Ladies and gentlemen, good day. Welcome to SBI Card second quarter FY 2021 and first half FY 2021 earnings conference call with analysts and investors. As a reminder, all participant lines will be in 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.
Good afternoon, everyone. On behalf of our company, SBI Card and Payment Services Limited, I extend a very warm welcome to you and thank you for joining us today for the Q2 and H1 investor call for the financial year 2021. You would have seen the presentation which has been uploaded. I would like to extend my gratitude to all of you for helping SBI Card grow as a trusted and responsible organization. We also hope that you and your families are staying safe and healthy. It is imperative to continue taking precautions during this festive season and beyond, as the country goes through unlock Phase 5. Despite the challenging macroeconomic environment we are operating in, I am happy to share that our business has continued to perform well.
SBI Card has remained agile in responding to changes in the operating environment and has continuously harnessed new opportunities to sustain business growth. This, when combined with our sound business fundamentals, has enabled us to post an impressive performance on new account acquisition as well as spends, with both coming closer to the near pre-COVID levels. Let me just give you a high-level view of what the performance has been. On the new account front, on a sequential quarter-on-quarter basis in Q2, which is July to September, over Q1, our new accounts volume has grown more than 2.4 x to 688,000 accounts compared to 288,000 accounts in the previous quarter. This obviously is lower than the previous pre-COVID levels.
In the month of September, we almost reached the pre-COVID level at about 98%, and we had a run rate of 308,000 accounts, which was almost the same level as pre-COVID, which we define by December to February months. Because March, part of March was also part of COVID. The other thing I want to point out, which is detailed in the presentation, is that we are also expanding the market. This is on the back of increased sourcing from the banca channel. The Tier 3 plus sourcing in Q2 was about 15% higher YoY, and new to credit card was 28% as against 25% in the YoY. New to credit itself was 23% compared to 18.6% in the previous year.
Therefore, we are expanding the market going into Tier 3 and beyond, and also new to credit and new to credit card customers. The delinquency levels on these are behaving better than the others, which we have simply because they are coming from the bank and therefore we have a visibility on the accounts and also an access to accounts should they default. As for zero data also, our market share in these segments in new to credit was 31%, so we are leading the market here. In terms of spends on a sequential Q- on- Q basis, our retail spends grew by 50% and the increased growth was a result of the phased unlocking we have been seeing and the resumption of economic activity and consumption. There was also some element of pent-up demand, which is due to the lockdown in quarter one.
Overall retail online spends, which we gave in Q1 as 105% of pre-COVID, have gone to 114%. Overall, it is 54% of the total retail spends, and we estimate this will continue to grow well. The retail point-of-sale spends are at 72% of pre-COVID levels, whereas the online spends were 114%, as I mentioned. Retail spends for month of September especially have improved, and they are at almost at 92% of the pre-COVID levels, which as I mentioned, were defined by December to February period. Retail online spends at 114% and POS spends are at 75% in the month of September. For October, we have seen further growth in spends in the launch of festive offers.
The festival season began in October, unlike last year when it began in September. We had a six-day billion-dollar day sale with Flipkart, which has seen a significant jump in volume compared to last year's program during the festive season. We have also seen cardholders increasing adoption to the non-touch or contactless payments, and almost one in every four point-of-sale transactions, which our card sees is coming in as a contactless transaction. Card popular categories include grocery, departmental stores, fuel, and restaurants. This is likely to continue. Our performance is a result of various proactive and strategic initiatives we rolled out. For giving more choice to the customer, we have continued to forge new and strategic partnerships to give differentiated value proposition.
We partnered with American Express to bolster our network and premium play, and now the SBI Card is available on all payment networks in India. Our payment cards that we have released and SBI Card PRIME are now available on the American Express global network. We also launched a flagship offering of IRCTC SBI Card on the RuPay platform, extending the product to a larger customer segment and making our massive premium portfolio more comprehensive. We have also collaborated with Google to enable our cardholders to make contactless payments using Google Pay. We continue to strengthen emotional connect with customers through various brand campaigns, and we brought in targeted offers in line with consumer spending trends through extensive use of data analytics.
On the merit of many such initiatives, we continue to grow faster than the industry, and market share on both parameters, spends and cards in force, has risen for the quarter. One positive outcome of the COVID-19 is that digitization is the new normal. We expect consumer interest in digital and contactless payments to grow further. We also continue to monitor the situation closely and realign ourselves to leverage emerging opportunities, as also manage any potential business impact. On the other financial performance highlights on profitability, despite a tough operating environment, the company did well in delivering a 37% YoY growth in pre-provision earnings for second quarter FY 2021. This was enabled by a robust performance on the business front, ensuring positive operating leverage. Our net revenues for the quarter grew by 9%, even as our operating expenditure reduced by 10%, leading to a positive operating leverage of 19%.
The credit risk situation is also impacted by the macroeconomic variables around us. Post-COVID, the assessment of credit risk in the financial services sector has become complex, and it is also influenced by the RBI moratorium and Supreme Court orders on NPA standstill effective August 31st, 2020. To cover ourselves for future credit risk, we have enhanced the management overlay to INR 268 crores in FY 2022, and the overall management overlay in books stand at INR 758 crores as on September. This is over and above the base required provisions of INR 1,295 crores. Our GNPA number is 4.3% as compared to 2.3% YoY quarter two last year. The profit of the quarter has been impacted by higher provisions outlay, which was flat for the quarter at INR 206 crores compared to INR 381 crores in Q2 financial year 2020.
Therefore, the ROA for September 2020 is 3.4%, and ROAE is 14.1%. We have much greater detail in the presentation, we'll be discussing more about this in the questions which follow. On market share, we've been steadily growing our market share in terms of cards in force and spends. I'm happy to share that our market share for cards in force has grown to 18.7% in August, which is the last RBI available data, from 18% in Q2 FY 2020. Our market share for spends in Q2 FY 2021 has grown to 20.5%, from 18.6% in Q2 2020. In each of the previous three months, our market share, both in spends and in cards in force, has grown. Moving on to the cards in force and receivables.
Our cards in force grew by 16% year-on-year to INR 1.10 crores or INR 11 million, from INR 0.95 crores in Q2 FY 2020. Receivables grew by 4% year-on-year to INR 23,978 crore compared to INR 23,038 crore in Q2 FY 2020. On liquidity and capital adequacy, our liquidity position continues to be strong. We have a lot of lines which are still not utilized. Our capital adequacy ratio for the period of September 2020 is 25.3% as compared to 19% last year in the same period. Our Tier 1 capital ratio has moved to 21% from 14.8% in Q2. Our credit ratings remain excellent with A1+ and AAA ratings by CRISIL and ICRA for both short-term and long-term borrowings. These ratings by the rating agencies reflect our robust business and financial fundamentals. At SBI Card, we are working towards driving market expansion.
As I mentioned earlier, our sourcing of new to credit, new to card customers is continuously increasing. We are seeing increasing percentage of customers from Tier 3 plus cities. Our share of market in new to credit, new to credit card, and Tier 3 cities continues to be significant as per CIBIL report for quarter one. This also reflects the increasing penetration of the SBI's base. We understand that SBI Card has also been included in the FTSE Global Equity Index Series in September 2020, which reflects our strength and trust to investors. Foreign portfolio investment share in our stocks has increased to 5.93% in September 2020 from 4.23% in June 2020. We at SBI Card have always been working towards holistic and sustainable changes impacting our communities. We have recently implemented a sustainability policy approved by our board, which will strengthen our commitment to building a better society.
We have included a summary of the ESG areas in this presentation. Just to highlight our digital interventions through paperless communications have enabled a saving of over 1.5 lakh trees in the last three years. In this year, we have contributed 18.66 lakh medical equipment and distributed over 3.1 lakh meals and ration kits to the underprivileged. Our social interventions through community development remain strong. I also want to call out the diversity. We have a share of 29% women in our workforce, and more important point is in the senior leadership position, we have a similar number of 29%, which is much better than many others in the industry. We also have a very young workforce, with 40% of the workforce being less than 30 years.
I would like to reiterate that our business operations are running normally, and we at SBI Card remain committed towards supporting our colleagues and customers while remaining financially robust. Over the years, we established ourselves as a leading player in the Indian credit card industry, and today, we are the largest pure-play credit card issuer in this country with deep domain expertise and a strong legacy. Before I end, on behalf of SBI Card family, I also extend my heartiest warm wishes in advance for the upcoming festival. Enjoy the festivities while staying safe. Thank you very much for your time, and I will request the operator to please open the line for any specific questions you may have on the performance of the company. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question- and- answer session. Anyone wishing to ask a question, please press star and one on your touch-tone 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. Ladies and gentlemen, we will wait for a moment for the questions to assemble. Participants, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The first question is on the line of Nishant Shah from Macquarie. Please go ahead.
Yeah. Hi, sir. I just had a question.
Oh, sorry to interrupt, Mr. Shah. We're not able to hear you clearly. Your voice is breaking.
Okay. I'll just try.
Sir, your audio is not clear.
Sorry. Is it better now? Hello.
Yeah. Thank you.
I'm just trying to figure out what is the total to monitor. We have about 9% of restructured loans. We also have about 7.6% NPLs, including the Supreme Court judgment. First of all, is there any overlap between these two portfolios? That's question one. Question two is, if that 9% is restructured, does it include only the RBI restructuring, or does it also include the Easy Payment Plan restructuring as well? Third would be, does it include the full stage two? Or is there any potential reset funds which has not yet completely reflected? First, could you just touch on the first question, please?
Yes. I will ask Aparna to actually answer all of this, but 7.4% which you mentioned is the number including the Supreme Court standstill. It is not excluding that. That's the first thing. When we talk about 7.46%, it has the NPL number, which we have, and it also includes the standstill, which is not classified yet. Had it not been for the order, it would have been NPL. That's the point number one. Second is the RBI RE number, which you're talking about.
Yeah.
Does not include the Easy Payment Plan for the moment. Third is what? Stage two.
There is no overlap, I think.
There is no overlap as well.
Yeah. Could you just quantify all these things for us? What is the easy payment plan, AUM under that thing, and even the overlap? We're just trying to have an idea.
Of course not. The NPL numbers overall, the absolute numbers are.
INR 1,028 crores.
INR 1,028 crores, which is the 4.3% number. There is INR 762 crores, which is standstill, therefore the total number, including the standstill, is INR 1,790, and that accounts for 7.46%. That's the first big number. We also have an RBI RE number of INR 2,108 crores. There is no overlap between these subsets of numbers. The Easy Payment Plan we haven't given out actually in the results.
Just, Nishant, to your point, the easy payment plan was given only to customers who paid all their overdues and became current, and hence that's the reason why it's not being called out separately.
That's a much smaller number compared to the RBI RE number.
Still it could be really helpful for us as investors to get a sense of the numbers.
Nishant. Okay. We have not given out, this number is just INR 160 crores. It is all current because they all paid up whatever dues they were, their old dues.
Okay. I want you to see the total amount.
Yes.
Just to be clear.
Total amount till Q2. More people might come in later at Q2.
Okay, got it. Just the last two on the stage two, do we just interpret that the difference between the 4.6% NPL and the 7.6% NPL? Is that the comprehensive stage two, or are there more accounts outside of that as well?
Nishant, stage two for us will be accounts that are what we call as SICR. They're not current, but they are significantly clean credit risk. This 762, which is asset factor. It's not just 762. There is a data there also. We haven't given the breakup between one, two, and three here. However, I think in the financials that's been uploaded, the numbers are available on that.
Okay. I have a question on that as well. Okay.
Thank you.
We'll move on to the next question. That is on the line of Anuj Singla from Bank of America. Please go ahead.
Yeah. Thank you very much. Good evening, Mr. Tewari and team. My question again relates to the 7.46% in September. We had actually take a cautious strategy of pushing people out from moratorium 1 and we had seen some decline in moratorium 2. When I look at this number, this is a very limited number. What kind of resolution framework do we have towards the second half of the year and if at all, we can give some kind of guidance of that process as well, what credit efficiency could actually be?
Two or three things. We don't really give any guidance as to how the numbers will behave. Two or three things. One is that the problem actually is only on the moratorium stock because what we have been seeing from the post moratorium, which is those who did not go into moratorium, let's say somebody funded in April, May, and thereafter, that number from an analysis tells us that it is already below the pre-COVID level. That portfolio is behaving good. I mean, all of that which is taken the post moratorium period. That is one part. The current business as we grow that business is behaving good and in fact it is the delinquency levels are lower than the previous pre-COVID levels. That's one. Second is on the moratorium hold.
As I mentioned in the previous, this thing also in the Q1 call, a lot of these people have already paid up. What you see here, which is in terms of the RBI book from which as per the first month of that RBI book, the month of repayment has just started out in the month of October because many of them came in from August towards mid-August or let's say towards end of August and their first payments became due towards in September. Almost, a large proportion has already paid up. I'm not saying that there are no delinquencies there are, but we are able to pull back quite significantly. That gives us some comfort because there was always this fear whether all of these people are going to pay or they're not going to pay.
We need to watch this book for the next quarter or beyond. If they pay the first three installments in our view, this book should be good. That is second part of the piece. The 2,108 number has actually gone up since then. I can't give you that number, but it has gone up since then. What the Supreme Court order has done is given us some more time to actually enroll more people into RE because the difference between the RE and the EPP is that for EPP people have to pay quite a lot upfront and that is why most people are today preferring RE. That is the second part. Third is that the standstill, we have already provided for the entire standstill and we have given out those numbers so that whatever hit we had to take, we have already taken.
Part of this standstill has also been pulled back into RE. It's not that this is the final number. There is of course, there's some other number beyond this also, which is today sitting in, let's say, midway between the NPL stage and a standard or overdue stage, which might turn NPA also going forward. Again, from that pool also we are working to get them into RE. The other thing is that there are some who are coming in for even these settlements. Where we might have to take some hit, the account gets closed and they want to settle in one go. We are open to all the things which are out there. We are also engaging with a couple of other partners for communication, reaching out in innovative ways. For example, Creditas, that's one of our partners.
We are also talking through SBI for gold loans to many of these who may be SBI customers or otherwise because SBI is into a big way in gold loans. A combination of all of these factors in my view should help us going forward. This number which is elevated, which you see might stay around that for some time because clearly the resolutions will take over time. RBI book of course will remain standard till the time the customer continues to pay us, but the elevation part could be a little bit elevated like you see. I don't think that we are not in control of the situation. When we began this quarter actually and when the people just came out of moratorium, we had a real issue whether how we are going to plan out because the RBI scheme wasn't there.
It came only on the August 6th. Since then actually our team has done a fantastic job in terms of enrolling this many numbers and this number is equivalent to lakhs of people, almost like 3 lakhs-4 lakhs of people who have been enrolled. It's not a small number. We are continuing to work on this problem as we go along and I'm sure that we are on top of things and we will continue to provide if necessary.
Understood. The second question relates to slide number seven on the presentation. It's happy to see that on the incremental sourcing, SBI now constitutes around 50% of the booking. However, when I look at the cards in force in that book, the total number of SBI sourcing has actually declined on a Q2 basis. Is this on part of some of our cancellations which have happened for SBI customers?
What happens is that you are referring to the overall CIF data. Any kind of archival or attrition activity also impacts the CIF number and that's not evenly distributed because that's not being caused by the acquisition effort. The distribution that we have given to you on acquisition is the correct distribution in this quarter, which is 59 and 41. You are right, the CIF number will be impacted by the cancellation side as well.
What we have been seeing actually is that this number also is trending upwards. Overall distribution also the vendor side is coming up. This is more a short term thing because of the archival effect which is mentioned.
Understood, sir. Lastly, sir, Tier 3 structures account for around 27% of unused card sourcing. What kind of confidence we have and these might be untested customers as well. What kind of confidence we have that this is not going to lead to significant deterioration on the delinquency of the credit card side?
That's a very good question. Just I'll refer you to slide nine, where we have given this tier-wise distribution. What we have seen here is that, for example, I'm referring to the slide now, the 32% Tier 3. Is that 33, 32? If you look at the delinquency beside it is lower than the others. I mean, the Tier 1 itself. Our comfort is that most of this Tier 3 and beyond is coming from banca. That is where we know the account. We have a visibility on the account. We also have a history of the transaction history of the person. Finally, we also have access to the account. We can sweep the balance from the account where they're to be in default.
Combination of all three gives us the confidence that it will behave well and the delinquency number bears this out that so far it is lower than the Tier 1 itself.
All that's okay. Thank you very much.
Thank you.
Thank you. The next question is on the line of Ashish Sharma from Enam AMC. Please go ahead.
Yeah. Thanks for the opportunity. Two questions on my side. One is on the SBI Card Google Pay partnership. Second is this classification on the stage two classification. We haven't been providing stage wise classification half-yearly. Any comment on that? Based on your observation, given that the annual report stage two number was quite high, how do we evaluate it maybe for outlook FY 2021?
The Google Pay partnership is really very important for us. I will start with that because it is one more way to actually push the digital journey forward, and you know the future is all digital. Since GPay has really taken over a significant chunk of the UPI transaction volume, they are the number one player at the moment, close to 50% of the UPI transaction pool. We thought it important that we are part of this journey, and now we are there, and as a tokenized card, we are available wherever the GPay app is used for payment. This has just begun. I'm sure that this will go a long way in terms of our acceptability as a payment mode. That's very important, and we are also in conversations of other things, which as they materialize, we will disclose.
That's on the Google Pay side. On stage two, we haven't actually given the numbers as you also pointed out. We have not distributed between the stages as they are. You want to comment?
It would include two things. The RBI RE that we are booking, that will be part of stage two. The other piece to notice is the 1,062 that we were talking about, the HDFC bank loan, that is also a part of stage two. To that end, stage two will not be a pure stage two number.
Okay, Ma'am. Just on how to sort of see, given that the annual report mentions that the probability of default and the loss given default on the stage two is a high number. How should we see the credit cost panning out? Just on the Google Pay partnership, in that such case, these are regular MDR rules apply or we have a separate arrangement?
No, no. The regular ones apply because you have to understand the debit card, there are limitations, up to 2,000, there is nothing, and beyond 2,000 there is something. In credit cards, so far the MDR there has been no change. For us, as far as this partnership goes, there is no change in the MDR for the moment.
Okay. Perfect.
Thank you. The next question is on the line Shweta Daptardar from Prabhudas Lilladher. Please go ahead.
Thank you for the opportunity. Two questions when it comes to asset quality. One, the fact that HDFC Bank loan portion has gone up, what will be GNPA number approximately from this banca channel sourcing? Second thing, if I look at the driver mix, for this particular quarter, if I add up the RBI RE numbers, the revolver mix short-term pattern has actually not changed. It remained almost stable. Does this mean implication that the credit cost still should continue to remain higher? How do you see that playing out?
The second question first. If you add those two also it is 43%. It is a little lower than 45%, which it was. The RBI RE we have just shown separately to be very transparent. This is rather converted into a kind of an EMI program where the customers will be paying over a period of one year or two years. The key question definitely is how is this book going to behave going forward? Because there could be questions on this. As we mentioned earlier in response to an earlier question by Nishant, that what we have seen the first round of payment, which became due for quite a significant portion of this book has been paid. Those who did not pay, we have been able to claw lot of them back. There are still some delinquencies left, but we are on top of it.
If we watch this book for next two, three months, and we are able to collect a significant portion of this, I think we'll be good. That is a question. We can't fully predict it because this is just the first month, and even there also not everybody has been statemented. Over the next two months, we'll probably have a better handle on how this book is going to behave. That's one thing. Regarding the other part, which is the standstill NPA, as I mentioned, we have already provided for it. We are already pulling back some of that into the RBI RE scheme, because the RBI RE scheme, as you know, is applicable till December. Therefore, we are doing that and the Supreme Court order is still at the moment till November 2nd, we will get this dispensation.
Till November 2nd, provided the November 2nd thing opens up the NPA, we still have some time to go. We also have our own restructuring scheme, which at the moment we were not applying, but that applies to NPA accounts, so we are working on that as well. We have a lot of tools available. As for the credit cost goals, I don't think we'll have many fresh surprises, but the level could remain high till we are able to provide for it completely and/or recover it. Even if it goes into RE, it will still continue for the period of one or two years, and there will be certain amount of uncertainty on that book.
Only on the banca channel as a quality.
Sorry. Yeah.
Do you think that should be better off?
Banca is much, much better. Therefore, while I don't think I've given the numbers separately, it is much, much lower than even the declared GNPA number what we have. Since we have not declared the number, I'm not giving you that number, but it is much better than the declared NPA number, not counting the standstill. You can deploy your conclusion from that.
Sure. Thank you. I'll join back in.
Thank you.
Thank you. The next question is on the line of Pankaj Agarwal from Ambit Capital. Please go ahead.
Hello.
Hi.
Sir, what's the economics of this Big Billion Days sale? How is it-
Sorry to interrupt, Mr. Agarwal. Sir, your voice is breaking up.
Is it better now?
Sir-
Yes, it is better. I can hear you, so go ahead, please.
What's the economics of this Big Billion Days sale? Because the discounts are quite high on some transactions. Is it a high-cost income kind of transaction for you?
Girish, please answer.
The economics works like this. If you have seen this offer, let's say the Flipkart offer, it was broken into two days offers. INR 1,750 on first day, INR 1,500 maximum cashback on second and then INR 1,500 once again. The cashback was also, there was a minimum transaction amount, and this was the maximum amount of cashback that you get. There are actually limits to the way the cashback is given. Secondly, this particular cashback amount is shared. There is a contractual sharing of this. There is a back-to-back contract which we have with Flipkart or Amazon, wherever when we are doing a cashback offer in terms of how the money is going to be looked at. Okay.
A lot of this is under NDAs, but the way it works also is that we see a large proportion of some of these sales because these sales typically, people end up buying smartphones, consumer durables, and high ticket size categories. What we see is a lot of this gets converted into a EMI option. Typically, anywhere between 25%-30% of the volume comes as EMI purchases, which stays with us over a period of time and gives us interest income also.
The other, just to add, actually, one other thing is that we have a fixed amount which we pay for a part of cashback. There are, of course, caps around the cashback as well. It's not that the scale, if it goes beyond that, whatever we had budgeted, we will continue to pay more. No, we don't pay more. Actual numbers are actually far more than what we budgeted scale number one.
For example, this Flipkart sale, there are multiple things which happen. For example, tier 2 and beyond, almost 50% of the sale comes from Tier 2 and beyond. We are very strong in Tier 2 and Tier 3, and we are sourcing a lot of cards from there. It helps us activate those customers. For example, a lot of inactive customers, almost a lakh plus, around 1 lakh customers who were inactive for last six months suddenly started using their card during this sale. They continued to use their card over a period of time with us. This sale has multiple benefits. It improves not only spends, customer engagement, it builds assets over a period of time and also lesser attrition, because once the customer gets a cashback offer, he realizes that he's got some value from the card. There are multifold benefits of this.
The cost is limited because we budget for a particular sale. Beyond that, we don't pay at all.
Yep.
Thank you. Okay. Leaving aside the long-term benefits like EMI or customer engagement, would it be fair to say that at the time of transaction, a transaction is just from a normal transaction?
If you just say that the cashback on its own, of course, the cashback is upfront and the MDR is very small portion compared to the cashback. On that day, perhaps, yes, that's the case. Overall, what we have seen, and this is not the first time we are doing this, last year we had with Amazon.
We've been doing this the last almost seven years. We have quantified the benefits of it. Not to mention the benefit which the brand gets because new customer acquisition, these are biggest sale in the country at this point of time. Being the largest standalone credit card sale provider, we have to participate and we should be participating in these. HDFC did participate with Amazon. We tied up with Flipkart and-
We are not losing money. Let me be absolutely clear.
Absolutely.
On the day of the sale, maybe you could say what you have said, but we are not losing money at all.
Okay. Two questions on your standstill NPA. Where is the provisioning on the standstill NPA? If I look at your normal provisioning outstanding, it's roughly, I think, INR 678 crores. If I take 10% on standstill NPA, it's roughly INR 114 crores, right? This additional INR 700 crores is not included through P&L. From where it's hitting this extra provision?
Of course, it is through P&L. How can a provision be outside the P&L? That number for our actual NPAs and et cetera, et cetera, is about INR 1,200 odd crores. We have the other overlay of INR 758 crores on top of that. That includes INR 500 crores of the provision against standstill NPAs, plus an overlay of INR 268 crores. That's the total distribution. I don't know which slide are you watching this, where you say that it is not being seen.
I was looking at your 1Q provisions outstanding. It was roughly INR 250 crore outstanding. Provisions outstanding. On standstill, it comes up to be INR 675 crore, right? Roughly INR 450 crore of provisions sit with you finally. You have some management overlay and some write-offs. Now if you include the standstill NPAs, your total provisions outstanding should be INR 114 crore, right? This INR 500 crore, are you including that management overlay which you have provided in Q2 this quarter or it's extra INR 500 crore?
Yes. That is included. This is as on there. Don't count that INR 489 separate. If you go by that logic, that INR 489 should be read today as INR 268.
Okay. This management overlay is part of the INR 489, right? Okay. Got it. Okay. Thank you, sir. Thank you very much.
Thank you.
Thank you. Next question is from the line of [Gaurav Shah] from [ASK] Investment Managers. Please go ahead.
My question is more with respect to these moratorium and subsequent action by the Supreme Court. Essentially a business like yours, which is revolving around very short-term credit, any idea of a moratorium is a very problematic mark. When a moratorium of three months gets doubled by one more moratorium, it makes it even more difficult. On top of it, when Supreme Court intervenes to not declare an NPA for a given length of time for not really clear rationale, it makes from a credit culture and other standpoint, very complicated kind of situation. Because rule of law, Supreme Court, so that it doesn't have really a place to stand in this matter, as well as probably not a domain knowledge. Judges like this are actually upholding of the legal context. This is what courts are supposed to do.
Courts allow legally entered contracts to be delayed and deferred, openly offer concessions. It's a very problematic overall issue. In a short-term business like yours, doesn't it introduce kind of an unforeseen, unknown kind of a risk?
Mr. Shah, frankly, I cannot comment on the Supreme Court's rationale or whether it was right or not. All I can say is two, three things. One is that we had actually, at the end of the moratorium 1, and of course, the uncertainty part is absolutely correct. It lends a lot of uncertainty, and the general thing is that nobody can pay 42% or 43% interest on a revolver for a long time. Just not on. That is why what we did at the end of moratorium 1 was to make it, instead of an all-out, to make it opt-in, which means people had to go online and then apply for a moratorium. What we found that our numbers of INR 7,000+ crores which were there at the end of May, it already come down significantly at the end of moratorium 1, and about INR 1,500 crores remained.
That also came out to the significant extent in the next one or two months. Actually, for us, the moratorium 2 was a very small number and was not there at all actually. For most of our customers, there was no moratorium 2. That is one thing. I wouldn't say that we are on top of the moratorium game altogether, but we decided that let's face this problem as it stands. Therefore, for the last three, four months, we have been working with all of these customers and RBI RE came at a very good time because people were not willing to pay the upfront significant minimum amount we required under the in-house plan. Once the RBI RE came, which was an equal kind of distribution, and they did not need to make a significant payment upfront.
From August 6th till September 30th, INR 2,108 crore is what we enrolled and some more numbers beyond that. Therefore, this was a good success. Our pitch was to all of these customers was, well, you get more time, but more importantly, your rate comes down. It becomes like less than half of what you're paying. That actually many of the customers understood. From that standpoint also that it's a sustainability of the debt, we were pushing this scheme not so much to defer the NPAs or any other recognition, et cetera, because we will take provisions as they come along, and if the book does not behave as we intend, we'll provide more. Our idea was to make it sustainable, and that's why we are continuing to work in this direction.
Of course, the Supreme Court judgment, when it comes out, we have already taken a standstill number. We have kept it out. We have provided for it. We are ready. When the judgment comes out and what they will decide, ultimately, hopefully, we will get reimbursed. At the moment, we don't know, and we will wait for the judgment when it comes out. That's where we stand. The uncertainty definitely is there, but we can't help it, and as a responsible corporate, we better face this uncertainty.
Sure. No, I appreciate your answer.
Thank you.
Thank you. Participants, in order to ensure that the management will be able to address questions from all participants in this conference, we request you to limit your questions to one per participant only. The next question is in the line of Jaimin Shah from RWC Partners. Please go ahead.
Yeah. Hi. Thanks for your time. Two questions on my end. First one is, could you talk a bit on what are the contours of restructuring, duration, rate, whether the spends are allowed, how credit limits kind of kept. The same for the other two brackets, which is RBI standstill and the EPP scheme. That's the question, and I'll pass the question to you.
Sure. RBI RE scheme, the accounts were all blocked because these had become delinquent. Our pitch is that if the customer pays 1/4 of the scheduled EMIs, let's say a one-year plan, they pay for three months, we will open up the card for them to a limited extent of what has been paid. That's the pitch. At the moment, those cards are blocked if they reach that level. Same applies to the EPP also. Initially it is blocked, as they pay about two or three EMIs, we will open up that card. That is where both the accounts stand. In terms of contours of the scheme, the RBI RE scheme, actually, the limitation is that the maximum period is 24 months, and the customer has a choice to take plans. We came out with only two plans, actually, one year and two years.
Which means just to simplify it. We have an interest rate of 14% and 16%. Those are the two interest rates for these two periods. We have not placed any limitation on prepayment or earlier payment, et cetera. Some customers actually came back to us and paid the entire thing upfront after the first payment. We are seeing all shades here. That is what the RBI RE scheme is. The EPP scheme is more nuanced. We give time from 3- 18 months, and the rate of interest varies from 12% - 20%. Therefore, there's a greater range there. The other difference is that the EPP scheme is not reported to the bureau because the minimum amount due has been paid, therefore they are current, whereas the RBI RE scheme is reported to the bureau as a restructured account.
If they do pay us, then we would look at cleaning up this bill book. That's the overall way in which the RBI scheme and the EPP scheme are structured. As I mentioned, the number for September was 2,108 for RBI-RE and INR 160 crores for EPP.
Okay. That's helpful. Broadly, how many of the accounts are in the scheme? I'm just trying to understand this because if your spends, for example, on online has been month four, the existing active accounts are essentially kind of spending are not full. I just wanted to understand when do these accounts come out of either EPP or restructuring, so that your spends kind of I'm just trying to understand when the growth on spend come back, it helps to kind of keep raising your receivables later on with a lag, which then kind of we don't want to focus on percentage basis, because on percentage basis, growth on services which you want to see is little subdued. Probably because of the blockage of cards.
Yeah, that is a significant factor in terms.
One key lapse.
You are right that in terms of the significant number of cards blocked, and these are in terms of less, these are blocked, and therefore to that extent, the spend is not happening on these cards. It is also not happening on those which have become NPLs, and where they're not still part of the RBI RE. That's a significant number. The other cards, which are existing cards, are spending more on the back of a lot of these schemes and campaigns which we are running, and also the new sourcing which we are doing. A lot of that is becoming active. Therefore, our spend levels, as we mentioned in the month of September, had already reached 98% of pre-COVID levels. Since then, actually, our receivables also have gone up significantly, especially in the Flipkart campaign.
We don't give a number, but it's gone past whatever number was there in our earlier year-end number. We are already doing good on both spends and the receivables. As these cards get opened up and start spending, I think we'll have a very good cycle going. I think on the spend side, we are not worrying too much. If these cards get opened, so be it, because one other thing which I had also mentioned in Q1, that 54% of these customers who were not paying us had been very good customers earlier, not missed a single payment in the previous 24 months. We do want to re-engage these customers. We want them to actually become regular and start spending again.
Right. If I were just to kind of squeeze one more question on a related note, on these two schemes, EPP and RBI, how should we think about leverage of the consumers, if you can? How much is from banca, and you can see the ticket amount. If it's outsourced, is it second card, third card, or simply new customers, new to credit customers? Any comments on there? I am just trying to understand is if they are leveraged, it is clearly going to default in next three months.
We have not given the data. I'll just give you some high-level figures. We've not given the data.
Yes.
The high-level thing is that the bulk of this, the major segment out of this pool is the self-employed segment. We have really tempered down on that segment by tightening the credit filters. Whatever self-employed is currently happening, the bulk of it is today happening from the banca channel. As I mentioned earlier, the banca default rate is very low. We're not seeing any default for simple reasons. One is that we knew that account details and the transaction history earlier, and we also have an access to the account. If he's defaulting, we can seize that account. Therefore, the default rate in banca was very low. Therefore, all of this which you see is not from banca. Mostly it is from the open market and the earlier ones, self-employed and category C. Those are the major segments.
Going forward, yes, whatever has been classified or whatever is in the RBI RE book, we could still have some defaults or delinquencies there, but we need to continuously follow them up. We have a special team to actually only look at following up on the RBI RE because we understand that for the first three months at least, we need to actually follow these customers closely, explain to them the benefits of continuing to pay. Some of them may actually advance the payment date, some of them may be a little delayed, so we will work with them. If they pay the first three, four installments, I'm pretty sure that then they will be good because then they know that just one or two installments later, the card is going to be open now.
Today, many of the customers actually are very sensitive about credit history and they do want the credit history to continue to be good. The credit culture in terms of the bureau history is very important to many customers. We are very positive on the continuation of repayments in those areas.
Thanks. Just to clarify, major of these is self-employed and of them, the bulk of them are from banca, correct?
No. The default segment is not banca, that's what I said. The default segment which we have majorly is self-employed, not from banca, but it is generally from open market, from the previous side.
Okay, fine. Thank you.
Thank you.
Thank you. The next question is from the line of Dhaval Gada from DSP Investment Managers. Please go ahead.
Hi, sir. A couple of questions. First, if you could give the number of accounts in the standstill in RBI RE and the ETC scheme. Just want to understand what quantum of customers are going to be inactive, they will be trying to remove from the base. That is point number one. The second point was, can you also give the net NPA number if possible? I have one more follow-up, yeah.
Dhaval, we've not given the number of customers, we have given the balances. Like Mr. Tewari had mentioned, there's about INR 2,108 crores sitting in RBI RE and there's about INR 762 crores that is sitting in the SC standstill book. However, again, like we said, we may not have classified them as NPA, but we have taken provision on them as if they were NPA. To that extent, we've already covered that.
Understood. Approximate cumulative number also, would it be possible to share across what is the kind of customers who are under standstill or who may not be able to spend at this moment? Just want to model the spend accordingly.
Dhaval, I don't think the logic that only standstill accounts are not able to spend is not correct. Even under a regular course at BAU, there are accounts that get blocked for spend depending on their bureau history, depending on the kind of transactions that they are doing. By that logic, anybody who crosses a particular number of days anyway gets blocked for spend. I don't think you can draw the line between NPA and inability to spend. That wouldn't be correct.
Just to give you some comfort, actually, all of the moratorium customers had their cards blocked. Whatever the peak was, which was, I think we did declare, did we declare the Q1 number?
It's INR 12 .5 lakh .
INR 12.5 lakh. INR 12 .5 lakh, which was the original number of moratoriums, they even their cards were blocked. Out of this, 1/3 by numbers had paid up at the end of, I think Q1 itself. You can draw that conclusion. Significant numbers had paid up. Whatever remains, which remained in moratorium or which actually either came into RBI RE or became NPL, they continued to be blocked. As I mentioned, we have already reached our 98% pre-COVID spend level in September, and this is before this Flipkart and other sales, et cetera, and the festival season had not even begun. I think we are very good on the spend side. We don't have a challenge. If these customers come out of moratorium, et cetera, you will see a significant leg up in the spend.
That's what we are hoping for. That's an additional bonus. We're not counting on it to happen.
Got it, sir. The net stream number. The third point was related to corporate trend. We've seen some pick up in the second quarter. What's driving this? If you could give some color and for the rest of the year, any comments there?
Net NPA is 2.7%? Net NPA is 2.7%, and corporate front, Manish, please go ahead.
Sure, you are right, because in the numbers in the first quarter, we had about INR 2,477 crore spends, and then INR 4,700 something in quarter two, principally driven by new use cases. International travel and corporate travel, yes, it is correct, it is still not happening. There is a domestic travel component which is happening. It is going up. DGCA has put a 60% limit on the flights that the domestic airlines can carry, so it's not fully back to normal. That is subdued. The opportunity has opened up in other use cases for corporates. They are also adopting digital payments in present times, especially GST payments, tax payments, utility payments, vendor payments. These are some of the categories.
We have signed either new deals or we have activated some of our customers who were doing those spends because they were good at getting B2B spends from these customers into these particular segments. Proportion of that within the mix of total corporate card spend has increased. We will continue to follow that strategy because as it is, it deepens the corporate card spend space from an opportunity standpoint. Once the corporate travel is back, international travel is back, because we are in unlock state, it's bound to happen at some point of time. Those numbers will add up to the space which is already there. This is not temporary. What we have created as use cases is not for this period alone just to offset the loss of spends on the other side. These are actually making sense to the corporates.
They're adopting the cards for these payments, and we expect that to continue.
Just to add, actually, the pre-COVID, about 80%-90% was travel and business segment. Now we have already reached a 70% level of pre-COVID, and where the travel, et cetera, is very small. Once that comes back, I think we'll be very good because of these new use cases. For the Net NPA, just to clarify, 2.7% includes the standstill and 1.4% is our Q2 number for Net NPA.
Understood. Just one follow-up on the corporate front. From the new use cases, 70% is now coming from these new use cases?
Well, if I look at the mix, there is a bit of domestic travel which is there. While we don't release these percentages, yes, I can give you a spend. About 50%+ is coming from the new use cases, a bit from the T&E, from domestic travel. That also is there. We also have a business where the travel inventories in bulk, ticket sales in bulk are done from the airlines to the travel agencies. We've had a pretty dominating spend in that particular segment. Some bit of that also continues. That is what constitutes the total spend and a small percentage on utility payments.
Thank you so much.
Thank you.
Thank you. We'll move on to the next question that is on the line of Gaurav Kochar from Mirae Asset. Please go ahead.
Good morning, everyone. A few questions to my side. How do you plot the index particular during the new-to-credit and new-to-credit card category? Is it for that particular category or how is it plotted?
Sorry to interrupt, Mr. Kochar, your voice is breaking up.
Yeah. Is it better now?
A little better. Thank you.
My question was, how do we plot this index during the same slide number 14? Is it industry average for that particular category or how is it plotted?
Slide 18, I think.
18. Slide 18.
Index 30+ selling practice.
It's not linked to the industry, Gaurav. It's just indexed against our own portfolio. If you're looking at new-to-credit versus others, it's just indexed against the others. In our portfolio, there's no industry data.
Okay. Still I experienced in the new-to-credit or new-to-credit card category, it is plotted there, right?
I couldn't get your question.
Mr. Kochar, your voice is breaking up.
Is it better?
Not able to hear you clearly. No, sir. Can you use the handset mode while speaking?
Yeah, it's on the handset only.
I am so sorry, sir, but we're not able to understand what you're saying.
New-to-credit cards, Gaurav, you were talking something about new-to-credit cards. What was that?
My question was, this index in the particular industry that you have plotted against new-to-credit card, there is an average against new-to-credit card in this category?
Yes. It's based on our actual data.
Okay. Sure. My next question was, just telling me the total provision that you're carrying as 90-day. Does this also includes provision on the restructuring book as well as on standstill book?
No. For restructuring, RBI had mandated a 10% provision. That is part of the base provision. The overlay has two aspects. One is INR 500 crore that is coming on account of the Supreme Court standstill of the NPA, and the balance is the overlay. We have provisions in addition to the standstill as well.
INR 268 crores is that overlay number.
Okay. Sure. Another question which I had was on the ALM. In ALM, I can see there is an INR 1,800 odd crore inflow after five years. I just wanted to understand, is that restructuring or anything which is beyond five years? Have we have anything outstanding which is beyond five years in tenure?
One second. I don't think we have it.
Nalin is on.
Nalin, can you answer? Slide 15, I think. 15.
Yeah. Some of the receivables which are there, it could be longer duration and those are included in the four years.
Okay.
This has nothing to do with the receivable, the receivables.
These are your SME loans. These are normal course. These are other loan assets. These are what? These are other than loan assets. Oh, these are other than loan assets. They are not loan assets.
No.
I was just looking at your balance sheet. I cannot see it. It's either going to be the cash bank and other receivables. The total is INR 1,800 crore. Just wondering where this INR 1,800 came from.
Even our EMI, which is maximum tenure is 48 months, so there will be no loan asset for us, receivable for us, which is more than five years. These are other assets.
Okay. Sure.
Just the last question was, in the previous quarter, we did not see any COVID-related provision. Completely outlook was that it cannot be answered. We saw moratorium coming down. After that, I mean, in one quarter, we are seeing delinquency go up. What has changed in terms of the environment? Because on that front, I think the unlock has improved. What has happened at the individual level? How do you experience this kind of in the asset quality? Are you qualifying them?
We are qualitating only because obviously the environment continues to be uncertain. It was even more uncertain at Q1. At that point in time, many of the borrowers had just come out of moratorium. Because during the moratorium, they were at a standstill, so many of the installments were not even due then. Therefore, we did not have any visibility as to how much was due and whether they will pay or not pay. I mean, hindsight, one can always argue that, yes, we could have, as a matter of evident precaution, provided more, but that is all history. Therefore, once we started working with all these customers, once we started to understand and we got the RBI RE and there were others who could not pay, then we understood the real extent of the problem.
We realized that and we decided that we'll proactively provide, and that is why we have covered all the entire standstill as well. This will be our philosophy going forward also that if any of the book does not behave, we will provide for it. This problem is, I mean, it's not fully solved. The pandemic is still on, and therefore, we really don't know how the environment around us will behave. At the moment, we are on top of what we have, the problem we have.
Okay. Sure. Sir, the last question with regards to your 3% restructured book. I mean, what is your sense of this book? Will it go up from here on now that C-15 has only started or you expect it just to keep coming down as we go ahead?
My only, I mean, this is your fifth question, by the way, but I'll answer it because it might help others as well. This book is the first set of dues actually in terms of the payments, which became due only this month. From our initial thing, there were some delinquencies, but we were able to pull back quite a lot of it. Therefore, our hope is that as we go along and these people continue to pay for two, three months, they will get regular and later on we will, of course, open their card as well. This obviously we cannot predict that some of them will not default. 10% is already covered as per RBI mandate. If we watch and see the book is not behaving as per our expectation, we'll provide more for it.
We have some hopes because we were talking to these customers that they will pay. Most of them will pay, actually.
Sure. Thank you so much.
Thank you.
Thank you. The next question from the line of Kunal Shah from ICICI Securities. Please go ahead.
Thanks for taking my question. Most of them I already asked. Just to follow up on checking for some of this. Firstly, in terms of interest on interest waiver that comes through, what impact do we see it comes to our customers' behavior? Would that be a significant benefit to them? Do we really see the improvement in their repayment behavior? How would that maybe impact our standstill accounts or maybe the other accounts? Secondly, maybe just to clarify again, in terms of the provisioning you said on RBI RE, we have created 10%. There is nothing more than that on a current basis which you would have created on that RE. On the standstill, what is the provisioning that you have created?
Okay. We'll go backwards. Yes, RBI RE, we provided 10%. On the other standstill, we have provided like we do for all our stage three NPLs, which is a number close to about 78%, 70%. Aparna?
65%.
67%.
65.5%.
65.5%. That's what we provide for all NPLs, and we have provided that. That number is INR 500 crore out of the INR 768 crore, which is the overall standstill book. In terms of customer behavior, actually, we don't really know because we have had customers who have had much higher expectations of maybe the entire waiver, et cetera. Some of them were not ready to pay because of that. All we said to them was, well, if you get a benefit from the court or from anywhere else, we want to refund it to you. That's what we will do for those customers who already paid.
Our only hope is, I mean, this is something, again, a speculation because we really don't know. Nobody has come out with a real circular or instruction as to how this will happen. Our only hope is that whatever we have to compensate the customers, we will be paid back by the government. Fairly how this will work out, we don't know. We'll wait for the government or the court to come out with the detailed instructions. We're not seeing too much change actually in the customer behavior because of this, because on an individual customer level, this may not be very significant. What we'll wait to see what exactly the instructions are and how we'll get paid. If we get paid, that will be good because that will also help us to address some of those which are delinquent.
Okay. In terms of the quantum, it would be significant, right? Maybe we will have to refund it to them and then recover it from the government any quantification you would have done?
The quantum is, we haven't come out with this number because clearly this is still something which the final decision has not come out. The quantum is not very significant. All I can say is that. If we were to absorb it, we can also absorb that. Since that number is not declared, I can't give you that number at the moment. We have done our internal analysis.
Okay. Just one last question in terms of the key income. Will it be extraordinarily different, maybe in terms of the pre-interest case, just like we are having extraordinary income, is it probably the same difference which we have seen, which is the normal income?
I don't think we have any extraordinary income. Nalin, would you want to take that?
No, sir, there are no extraordinary income. Every item of revenue is business as usual.
Okay. Thank you.
Thank you.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Tewari, MD and CEO of SBI Card, for his closing comments.
Thank you very much to all of you. I know that there were many others whose questions were not answered, and we can always schedule follow-up calls like we had did in quarter one for those of you who are interested in talking to us. I guess the major question trend was around the collections and the NPA provisions, and we have been able to answer those to a significant extent. We will definitely be open to more questions in the coming days. As we get more information, we will be open to sharing it with you. Thank you very much for today's call and for participating in the call. Thank you.
Thank you. Ladies and gentlemen, on behalf of SBI Card, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.