Ladies and gentlemen, good day. Welcome to the Q1 FY22 earnings conference call of SBI Cards and Payment Services Limited. As a reminder, all participant lines will be in the listen-only mode. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Card. Thank you. Over to you, sir. Yeah. Thank you, Rutuja. Good evening, everyone. On behalf of SBI Card, I extend a very warm welcome to you, and thank you for joining us today for the earnings call for the Q1 FY22. My heartfelt gratitude to all of you for continued support and confidence in SBI Card over all these years, especially during the current pandemic. Your trust encourages all of us at SBI Card to explore new horizons, drive the business forward, and achieve the vision of the organization. I wish safety and the best of health for all of you. I would also like to express my gratitude to my colleagues who rose to the challenge and diligently followed their professional responsibilities. As you are aware, while FY21 saw different stages of COVID-19, Q1 FY22 too got impacted going to the second wave. Among all this, silver lining is the intensified vaccination drive now in force in India, with over 40 crores of vaccinations completed, well in line with the government's plan to vaccinate entire 18-plus population by the end of 2021. During COVID wave two, there were state-specific lockdowns. The impact of the same was not as severe as was observed in the Q1 of the last year. Another positive development is the revival witnessed in June 2021, which continues to be seen in early July 2021. As an agile and adaptive organization, we continue to closely monitor the situation. We are taking calibrated measures to build a robust, reliable, and resilient business. Despite the challenging environment, SBI Card managed to grow its cards in force and reached a milestone of 12 million cards. We continue to bolster our portfolio. In a move to augment our premium portfolio, we announced launch of a new co-brand relationship, Fabindia SBI Card during the quarter. As a measure of abundant precaution, we are continuously calibrating our credit filters for more customer acquisition. We continued with efforts to offer customers with easy payment options over a period at lower interest levels, which have been received well. At the same time, we beefed up the collection efforts to minimize risk. Our employees are diligently pursuing various initiatives to fuel organizational growth. During the quarter, we took varied measures and initiatives to ensure their safety and well-being. Taking this further, during the quarter, we also organized vaccination drives in different cities for our employees and their family members. It's heartening to share that as a responsible organization, SBI Card is strongly focused on driving a positive change in the communities by ensuring their welfare and holistic development. During the period, besides regular initiatives, SBI Card also supported efforts to alleviate the pain caused by COVID-19. SBI Card supported health infrastructure and capacity building at various government hospitals and medical colleges by providing PPE kits, COVID testing kits, ventilators, setting up oxygen generation plants, developing COVID care centers, et cetera. Other initiatives included providing dry rations to cook meals, among others. At this point, it is important to emphasize that backed by our robust business model and learning from the toughest phase we witnessed last year, we surely are much better equipped and prepared now. I am confident that we will effectively navigate the business in FY22 as well. Let me now take you through our financial performance for Q1 FY 2022. We had strong business performance in Q1 FY 2022, despite the quarter being impacted by a very strong COVID-19 second wave. Our resilient business model ensured that our key business volume indicators were significantly higher on year-on-year basis. This reflects on our ability in managing business during COVID 2.0. Our new accounts for the quarter are 609,000, which is 111% higher than corresponding figure on a year-on-year basis. As mentioned earlier, our cards in force are now higher than 12 million. Our retail spends grew at 63% year-on-year to more than INR 27,000 crores. Corporate spends grew at 149% on year-on-year basis to more than INR 6,100 crores. Receivables grew at 5% on year-on-year, to more than INR 24,400 crores. Our card market share increased to 19.2% in May 2021 from 19.1% in March 2021. Our spends market share has increased from 18.2% in Q4 FY 2021 to 18.9% as of May 2021, as adjusted for disclosures by a major bank to stock exchanges. Profit after tax for the quarter is INR 305 crores, which is 74% higher versus previous quarter, that is Q4 FY 2021, but 23% lower on year-on-year basis. Total income grew at 12% year-on-year basis to INR 2,451 crores. Operating expenses were lower by 9% versus Q4 FY 2021. Moving to asset quality. The credit risk situation continues to be impacted by resurgence of second wave and overall macroeconomic variables surrounding us. To cover ourselves for future credit risk, we continued with the management overlay of INR 258 crores as on June 2021. Our GNPA has come down to 3.91% as compared to 4.99% as at the end of March 2021. Net NPA for the period is at 0.88% as compared to 1.15% as of March 2021. As of June 2021, close to 60% of the total RBI RE book is less than 30 days delinquent. For the RBI RE book, which is between 30 days and 90 days, the company continues to provide a stage 3 ECL rate of 65.2%, which is equivalent to provision rate that is applicable for NPAs. Further, for RBI RE book, which is greater than 90 days, the company has increased its ECL provision rate from earlier 80% to now 100%. ROAA, that's the return on average assets for the quarter ended June 2021, is at 4.5%, which is higher by 196 basis points as compared to 2.6% for March 2021. ROAE, return on average equity, stood at 18.8%, which is again higher by 761 basis points as compared to 11.2% for March 2021. On liquidity and capital adequacy, our liquidity position continues to be strong during Q1 FY 2022. Our capital adequacy ratio for period ended June 2021 is at 26.1% as compared to 24.8% at March 2021. Our Tier 1 ratio has moved to 22.6% from 20.9% as of March 2021. We continue to enjoy strong credit ratings. Our credit ratings remain excellent with A-1+ and AAA ratings by CRISIL and ICRA for both short-term and long-term borrowings. These strong credit ratings by the rating agencies reflect our robust business and financial fundamentals. With that, let's open the call for questions. Rutuja, you may please open the call for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to limit the questions to two per participant. If you have a follow-up question, please rejoin the queue. To use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Anuj Singla from Bank of America. Sir, please go ahead. Thank you very much. Good evening, sir. Sir, first question is with regards to your comment on credit filters. You mentioned that there are some changes you have done given the volatility in the market. Can you talk about that in a bit more clarity, what kind of measures have been taken? Secondly, on the Restructuring 2.0, what kind of response have we got in the month of May and June, and what kind of escalation we can see in the RBI RE book, let's say, in the next quarter, or is the worst done in terms of restructuring? Yeah. Anuj, coming to the first question, credit filter, this is a kind of continuous activity. As part of portfolio management, we always change the filters. Wherever we see a kind of stress or delinquency higher than an acceptable level, we do make changes. Some broad level changes happened twice last year, one in May and one in November. That has ensured that the new acquisition is of acceptable quality. Apart from the big changes, some kind of micro level changes will continue to happen. We do source a sizable segment from banks, particularly NPC. I think recently we have seen some small increase in delinquency where we have tightened the filters, introduced some additional documentation requirements so as to ensure that we are getting a right customer segment. That way, the changes to credit filters is a continuous activity. Coming to your second question, RBI RE 2.0. Actually, RBI issued the circular in May, and we got the policy approved through Board in June. Our dispensation was available only in the first week of June. We saw a demand. Initial days, we saw a good demand of around INR 258 crores is the portfolio, kind of RBI RE 2.0 restructuring portfolio based on the request received from the customers. After evaluating the suitability and eligibility, we restructured around INR 258 crores. Which in a way, if you compare our earlier portfolio was around INR 2,700 crores last year, so that way it is not even 10%. What we have seen now in the July is the requests have come down. It is not at the same level, and we don't see a kind of situation of having the same portfolio like last year, definitely. It's too early to comment. The flow has come down as compared to June. Understood. Sir, one more, if I may. The cost of funds is 5.2%. It's a very impressive number. How should we see this number panning out during the course of the next few quarters? I think to the credit of my finance team, Nalin and his treasury team. They have managed these cost of funds very well. Whatever opportunities were there in terms of kind of shedding the high-cost borrowings or high-cost facilities and then substituting with the low cost, they use it fully. All those opportunities were leveraged. Given the kind of current macroeconomic situation where inflation is ruling high, I think perhaps the scope for further reduction in the cost of funds will be very limited. That is what our internal feeling is. While RBI kind of excess liquidity that is prevalent in the system may continue to support, but if inflation continues to be high, then I think there may be a juncture where policy rates may get revised. This is our opinion. Correspondingly, the borrowing rates will also increase. As long as the liquidity is good and as long as the current rate environment prevails, we will continue to look for opportunities. I think, Nalin, in the Investor Day, we have given the borrowing percentage versus the overall. Yeah. Long-term versus the short-term, just to give you some comfort that we have increased the percentage of long-term borrowings from 28%-34%. 34%. 34%. While the cost of funds overall has come down, our long-term borrowings have actually, as a percentage, they increased from 28% - 34%. We are constantly looking for opportunities, and that's the endeavor to keep the cost of funds as low as possible. Understood. Thank you very much, sir. All the best. Thank you. The next question is from the line of Amit Nanavati from Nomura. Please go ahead. Yeah. Hi. Just two questions. Firstly, just want to understand the linkage between your spends recovery and the revolver book. Even if I look at last year, in the second half, we had roughly around 71% kind of increase in the overall book. If I look at the revolver book per se, that was down. Even if I kind of add back the RBI book and add back the write-off there, it was still down like 3% versus 4Q versus 2Q. Just want to understand, once you come out of Wave 2 impact, once spends recover, typically, just more theoretically, firstly, how long does it take to kind of come back in terms of a optimum revolver mix? Secondly, more strategically also, we would have chosen to keep the revolver book lower by optimizing your customer mix. In that sense, more at a practical level, how long does it take the revolver book to kind of improve and the margins to kind of recover? Yes. I will just add a couple of lines, and Girish will supplement. If you look at our composition, transactor balances, revolver, and EMI kind of balances, revolvers were pretty high at 45% as of June 2020. That was a result more of a moratorium and the hardship tools were not available at that time. Only in August, only the restructuring tools were available. The moment the tools were available from August onwards, part of those balances got converted into EMI. We have also given a RBI work where we were seeing a steady rundown in the portfolio. Some of it, of course, the standstill portfolio got written off, RBI portfolio, we were able to see some robust payments till March 2021. That brought down slowly the percentage of EMI. I mean, the RBI, I'm talking about RBI percentage. It was as high as 9% at one point of time, maybe in December 2020, came down to 8% as of March 2021, and now it has come down to 6%, despite RBI Resolution Framework 2.0 portfolio, new portfolio of INR 258 crores. As this portfolio wears down, or otherwise, as this portfolio pays off, to that extent, you can see improvement in the revolvers. In fact, despite converting INR 258 crores of current balances into RBI, which is almost like a 1%, our revolvers improved in the quarter by 1%, 28%-29%. We always used to say like a BAU kind of scenario will be 1/3, 1/3, 1/3. Transactors reached that level. Now it is 33%. As RBI portfolio comes down, we can see some kind of reversion to the mean in terms of revolver balances. Just to add a couple of things there. From a quarter-on-quarter perspective, if you look at the movement, the asset primarily on the revolver portfolio is almost stable. There is an increase in the term asset balances, so which is the EMI portfolio on the balance. This is despite the movement, as our MD, sir, mentioned, that you have movement of earlier revolvers going into RBI and the pay down. Despite those movements, the balance revolver is almost stable. There is a decrease in the transactor EMI because of the impact of COVID, which was not there in the end of March, but you could see that part of that till the month of June, because June was also not fully COVID-free. That impact is also there. There is a decrease there. That is why some mixed thing you see looking at this. The other question which you asked, what is the kind of timeframe that we should look at from a conversion perspective? There are 2 kinds of conversion there. One is when we look at new spends, we try to convert a good quality of that spends immediately into a EMI kind of a growth portfolio, which is either through Subvention or Flexipay products that we have. We see a good conversion rate there. That is one way of conversion. The second is the revolving conversion, which happens at the asset, which builds up over a period of time. That takes normally anywhere between 12-18 months to get built up. Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead. Thanks for the opportunity. I had a question. Let's jump this Q1. Subramanian, your voice is not audible. It's breaking. Is this better now? Yes, slightly. My question was with respect to the loan yield. There's been quite a good improvement in this quarter, and obviously a lot of it has got to do with the favorable shift this quarter. Just wanted your thoughts on basically how do you think about the mix going forward? Also, the shift in mix this quarter towards the term loans was a bit unexpected because, obviously in a quarter like this, we thought that term loans, which is probably at the might move towards. Just wanted your thoughts on that. Also, were there any other factors which also resulted in improvement in the loan yield at this quarter? Going forward, as was mentioned, we will look at a one-third, one-third, one-third mix once RBI RE gets completely paid off from the portfolio. Broadly, this was a mix with which we used to operate before the COVID period, and we had been operating with that mix for a fairly long time. It was a consistent mix on a portfolio that we looked at that. We are seeing even now the movement is going towards that direction. There are, apart from, I think, some bit of revolving mix to be changed, but if you look at revolving RBI RE, which was actually a part of revolver earlier, then the mix would be approximately in the same one-third, one-third range. We look at that. On the term loan perspective that you talked about, there is a consumer demand towards whenever consumer large ticket items or mobile phones or some of these items are being purchased online, there is a very strong demand to convert into a EMI kind of a portfolio. Subvention is working very nicely there. We see customers converting their balances into installment, both at the point of sale as well as later on. That demand is very strong. Also, in this quarter, we have very strongly looked at some of our good customers and looked at giving additional loan to those customers so that asset can be built there also, which is a product which we sell, which we call it Encash. We build asset there also. Okay. Thanks for that. Just a follow-up question on the reduction in the RBI RE book, if you can split that reduction of INR 789 crores into basically write-offs and actual repayments? Yeah. Out of INR 789 crores, I think bulk of it is the RBI RE portfolio NPA, which was outstanding for more than 90 days. I think around INR 600 crores, INR 640? 47. 647 crore was outstanding as of March 2021. Normal situation, we would have resolved at least a part of it. Given the kind of situation second wave, I think most of it has actually was charged off. Mostly it is a RBI RE NPA portfolio. That is also one of the reason why as a proactive measure, we increased the ACL provision for more than 90 days from 80% to 100%, based on the recent experience. Okay. Thank you. Mr. Subramanian Iyer, we are sorry, but we cannot hear you, sir. Sorry. No, I said, thanks a lot. I mean, that answers all my. Thank you so much. The next question is from the line of Kartik Tillappa from Buena Vista Fund Management. Please go ahead. Mr. Kartik Tillappa, please go ahead with your question. We are not able to hear anything, Rutuja. Rutuja, why don't we move to the next person in the queue? Yes, sir. Just give me a moment. Rutuja, we can't hear you. Are you able to hear us? Sir, yes, I can hear you. Just give me a moment. Sir, please give me a moment. I'm facing some technical glitch. Rutuja, can the group hear us or no one can hear us? Yes, sir, the group can hear you. I'm sorry, the problem is from my side. There is a network glitch because of which the participants, I am unable to promote them in the queue. Okay. Please give me a moment. Please just allow me a few moments, sir. Yes. We'll take our next question from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead. Yeah. Hi, good evening, sir. Sir, I have two questions. One is on your incremental customer additions that you're doing. This quarter, we had significant additions via the non-bank or the open market channel. If you look at the various breakups, we've added more salaried, more category A type customers with a little younger age of 30 and below. Also, if you look at the geography mix, it's more tier 1. Is there anything specific, any new channel that we found, which is leading to getting back to maybe a different type of customer segment during the quarter? If you could just talk about that. Yeah. Mr. Bhavik, last year, our banker channel contributed more than 50% to our incremental sourcing. This quarter, it so happened, like a lot of restrictions were there in so many states including states putting restrictions on the operating hours of branches, which came in the way of sourcing through this channel, because even the customers were hesitant, and even the branch team was also functioned only for part of the day in some of the states, particularly in May and the end of April. That came in the way of sourcing by a banker channel. That was the reason open market, of course, did not have the challenges to the same degree. They continued with the acquisition, and that was the reason open market accounts for maybe more than 65% and 35% roughly from banker. Banker earlier because we always work with the Shikhar model and tier 3, tier 4, we were targeting through the Shikhar model where we had the benefit of that auto debit and auto sweep. Because the banker sourcing itself has come down, now it will appear like open market is always active in tier 1 and tier 2 only. That contribution will appear like that got increased. It is not like a specific strategy. It is more around our inability to operate banker at the same level at which it was operating in the last year. Sir, if you could just talk about between last seven, eight quarters, we had very good sourcing by the banker channel. If you could just give qualitatively, help us understand how is the customer behavior there been, how is the spend behavior been, because those customers are also now getting online on the various apps or various e-commerce websites. How has the graduation of these customers been over the last seven, eight quarters? If you could just help us understand the balances or the spends have increased from these customers that we acquired via the banker channel over the last seven, eight quarters. The way that we have been acquiring banker customer, as was mentioned, is through the Shikhar program. We run this Shikhar program in various batches. We do it in program, I think at this point of time, number 17 or 18. We take different kinds and sets of customers in each Shikhar program basis either a savings bank account or let's say a set of wealth customers. We look at those, each Shikhar program in that separate sense. What we have, however, seen across the portfolio is that people who become active and start using the card, their spend per card is broadly similar, slightly lower than the normal open market customer in that city. There is always a tiering level because tier 1 spends are higher. Customers in tier 1 spends are higher. Tier 3 are slightly lower. Even when we look at the breakup, the online spends are broadly similar. It is this issue at the point of sale where, because the number of point of sale terminals are not that much available in tier 3. The need is also usually not that much because you know the local grocer or the shop owner and those kind of things. Yeah. Online spend is broadly similar. Where we were seeing some challenges were in terms of getting the customer to start using the card and activating the card. We've been doing a lot of programs. What we see is that it does take time for some of these customers to start using the card. We have now figured out that as a customer comes on board, doing an onboarding session, talking to the customer, explaining the product does help. We have put in those set of programs. The second thing which I want to highlight is that the asset build-up in some of these customers in tier 3 is slower compared to a tier 1, tier 2, or already carded customer. The balance for a mature customer does almost become similar, but the maturity timeframe is slightly longer for these customers. Sure. Sir, second question is on the EMI part. When we are seeing more and more customers, both at the POS terminal and also their balances getting converted into EMI. If you could just talk about what are the rough fees that you charge, maybe at the POS terminal or when you convert the balances into EMIs, and how long does this book stick around? Is the average duration 12 months or lower? Anything to read into that? We do not convert revolving balance into installment lending because that is not the right way. Customers, if they are doing their fresh spend. Sorry, sir. It was Mr. Singh's line that went on hold. We've placed him on mute right now. You may proceed. Okay. If the customer is doing fresh spends on the card, then what we charge is 14%, and we also get the interchange on that transaction. These are the two income streams that we make on those transactions. On the tenor part of it, the average tenor of people converting into installment lending at the point of sale is close to 8 months. It's a short tenor thing. People prefer 6-month tenors or 12-month tenors primarily for conversion of new spends into installment balances. Mr. Dave, I'm sorry, may we request you to return to the queue, please? As there are several participants waiting for their turn. Yeah. Thank you. Thank you. We will take our next question from the line of Jaimin Shah from RWC Partners. Please go ahead. Yeah. Hi. Thanks for the opportunity and quite commendable performance given the circumstances. I had two questions. The first question is on spend. Could you talk a bit on spends on how it's evolved from April, May, and June, and what you are seeing in July? Could you talk about the frequency, as in one of the slides, you kind of show that spends on more of a daily necessity kind of stuff has gone up quarter-on-quarter. What has kind of suffered is essentially the discretionary and, more importantly, the services which were quite close. I'm just trying to understand how you see the usage. Also the data we see from RBI is on per transaction basis, the average ticket size has gone up significantly quarter-on-quarter or even in the data we have until May. Any color that would be great there. When you read RBI data, you should look at it that spend is both retail spends as well as corporate spends or B2B spends. The breakup is not given in the RBI data, so that way you will not be able to get a mix on that. Typically, what happens is, for the retail spends, the ticket sizes are lower. For B2B spends or SME spends, the ticket sizes are higher. That's the insight while you are evaluating the RBI data. While on the first part of the question that you asked, you are right. Couple of trends that we see here is that discretionary spends have gone down. They continue to be down at this point of time because travel, lodging, hotels, restaurants are still not there. It is the non-discretionary items are actually growing. What is also what we see is that online spends in Q1, in April, May, June, actually on an absolute basis were also higher than what we saw in Q4. There is a trend line for, as you can see on the slide which we had presented, 55% of the spend is almost online. Trend is basically that the customer is now buying non-discretionary items online. That is a consistent piece that we are able to see. Right. Okay. No, that's helpful. Just on the asset quality side, your GNPA or whatever your stage 3 includes all the RBI RE more than 90 days, right? Yes. It's inclusive, right? Yes. Okay. I'm just trying to understand here, the INR 258 crore you gave that number is similar on management overlay and the RBI RE 2.0. Essentially, is it fair to say that you're kind of covering 100% of RBI RE too? No. Jaimin, coincidence that the numbers end up being the same. That was not intended to cover the fresh RBI RE. Like we had mentioned earlier, the INR 258 crores that you see as management overlay is just the fact that we cover for any delinquent RBI RE at 65.2% and any NPA RBI RE, we are right now covering it 100%. It's the sum total of both. The fact that it is exactly equivalent to that is just a coincidence. Okay. No worries. Thanks, Adan. Stay in touch. Thank you. We'll take our next question from the line of Bharat Shah from ASK Investment Managers. Please go ahead. Two questions. First, you said that per se desired mix that you aim for is about one-third each, transactor, revolver, and EMI. Why would you desire one-third to be revolver of necessity? I mean, does it have an impact on the way you assess the credit and do you take a bit more liberal stance and issue card accordingly? If the idea is to earn the interest income, will it not structurally result into an issue at some stage? When we said 1/3, 1/3, 1/3, it's primarily what we have seen from the consumer behavior over a period of time. We are talking about this after demonetization, where we have seen that there are people, customers, who are taught. We are not talking about habitual revolvers or chronic revolvers or consistent revolvers. People these days, let's say, if you purchase a thing, as I was mentioning earlier, rates are available as low as 14%-18%, where the customer can convert into installment lending product. Customers who still revolve are either looking at it for a very short-term working capital requirement. What they're looking at is that they will be able to pay the outstanding within two months. That's the kind of thought process with which they revolve. Yes, you are right. Every customer who goes into finally a loss ultimately revolves before that. That is a slow path, but from a consumer behavior, what we have seen for the last four or five years consistently is that if the customer wants to pay back and he has a planned thing, then there are installment lending products. That's why they have become 1/3. Six years, seven years back, this number used to be almost close to zero. This is a trend in the last four, five years that it has happened. Revolving is where the customer need is getting fulfilled for a very short-term period. There are some sloppy payers also, people who forget to pay their outstanding at the due date, so they will go into a revolving model and then come back and then pay back. There are those customers also. I thought I heard you saying that you prefer it this way. It's not an outcome of the consumer behavior, but probably you prefer it to be one-third each, which is what I was a bit curious about. Why would you structurally expect one-third people to revolve? That will then have an impact on the way you assess or judge the credit risk before issuing the card and all of that, I would have thought. Let me clarify that further. We don't expect 1/3 of the customers to revolve. This 1/3 is of the asset, and that's the number of customers revolving is actually far lesser. Much lesser. This is how the trend line that we have seen over a period of time, and what it also does is, if the mix of asset is broadly in this one-third, one-third range, the yields which you finally get are in the space where our business model is rightly positioned. Okay. Secondly, when I structurally look at your business, it is designed for a very superior ROE, which typically most lenders can never hope to get, because a substantial part of the income comes from the card spends. Typically, what we are seeing is your non-interest income covers all your expenditure other than the provisions. Therefore, structurally, that's a very superior business. You say it fundamentally takes care of all the expenses. It's a practically very high ROE activity. Interest earning income portion also is a high-interest component, ranging from EMI to your defaulting revolving customers all the way to 36 months. If your credit losses are kept in check, even that part of the lending activity is a superior ROE activity. If the two things we put together, can we kind of say that structurally you should make more than 30% return on equity on a perpetuity, if not a higher number than that? Thanks. Yeah, this is the business model. You're right. I wouldn't like to comment on the perpetuity bit at this point of time, definitely. Yes, right now we are impacted just like everybody else with the COVID and we have a stress book. That is there. Yes, you're right. In terms of business model, this business can generate higher returns than most of the business because the income-earning capacity per dollar of asset is definitely better than any other lending business or payment business that you can think of. Sorry to interrupt, Mr. Bharat Shah. May we request you to please return to the queue as there are several participants waiting. Thank you. We'll take our next question. That's from the line of Mahesh MB from Kotak Securities. Please go ahead. Good evening, sir. Just two questions from my side. The first question, if you start seeing more number of transactions on the online and specifically it starts getting concentrated on a few websites, have you started seeing any change from a revenue perspective for you? No. Not as of now, we believe that this concentration is there online between, let's say, the two large online players. As the point of sale gets opened up, we believe that point of sale will increase. The second thing is you should also note that, as mentioned, there is a large set of categories are still not open. The whole travel, the whole restaurants, where the card used to be a natural medium of payment, those categories are not open. They will also pick up. It's quite well-diversified from that perspective. Just kind of extending that question. When there is sales which is happening on specific days around these platforms, do you have to propose a specific incentive for them to be part of that or how does it work? The way that it typically works is that if there is a cashback offer, because that is typically the offer which comes in with most of these large players, and that cashback is the customer value proposition where the customer directly gets that benefit. Part of that benefit is shared between the merchant, the manufacturer, and us. There is a sharing arrangement which happens. That's from a fiduciary perspective. Otherwise, advertising and other things are also looked at depending on who is able to put in what into the overall basket. It's a commercial arrangement between three parties. My question was a little bit different. If there are three very large credit card issuers, does the website provider decide as to who does he partner for this program, or all of them get an equal opportunity on how they want to take this forward for that specific few days of sale? End of the day, the program is being run by the website. They can always individually do it or decide who amongst themselves. We are a large player in this space. Sure. All these websites, they connect with us and we are in regular contact with them for various programs. Second question to Aparna. When you look at the spends today, Aparna, if you could just kind of qualitatively comment, have you started seeing spends coming across all the set of clients, which is the prime, subprime? How are you seeing the spends coming or shaping up in the card base? The spends, I don't think we should be looking at it as prime, subprime or any, but so one of the things we need to note is, like we mentioned earlier, there's a fair bit of dynamic portfolio management that we are doing. If anybody is on the margin of, or they have a very high probability of becoming delinquent, then the requisite amount of credit actions have already been taken on these lines. The lines have been brought down, and if they're trying to do any specific high-risk transactions, those will get declined. That kind of activity is happening. Lines are available to spend only from the better customers. We've not really seen any specific bunching of spends coming only from the lower score segments or anything like that. We haven't seen any such grouping of the spend. Can you reverse the argument and say the spend that you're seeing today is almost similar to what you saw in 2018/2019? Or you think you've not reached that point? No. It is not because, as I told you, there are certain categories which are completely shut at this point of time. They used to be mid-teens in the overall mix. That is not there. The second thing also, which you would note, which we have given in the presentation, is the categories like, for example, the whole non-discretionary set, which is your utility bills, telecom. Yeah. Okay. These categories are typically used by everybody. The good part is that a large part of that was earlier going through cash. For example, insurance payments through the insurance agents where people used to give checks and make the payments. Now, all that is coming on online and is being done by the customer regularly. It's a very good sign actually from an overall digitization perspective. Mr. Mahesh, may we request you to please return to the queue? Thank you. We will take our next question from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah. Just two questions. One is on the credit cost. If I were to really look at it, the last two quarters it's been hovering around 10%-11% of AUM. Do you think really the second half could see, notwithstanding a third wave, Can we see a substantial reduction in the credit cost numbers for the later part of the year? I'm not asking for a specific number, Can we really see this coming down? Yeah. I think last time also in one of the interactions, we said. Yes. a kind of a downward trajectory for the credit cost that was much before the second wave. I think I can only say, the second wave has actually delayed that downward journey. The pace at which it will decline et cetera, is a function of macroeconomic environment and regaining the complete collection efficiency. Like BAU kind of efficiency we need to get back. Consumers also should be accessible, customers should also be accessible. Definitely the trajectory will be downward. I cannot comment on the slope part. I mean, how fast we'll be able to reduce it, that we need to wait and watch. Over a period of time, as compared to May, the position in June was better, and again, as compared to June, July's position is better. Okay. It's improving, yes. Okay. That's clear. The other part is, of course, this question has been asked in a different way by various participants. Let me also try to attempt this. There is a big debate that the BNPL customers are going to be INR 40 billion-INR 50 billion in the next 5 years. Have you seen some signs of aggressive pricing in the market, thereby you're compelled to do, or there is an issue of loss of market share in certain of these segments? I don't know, the industry data is actually not available, but how are you approaching this particular segment? If you traditionally look at our own company, Experian CIC, typically the limits will be minimum INR 30,000-INR 40,000 kind of limits from a unit economics perspective. Otherwise, it will not work out for us. Okay. BNPL is in a totally different bracket where it starts with a very small amount of even INR 5,000 and may hover around INR 10,000, INR 12,000. With regard to the potential, if you don't rule out the potential, definitely the market will definitely increase. Mostly it's very popular with the millennials or otherwise the NPCI kind of segments. Way forward will be perhaps some convergence will be there where the BNPL customers can potentially become customers of credit card once they build a good credit history. Otherwise, we will also be making journey towards it, so there will be a convergence point. The question is, we have to use the right channel of acquisition, right value proposition has to be offered. There will be convergence, definitely, over a period of time. We may have to have different product offerings to cater to that. We will also have to articulate some more risk appetite going forward, but we are waiting and watching, and then we will be calibrating our strategy based on the situation. Okay. Thank you, sir. Thank you. We would like to request participants to limit their questions to two per participant. Time permitting, you may come back in the queue for a follow-up question. Our next question is from Aakriti Kakkar from Goldman Sachs. Please go ahead. Hi, sir. Thank you for the opportunity. I have two questions. Starting with a quick one first. Do we utilize YONO SBI as a sourcing instrument? If we do, could you please give us some idea around the proportion that is sourced from there? Yeah. YONO SBI is definitely used, both the app as well as there is an internal portal within the bank. Both are used because that's a more convenient way of getting information in respect of a customer who has given a mandate to the bank to share the information. That is a preferred channel. That's definitely a preferred channel, and as of now, I think 20% of the sourcing happens through YONO. 20%? Yeah, 20% of the sourcing happens through YONO. Okay. It has potential for further increase. All right, thank you. Sir, I'm looking at slide 4 of the PPT, and in the total receivables, 32% is EMI. How much of it is converted at POS for the industry and for SBI Cards? We have not declared that asset balance out of this INR 32, how much is at the point of sale. I can give you one indication, that close to almost 10% of the new spends get converted into installment lending products. Okay. All right. One last quick question, sir. 29% is revolver here in the total receivables book. What is the duration of this revolver book? It's about 3-4 months. Okay? That's generally what we've seen in terms of how long the revolver stays a revolver. All right. However- Yeah. Sorry. One point is that it's important to note that these are revolvers. Anybody paying between 5% and 100%, 99%. We do have customers who revolve by paying 40%, 50% as well. We'll take our next question from the line of Ajit Kumar of Ambit Capital. Please go ahead. Thank you for the opportunity. Again, on this sourcing, this jump in the open market sourcing to 62% from normal 45%-50% driven by co-branded partnership or normal open market sourcing. Could you please provide a breakup between co-branded and retail within this open market sourcing? You used to provide this data earlier. Okay. We do not give the breakup among the channels in open market. What I can tell you is that when we look at our total open market sourcing, our co-brand partnerships are a significant engine of growth for customer acquisition. They do contribute a larger chunk. The other element is that the mix at any point of time also depends upon how the environment is. For example, in that quarter when the malls get shut or the organized retail stores shut, then, for example, the fuel co-brand could sell more. In the time when the organized retail stores open back again, then the situation normalizes. The mix changes in terms of how it is among the various constituents. It's a large component, but we don't give the exact breakup among the different channels in open market. Okay. Thank you. Is there any difference in the sourcing cost per card between this co-branded and retail side within this open market? You're asking co-brand and retail? Sourcing cost. a retail or open market card itself. In terms of open market versus banker, there's a difference in terms of the cost of acquisition per card. Cost of acquisition in open market tends to be on the higher side than banker, because in banker, we get a lot more information from the bank, and we can run pre-approved programs. Within open market, there are different channels in terms of telesales, we apply co-brand and the normal point of sale. These are four different cost elements within open market, within a small range of each other, but we don't specify that value. What I can tell you is that open market cost of acquisition is higher than banker. Thank you. Our next question is from the line of Saurabh from JP Morgan. Please go ahead. Sir, just two questions. One is this stage two book. One is, what is your normalized level of stage two book? Shall we take that Q4 number as a normal number? Is this restructured assets is over and above the stage two book, correct? The restructured non-NPA asset. No. That's part of the stage two. Okay. What will be the normalized stage 2? I'm just trying to compare what will be against this 12%, what's the baseline number, let's say you had experienced in FY 2018 or FY 2017. Pre-COVID, it was in the range of about 8 odd%. 8%. Okay. The second is, generally on the interchange fees, what we're seeing is an MDR pressure in the market. Have you experienced any interchange fee, or do you think that thing could be under some pressure because the MDRs are coming down, or you don't think that's what happens for the card companies? Our interchange are broadly fixed, and they've been consistent. If there is a change, the minor change happens on a month-to-month basis, depending on the scenario. Because typically, for example, utilities will maybe carry slightly lesser interchange compared to if somebody buys mobile from an online store. If you buy a mobile from an online store or mobile from a POS, we get the same interchange. There is no difference there. The mix and depending on the monthly scenario and overall fee, it does make some bit of change, but we have seen it consistent for last 1.5, two years, three years. Okay, you've not seen any interchange issue. Okay. MDR can be negotiated between the acquirer and the merchant, so that is a very different thing. Yeah. Okay. Thanks. Thank you. Our next question is from the line of Dhaval Gada from DSP. Please go ahead. Hi. Two questions. First is, what percentage of the EMI book gets converted at the time of purchase at POS? The second one was EPP outstanding number and provision on that. Thank you. On the first part, I just answered that some time back. We have not given the breakup of that asset into what it is. What I also along with it, we have stated that of the new spends which happen every month, we see close to 10% of them getting converted into installment lending products. Okay. On the EPP, Aparna? Sorry, I don't have it. How much was it? INR 300 odd. Yeah. About INR 300 odd crores is EPP. Okay. Thanks. Thank you. Our next question is from the line of Nitin Aggarwal from Motilal Oswal Securities. Please go ahead. Yeah. Hi. Thanks for the opportunity. Couple of questions. Firstly, if you look at the average ticket size of UPI has been increasing from INR 1,200 in FY 2018 to now INR 1,900. What is really driving this ticket size increase for UPI payments, and how much of this, in your view, is driven by market expansion or say substitution? UPI ticket size, we don't have that detail on that data as to where the transactions are happening because, we are not on the UPI platform. The P2M that is getting declared there is close to around 17%-18%. Majority of it is P2P still there. INR 1,700-INR 1,800 is a good, decent ticket size for small ticket transactions of people giving money to each other. From that perspective, but that visibility we don't have as to why the ticket size is moving up or down, but it's been quite stable at INR 1,800-INR 1,900 for some time now. Okay. Secondly, on the presentation slide 10, wherein we have given the spend categories, there is a decline across all the categories, a double-digit decline. Category 2, 3, and 4 range between 10%-48%. Overall retail spends are down 9%. What is balancing this? Is category 1 very big in size in terms of proportion of spends? Yes, you're right. How much could this be approximately in terms of overall spends? We have not given that breakup, but as you have rightfully figured out that overall spends on a quarter-on-quarter basis are not down by that much. Instead of INR 29,000 crore, we are around INR 27,000 something crore. Okay. It's in that range. Online actually has grown, which we also said. We have not given the exact breakup of these because departmental stores usually is a very large category, and this is after we have taken out fuel, if you look at the disclosure there. Fuel and automotive we have taken out because they are dependent more on what is the price of fuel at that point of time, and that is a growing category. Okay. Lastly, just on the write-off number, if you can mention it within the GNPAs, how much we have written off? Sorry. Within the GNPA? GNPA is the non-written off greater than 90 days. The movement of NPAs, basically. Our NPA was 4.99% on a gross basis as of March. That has come down to 3.91%. No, the composition of it in terms of slippages and reductions by way of write-offs. I think unlike a bank, we don't do that type of disclosure where we do slippages, then upgrades, the increase in the NPA balances. Typically, that is the way the banks do, but we have never given that kind of disclosure. We give a kind of picture around what are the gross write-offs and what is the recovery. Of course, the opening balance and closing balance will be there. Thank you. We'll take the next question from the line of Jai Mundhra from B&K Securities. Please go ahead. Yeah. I have just two questions. One is, while credit card is technically kind of a BNPL product only, but do you have a separate BNPL product or is there any restriction in your charter? Do you have a BNPL product as of now apart from this main offering? No, we don't. As you rightly mentioned, credit card actually is a true original BNPL product. In this case, you can buy and then pay either in revolving terms on your own or pay in three months installment or six months, 9, 12. The choice is with the customer, we don't have a separate BNPL product as of now. Right. Is there any restriction in your charter or maybe your understanding with period? What we can issue is a credit card, and so any BNPL type of product that if at all we build will be in the lines of credit card, because that's what we can do. Sure, sir. Last question, sir. Management overlay, is this your over and above IRAC sort of provisions, or this is just purely those provisions which have not been netted off in computing PCR? Is this over and above what is dictated by IRAC, or this is purely those provisions which have been set aside which does not go into PCR? We provide as per the Ind AS norms, not IRAC. The model throws up a number. Whatever we provide in addition to the model is what is the management reserve. Which is already there in PCR calculation, right? Yes. Sure, ma'am. Thank you and all the best. Thank you. We'll take our next question from the line of Ravi Singh from Motilal Oswal Asset Management. Please go ahead. Yeah, sir, just one question on the retail spend insight slide. These spend categories other than category 1, what are the trends you are witnessing in the second half of June and July so far after the unlocking started? Based upon this trend, what sort of normalization are you expecting? Do you think it will be a quick recovery in the spends level or it will be a longer recovery? On the spend side, what we have seen is that till the first week of June, it was quite soft. It started picking up actually as the rolling lockdown started to finish. It is actually the second half of June, which was very strong, where this started to pick up and become better. We are seeing that July is coming out better than June, and it is stronger than June. It is only after 15th June that the things have started to pick up. Right. In the second half and July so far, trends are strong enough to suggest a recovery in the spends in category 2, 3, 4? See, as of now, it is quite early, but what we have seen in July is quite strong. Understood. Thank you. Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Rao, MD and CEO of SBI Cards for closing comments. Over to you, sir. Rutuja, let me close the call by reiterating our business fundamentals are very robust. We follow all healthy financial and corporate governance principles, which form our core strength. We continue to closely monitor the situation, take all measures to minimize the risk, and ensure a sustainable growth. The 1st quarter results I shared with you reflect our stability and growth potential. To lastly, the need of the hour is for all of us to remain safe and extremely cautious while pursuing our personal and professional endeavors. Thank you, and stay safe. Thank you, members of the management. Ladies and gentlemen, on behalf of SBI Cards and Payment Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.