PSU and all this, therefore incremental percent was higher. As the market opened up, as in Q3, we had a full range. I mean, most of our places are open. Therefore, the incremental sourcing you see is higher in the self-employed category. As we go forward, I think it will revert back to the overall theme, which is also reflected in the cards in force. That is not changing too much.
Thank you, sir.
Thank you.
Thank you very much. A request to all the participants. Please restrict to one question per participant. If time permits, please come back in the questions queue for a follow-up question. The next question is from the line of Shweta Dalal from Prabhudas Lilladher. Please go ahead.
Thank you, sir, for the opportunity. You partially answered my question previously, but I would just like to have some color on you mentioned that incremental sourcing is now back to pre-COVID-19 levels from the open market channels. What is the customer acquisition rate differential between SC and open market channel, if you can quantify that?
Yeah. That percentage comes at, for this year, it has been in the range of 42%, 58%, and if you look at Q3, it is almost How much is that?
52, 48.
52, 48.
58, 51.
Yeah. Sorry. That's the incremental. That's the sourcing, fresh sourcing.
Yes.
Okay.
48, 52. In certain quarters, it was pretty skewed. It has starting to revert back to the mean, which used to be 50/50, but still SC is more.
Thank you, sir. I think I'll split the question again to two points here. You just mentioned in the previous question that it's getting back to the pre-COVID levels.
Yeah.
You also mentioned that it transpires into better asset quality when it comes from SC channel.
Right.
If I look at your pre-COVID-19 numbers as well, your SC sourcing was definitely slightly lower. Can you throw color on this? Secondly, what is the customer acquisition cost and the differential from open market channel and from the SC channel?
In terms of acquisition cost, clearly SC is much lower. I don't think we have given this cost. Have we given this cost? We have not given this cost, much lower. Therefore, from an acquisition perspective and from a delinquency perspective, the SC channel sourced customers are clearly much better. Where we have an advantage in open market, I mean, we have been a significant open market player, and we still are, is the fact that the sourcing, I mean, what we do from open market are customers who are carded, so therefore they spend more, they revolve more, and therefore they are more profitable customers in a way. We have a good mix of open market, which gives us profitability, though the delinquency could be a little higher, and SC, which is much lower delinquency and also much lower cost.
We have this mix. The challenge is to reduce the open market delinquency and increase the SC spends and profitability. That's what we are working on.
Secondly, again, a slight repeat question. You mentioned that credit cost will be coming down in the following year. If I remember your Q2 commentary, you had mentioned that credit costs would slightly remain at elevated levels in the second half of the year. Now that they are down almost to 12%, what could be the ballpark number as we exit this current fiscal? Some guidance there.
No, we never give guidance, so therefore, I can't give you a number. What I can tell you is that now you have, one is that the Supreme Court standstill book is there, which is a book we say that it's not a very performing book. There we'll have to have whatever losses we need to take. The usual NPAs which accrue in the normal course of business, their delinquency levels are back to pre-COVID levels. In fact, lower. The NPA accretion will be lower than what used to happen earlier. Finally, to the RBI RE book, as we have shown this time, 33% are overdue by 30 days, doesn't mean that all of them will go back. As a mix of all these three factors, I think our credit costs are going to trend lower.
I will not predict because the economy is not known how this is going to behave or if something might happen in the economy that we don't know about. In terms of what we have, the stock of what we have and the flow which is happening through the fresh acquisition, I think we are reverting back to the mean, which is pre-COVID-19 levels. It might take a quarter or two, depending on the Supreme Court opening it up for us. It's not going to go up. That's all I can say.
Sure, sir. That helps. Thank you.
Thank you.
Thank you very much. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Hi, sir. Sorry, I missed out in terms of the flow of this pro forma GNPA in terms of how much has actually slipped and what was the recovery and what is getting into the RBI RE pool.
We have given all this on Slide 17, Kunal, but just to recapitulate. On the RBI RE, we had INR 2,108 crore in September. We are now INR 2,344 crore and that had INR 613 crore of new bookings, but a recovery of INR 377 crore. RBI RE at the moment, 33% is overdue by more than 30 days, which is INR 777 crore, and we have provided at 65% for that book, though we believe that not all of this is going to go back. The Supreme Court standstill is around that same number, which was, I think, INR 649 crore last time. What is it?
INR 762 crore- INR 749 crore.
Yeah. INR 762 crore-INR 749 crore. Not much change. We have recovered a little bit because we've not been able to write off anything. That is a book which we believe, well, the recovery or the extraction will be low and therefore, this book, if we are allowed to, will qualify as NPA and maybe we'll ultimately write it off or second it. Then there's the usual NPA number, which we have already seen revert back to the pre-COVID levels or even lower than that. That accrual of fresh NPAs is lower. That's the overall thing.
Okay. When we look at from, say, 7.46- 4.51, the decline which is there, maybe that would have either been the new booking into RBI RE or recoveries and there are no fresh accruals, is what you are suggesting. I wanted the walk for this 7.46 - 4.51.
Okay. See, the 7.46 had two components. One was the NPA component and the other was the Supreme Court standstill at that point of time.
Yeah.
Now we have made a write-off of INR 682 crore. 52 or 82?
648.
Sorry? INR 648 crores in this period. From the book, which was NPL as on 31st of August, a significant portion, which is INR 648 crores, has been written off.
Okay.
That is one reason for reduction. The other reason for reduction is the recovery which we have made, which is just short of INR 400 odd crores, which is a mix of both recovery, closures, all of that. Therefore, INR 648 crores of write-off and about INR 400 crores of recovery. That's the walk which you have in this.
Oh, perfect. Okay. Got it. Yeah. Thanks.
Thank you.
Thank you very much. The next question is from the line of Dhaval Gada from DSP. Please go ahead.
Yeah. Hi, sir. Congrats on a good performance on the asset quality front. Just two questions. One is related to the EPP number that you shared last time. What is the update on that front? If we carry any provisions against that. The second, I'll ask the second question after this.
Okay. The EPP book, see, we don't provide for that. That's about 4.5% is the usual.
No, INR 500 crores.
Sorry. The book is INR 500 odd crores. Provision-wise, I think we just provide-
Provide like a standard asset.
Standard asset, which is about 1%.
Anyway, to book an EPP, you have to pay everything overdue. Anyway, the account becomes current to be able to be scheme EPP. That is actually our standard book.
What we have seen so far from that book is that the payments are regular. We don't have any concerns on that book.
Oh, okay. The second question. Sorry.
Yeah, go ahead.
Yeah. The second question is just a reconciliation. Last quarter, on a pro forma basis, we had about INR 1,790 crore of gross NPAs and this quarter, I think we have about INR 1,160 crore of gross NPAs. You mentioned that INR 648 is the write-off, INR 400 is the recoveries, therefore, the implied number of slippage would be like INR 400 odd crore, INR 400 crore-INR 450 crore?
Fresh and NPA domain?
Fresh, yeah.
Yeah, it's about that number. Yes, you're right. That you can evaluate from that. Correct.
Right. Okay. Thank you. Thank you, and all the best, sir. Thank you.
Thank you.
Thank you very much. The next question is from the line of Harshvardhan Agarwal from InCred Finance. Please go ahead.
Hi, sir. Just one data checking question. The ECL provision that we have on our book, which is at 8%, what would be the absolute number of that?
The 8% ECL?
I didn't get the question.
He said, what is the absolute number for that 8% ECL? The last line.
It's 8% of the overall outstanding.
Overall outstanding. Right.
That would be close to around INR 2,000 crore?
Yep.
Yeah.
All this provision that we have discussed for RBI RE, NPAs and EPPs, et cetera, all those provisions will be part of this INR 2,000 crore, right?
Yes.
Yes.
Correct.
Just to clarify, like he said, EPP is not any additional provision. EPP is provided as per the standard book.
Sure. Right. Whatever provisions we have on that EPP will be part of this?
It will be part.
Yeah.
Yeah. Great. Thanks. Thanks, ma'am. That was all.
Thank you.
Thank you very much. The next question is from the line of Prashant Kothari from Pictet. Please go ahead.
Yes. This is Prashant Kothari from Pictet. My question was the market share gains that you're having, especially on the spend side, which has been quite phenomenal this year. If you can just help us understand what is leading to these gains. Are there any specific campaigns which are helping us? Also on the flip side, who are the ones who are losing it? Is it the private sector banks or is it the foreign banks? Who is losing on that share of spend?
Okay, Girish, you can answer that.
We early on in the COVID period itself recognized that the spends were moving online, and given the technology and the analytics capabilities that we have built over a period of time in the organization, we were able to figure out and see that the consumer behavior is changing. We started tying up with lot of those players where those consumers were going. Our offers on online increased drastically in this period. In fact, we have done more offers in the COVID period than in pre-COVID scenario. If you see the data on Slide 10, we also recognized that there was a consumer movement towards not only paying, let's say, new categories. For example, insurance as a category which was already there, but it just exploded during that period of time. We capitalized on that and got that benefit.
The other is apparel as a category, because clothing, now it was subdued in quarter two, but quarter three it suddenly picked up because people were unable to go to point-of-sale scenarios. In quarter three, the online sale of apparel in that category, fashion as a category, just picked up. We tied up with lot of those players and partners in this category. That has helped. The market share being lost is basically either some players who are multinational and their portfolios were very dependent on travel as a category and were catering to that. There are players who have lost market share in that, and mostly that are multinational.
If you look at a couple of Indian players have also lost market share, but they would have lost because they would have blocked a large majority of their customers, and the balanced customers were not active enough. That would be the reason. Otherwise, it is restricted to people who are very biased towards travel as a category. Apart from market share, I think, what we have also done is we utilize our capability to target customer one on one, and have sent a lot of segmented offers during this period, which we have seen has also helped us not only in activating the customer but also increasing the spend.
I think you can look at the RBI data for November, which is the last available data. For nine months, or rather eight months, in terms of spends, everybody has shown a negative growth, but some have shown a less negative growth. We are amongst those players who have shown a less negative growth. There are other players, both domestic and foreign, who have shown more negative growth and less relationship spend, largely because they were inclined more towards travel or maybe some of them have blocked lot of their cards from spending. That's the reason.
This is a sale of them. Would you think that all these gains are not sustainable as those travel kind of open up and maybe all these blocks which have been put in place are also released? You think you'll lose some market share as well?
Something would definitely revert. We cannot say that this is going to continue. The only thing is that our engagement with the online players and the customized offers which we have been rolling out, and they have worked. I think we have a little bit of a head start. In that sense, while maybe this thing not continue in the shape, we'll surely be more than what we were there. As we continue to work towards more hyper-personalization, I think we'll be able to sustain a lot of our gains, if not the full one.
Okay. Thank you very much.
Thank you.
Thank you very much. The next question is from the line of Karthikraj Lakshmanan from BNP Paribas Mutual Fund. Please go ahead.
Hi, sir. Congrats and good set of numbers. Just on the non-RBI RE book, how is the over 30-day overdue book compare to, say, last year? Has it come down or is it in line?
The 30-day DPD book, which we haven't declared yet, but as I mentioned earlier in my comments, actually, it is behaving better than last year. The numbers are lower than last year, and this is largely a result of the fact that one book got cleaned off a little due to the moratorium blocks and those who ultimately did not pay. Secondly, our credit filters, which we have tightened significantly twice over, once in May and then later on in October again. Those are also having an effect in terms of bringing down that delinquency level. They are much, much lower than last year in all segments.
Right, sir. Just in terms of the gross new additions in the last four quarters is close to INR 27 odd lakhs, and the net addition is almost INR 15 lakh, INR 14.5 lakh. The difference is largely, is it the NPA accounts or the inactive ones, or should we read that? Is that number in line with normal years or is it higher this time around?
This is a mix of both. These are attrition, which is attrition is again both. One is people who actually request for a closure, which is a voluntary attrition, and those whose accounts become NPAs and delinquent, and therefore, those customers go off the books. Those are, say, involuntary addition. That has gone up a little. I think the traditional numbers, whatever they are, will revert back in the next year. At this point, the attrition levels are slightly higher, especially in the quarter three.
Understood, sir. Thank you.
Thank you.
Thank you very much. Ladies and gentlemen, due to time constraint, we'll take the last question from the line of Manas Agrawal from Bernstein. Please go ahead. Manas Agrawal, may I request you to unmute your line from your side and go ahead with your question, please. Manas Agrawal, if you're present, may I request you to unmute your line from your side and go ahead with your question, please. Due to no response, we move to the next participant. The next question is from the line of Pranav Gupta from Aditya Birla Sun Life Insurance. Please go ahead.
Hello.
Yeah.
Yeah. Hi, sir. Could you help us with the average tenure of the RBI RE book?
Pranav Gupta, sorry to interrupt you. Your voice is not coming clear. May I request you to come in a better reception area?
Is it better now?
Yeah, much better.
Just wanted to get a sense on the average tenure for the RBI RE book. Why I'm asking this question is because once this book starts running off, only then will you see your reversion to the usual revolver percentage of the overall spends. Could you give us a sense on that? The second question is on the corporate side. Spends have bounced back pretty well, even though travel and the usual spend categories might not have normalized. If you could give us a sense on what are the new categories of spends that are growing here for this to surpass pre-COVID levels as well? Those are the two questions.
Yeah. The RBI RE, the average tenure when we began this was around 18 months because 24 months and 12 months were the two categories. However, as I explained earlier, we are seeing a lot of different behavior. People are prepaying, people are paying in advance and closing the account or paying off some installments to get the card open. We see all of that, and therefore it may not stay till 18 months. That's our sense. We've already seen this book run off from INR 2,700 crores -INR 2,344 crores. Almost close to INR 375 crores has run off in one quarter itself. Going by this logic, hopefully in the next six quarters, we should run this book entirely. However, we will wait. This is too early to actually decide on anything. On the second question of corporate spend, I'll ask Manish.
I'll see if he has the option to respond. Thank you.
Yeah. Yes, the corporate spends have risen, but the composition of the spends has changed. See, we are working with our corporates to look at new use cases which are primarily around utility payments, online expenses, training, marketing expenses online, tax payments done through the payment aggregators. That has taken off in a big way. We're working with some of the good corporates, big corporates who are adopting to these corporate payment methods, that's what has increased the quantum. Yes, the T&E is low, the travel is increased to buy airline tickets. That is low. What we term as B2B spends, obviously we remain pretty tight on the credit parameters for this. That has built up nicely. When you look at this quarter and the recent months is actually higher than the pre-COVID quarters. That is what is coming up.
Corporate travel is still some more months away because a lot of companies will continue to be, in our opinion, working from home for some more period of time. International travel was happening on air bubbles only, though there is a recent media article which says the government is asking airlines to do domestic flights to full capacity. That has not got resolved. It's just a media item that was seen. That will take some time to come back. One more important thing is that our expectation is that these new use cases have more permanence to it. It's not that this is for the time being the corporates are doing this because the companies who've adopted this have been continuing to do this for the past several months, and we expect that to continue and the travel piece to come and add back.
Sure. Just lastly on the EPP. Just wanted to understand that in an earlier question, you kind of alluded to the fact that a customer has to pay all his overdues to convert his balance into EPP. essentially, what is he converting here? Is he converting a large spend which he's incurred in this month? I mean, I just wanted to understand what is the conversion which is happening here under the EPP.
Everything that is overdue. If you have missed the last three payments, so technically you will have three minimum dues overdue. You have to pay all the overdue amount and whatever is the balance on the card, that is converted to installments at the lower interest rate.
Say in your example, the past three months bills are due. Would you have to pay the minimum dues on those past three months, or would you have to clear the entire balances on those past three months to convert into EPP?
The minimum due because technically.
Okay.
A credit card works billed and the aging and everything works in minimum due. He has to pay three minimum dues, becomes current, and then whatever is the balance is converted to installments.
Just paying the minimum due for each month. That's the whole thing.
Understood. Thank you so much. That will be all from my end.
Thank you.
Thank you very much. I will now hand the conference over to Mr. Ashwini Kumar Tewari for closing comments.
Thank you everyone for your comments and questions. It gave us a lot of insight and we will prepare ourselves accordingly for calls to come in the coming days. I hope all of you have a very good evening. Thank you.
Thank you very much. On behalf of SBI Cards and Payment Services Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.