Ladies and gentlemen, good day and welcome to SBI Cards and Payment Services Limited Q2 FY 2022 Earnings Conference Call. As a reminder, participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your 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, and over to you, sir. Yeah. Thank you, Steven. Good evening, everyone. I extend a very warm welcome to all of you. Thank you for your presence today at the SBI Cards and Payment Services Limited Earnings Call for Q2 FY 2022. We truly appreciate your continued patronage and trust. I hope you and your loved ones are safe and healthy. It is heartening to see the pace of countrywide vaccination. India recently achieved a massive feat of administering 1 billion vaccines. As a result, majority of the population is now covered with at least one dose. Increased vaccinations and continuing COVID-19-related precautions. Normalcy is gradually returning across businesses and it is also boosting consumer sentiment. A recent report by IMF has indicated that India will be the fastest growing major economy in the world, with the GDP growth expected to be at 9.5% in 2021 and 8.5% in 2022. This is in line with the RBI's target for growth projection for FY 2021/2022 at 9.5%. Composite PMI for India sustained at over 50% level in August and September 2021. As per reports, both manufacturing and services sectors have shown steady recovery. While most parameters are positive, global supply chain continues to be strained and is likely to take some more time to normalize. Consumer sentiment too is up and is likely to spur consumer spending. As we have seen in the past, digital payments is increasing and is growing further. Consumer spending is moving towards the discretionary products and the gradual revival in travel is also visible. Continuing with progressive approach, regulators in recent months have introduced many initiatives to further make the digital payment easier for everyone. For instance, permitting card-on-file tokenization to enhance security and convenience, which is going to be effective from January 1, 2022. Now I will present business overview on new initiatives. As an agile organization, we have taken all measures to pursue sustainable business growth during the quarter. The results are visible across our business. For instance, our new accounts witnessed a very strong growth during the quarter at well over 9.5 lakh new cards. In fact, addition of new accounts has been about 56% jump as compared to previous quarter. New account sourcing through SBI channel has nearly doubled compared to the previous quarter, with over four lakh new accounts added during Q2 FY 2022. Our cards in force are now well over 12.4 million. As a result, we have been able to increase our market share in cards in force, maintaining our position as the second largest card issuer. Positive business momentum can also be gauged from growth witnessed in spends. At well over INR 43,000 crore during the quarter, SBI Card witnessed the highest ever spends during the quarter. There has been a sharp increase in both retail spends and corporate spends, with both witnessing a 41% and 80% year-on-year growth respectively. Noticeably, online spends continue to grow steadily across most categories. Importantly, as expected, with gradual normalization of the situation on the ground, card spends across most categories such as groceries, health, utilities, education, consumer durables, furnishing and hardware, have surpassed pre-COVID levels, that is December 2019 to February 2020 levels. With apparel and jewelry registering the highest growth. Travel and entertainment related transactions too have finally witnessed improved growth, though they are still to reach pre-COVID levels. During this period, we rolled out various initiatives to keep our customers informed, inspired and engaged. For instance, our campaign, Khushiyon Ka Credit Card. In line with an increased preference, we continue to offer customers with easy payments such as EMI at low interest rate levels, which have been received well. We initiated steps to further improve, strengthen and diversify our portfolio. BPCL SBI Card got introduced on the RuPay network during the period. We are noticing continuous steady improvement in delinquency. We have also successfully switched to new mechanism for debiting payments as per the deadline mandated by RBI. Not only on business, but we have also maintained a strong focus on our commitment to create value through ESG. We have funded second waste management facility to recycle plastic waste at a facility called Beta Noida. We continued our investment towards skill development, healthcare, dry ration support, etc. to underprivileged. Significant strides towards diversity and inclusion with the launch of women alumni hiring program, inclusive hiring for people with disability. I would like to express my special gratitude to all my colleagues at SBI Card who rose to the challenges and diligently followed their professional responsibilities that have helped us to reach so far successfully. Let me now take you through our financial performance for Q2 FY 2022. Our business model is inherently strong, with robust fundamentals. Based on strong business performance in the quarter, the company has delivered profit after tax of INR 345 crore at 67% year-on-year growth. Driven by growth in spend, receivables have grown by 12.09% year-on-year to close at INR 26,700 crore, further leading to a total income of INR 2,065 crore at 7% year-on-year. Our operating expenditure was higher by 23% year-on-year, driven by higher business volume. On asset quality, our GNPA has come down to 3.36% as compared to 3.91% at Q1 FY 2022. Net NPA for the period is at 0.91%. The overall management overlay to cover our risk of future credit risk stands at INR 231 crores as on September 21. Despite addition of INR 107 crores towards RBI RE 2.0, the overall book has declined from INR 1,376 crores in Q1 to INR 1,030 crores in Q2. The share of RBI RE book stands at 4% of total receivables, compared to 6% in Q1. For the RBI RE book, which is between 30 days to 90 days, the company continues to provide a PCR of 64.99%. For the RBI RE book greater than 90 days, the company provides 100%. Second, on average, the risk for the quarter ended September 2021 is at 4.9%, which is higher by 155 basis points as compared to 3.4% in Q1 FY 2022. ROAE is at 20.1%, which is higher by 984 basis points as compared to 14.1% in Q1 FY 2022. On liquidity and capital adequacy, our liquidity position continues to be strong during Q2. Our capital ratio for the period ended September is at 25% as compared to 23.3% at Q1, Q2 FY 2021. In Q2 FY 2022, our tier one ratio has improved to 21.8% from 21% at Q2 FY 2021. Our liquidity coverage ratio for the period ended September 2021 is at 74% as against the statutory requirement of 50%. Our credit ratings remain excellent with the A1+ and stable ratings by CRISIL and ICRA for both short-term and long-term borrowings. These strong credit ratings by the rating agencies reflect our robust financials. While the future impact of COVID-19 on the company's results remain uncertain, I would like to reiterate that as of now, most of the business activities are back at pre-COVID levels, including sourcing of new accounts and issuance of credit cards. During the COVID period, the company has had to exercise prudence to preserve economic value of the business. While we remain watchful of macro environment, we will continue to pursue all opportunities for sustainable business growth. With that, let's open the call for question and answer. 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 and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. First question is from the line of Anuj Singla from Bank of America. Please go ahead. Good evening, everyone, and thanks for the opportunity. My first question is with regards to the 50% spend market share and card in force market share. The presentation shows we have gained 52 points card in force. Transaction market share is also up 30 basis points, but we lost around 30 basis points on corporate market share. Seems to be the use of spend for card for us is trailing the industry. Can you give some color on is this related to corporate spend because what we spend, is that where we are losing some market share or in the retail space as well? The corollary to that question is, what are you doing something to address this? Yeah. Anuj, with regard to your query on the market share between the cards in force and spends. You are right to some extent. It is on account of corporate spends. While transaction share-wise, we have been maintaining the transaction share steadily improving, we feel like the competition, perhaps the third largest player, actually started. Since we have seen, like, public information is also available in August with their monthly when we look at the spends across our spends with effect. When we compare it, while the aggregated information is not available, the breakup is not available in terms of how much share, how much of their spend on account of corporate, how much on account of retail. The comparison of late registry in terms of transaction share versus the spends does indicate that transaction spends has increased of late for IDFC. That's a clear indication that it's a play of corporate spends. We have adopted a consistent approach. We never wanted to take a new risk in terms of, I mean, corporate exposure. Because we feel like with the low-margin business of corporate spends, it is always like we need to be mindful of the risk. That at this point of late was perhaps maybe different. We are evaluating the opportunity to ramp up while keeping an eye on the risk. Okay. Understood, sir. The second question is with regards to, again, sorry, regarding the disconnect between spend growth and the receivables growth. The QoQ spends have risen like all-time high, which you mentioned, 31% Q2 growth. The receivables growth is only 9.4%. Within receivables, revolver and term is only 0.8% on a Q2, so as the transactor doesn't raise. One question is this something which continue into the second half as well, where the spends tend to continue to do well given as the receivables growth will remain muted. The second query is, what is driving this significant rise in transactors? Is it seasonal? Is it something, you know, which is there in the economy if you can provide some help there? Hi, Anuj. In cards what happens is that, when I'm giving you the flow, when a customer spends on the card, at that point of time, we get that some amount of spend on the EMI, which we call it as a subvention spend. Some we convert immediately into a closed-ended, which is what we call Flexipay. When you see the spend increase, along with that, the closed-ended loans also have been increasing. The new closed-ended loans have been increasing at a higher pace than the earlier ones. Okay? The second thing is that the transactors in the For example, let's say whatever new spends are happening in the month of September, so that will come initially as a transactor spend and over a period of time that starts getting converted into some, depending on the kind of portfolios, spending patterns, repayment patterns, it gets converted into revolvers. You are right, it is, to a degree, the asset build-up follows the spends on the card because unless until there is spends and transactions, the asset build-up will not happen. Okay? That's point one. Second thing is, the rates are both exactly the same. We will never have if there is a growth of 100% card spends, then, a 100% of assets will increase. That is also not there. Because there are old assets, yet some of that gets repaid, new assets get built. The percentages vary depending on the profile mix and the consumer behavior mix which is happening at that point of time. We are hoping that in the Q2, because of strong spends which have come up, that will build up into asset in Q3. Q3 is hopefully, as of now, we are seeing very strong. If there is no COVID overhang, we should be able that it should give further boost to spends, which again, because that's the input to building the asset. Thank you. Mr. Singla, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Amit Nanavati from Nomura. Please go ahead. Hi, sir. My question on revolver rates. Typically you've seen at a macro level higher attrition than pay hikes for the IT and banking industry in general, right? Salary levels are going up and going up nicely. Does this historically you would have seen that this can give some sense. Does this increase the propensity to kind of leverage through cards or generally the needs to revolve goes down in the transitory period where salaries are rising and your spends kind of catch up over time? Can you just repeat the question? It's, I think the line was not clear. No, I didn't know. Better. Good. Yeah. Basically you've seen, I mean, the largest salary segment, right, in from an industry perspective would be IT and banking. Here you've seen higher attrition, higher pay hikes across the board. Does this increase the propensity to leverage through credit cards or does it kind of that transitory period reduce the need to kind of revolve, which means your revolver book takes much longer time to kind of build up. The spends may go up, but the revolve book may not go up in tandem. No, we have not seen that. Okay. In fact, in last, earlier multiple calls we have reiterated this. What we see here is today when the customer is spending, he has multiple choices to convert into a closed-ended term loan balance. Okay? He can convert at the point of sale. Let's say the interest rates are very low, very competitive, 14%. If he wants to do it at a later date before the payment due date, anywhere between 14% to 22%, the interest rates are available. Revolving is more from a short-term funding perspective. The customer uses if he sees funds coming back to him in next one or two months, people will keep revolving that. Okay? Now, given that that is the same scenario, after COVID and after RE, we had shifted almost 9% of our assets into RE. All that 9% was revolving at one point of time. Now the new cycle has to start after this. The new cycle is what we see is already started. That new cycle is first, you get the new customers. It is already upward of 9.5 lakh for this quarter. Those customers are spending, we are already seeing that spend behavior coming back. Average spends are higher than pre-COVID level. Now, the last step here is that building assets on these set of customers. Even on these customers, the closed-ended assets, the term asset is already being. We are already able to see that. It is a revolving balances which we will have to see as to how it comes out. We have been tighter in our underwriting criteria in the last one and a half years. Maybe it will not go back to the original numbers, but there is still an increase that we foresee in the coming months. Understood. Secondly, if I look at this cost to income ratio, right? You are back because the acquisitions are back, the spends are back. We are back to that 60% to 67% cost to income ratio. This transitory period will find that the revolver book builds up, right? The higher acquisitions are back, the spends are back. Do you see this cost to income ratio now from these levels, at least in the near term, next one to 12 months going further up or is this very kind of peak out? Amit, you're right that because what had happened, and if you look at the business in the last few quarters, and we've mentioned this in the past as well, that this was not a pause but a reset. It wasn't that due to COVID customers stopped spending and the COVID got over, the second wave got over, customers started spending. It's a reset because the profile of the customer had changed. What we've done from our side is that as this reset happened, we had to reinvest into the business. We started sourcing aggressively, so that's what you've seen. The Q1 to Q2 movement in the new accounts requires investment. That's what we've done. The growth in spend, both in corporate and retail, that too requires investment. The market is competitive, so one has to invest in the market to encourage, entice customers to spend. Now, this is a cycle that has started. The investment has been done, the spends have come. What it would do is that this is a festival season, say even in Q3, it will definitely need some more investment, and we would like to do that. Cost to income is something we're very, very particular and we would like to bring it back, but may not happen in the immediate one or two quarters because this is the time to build the business back. Once we've got the right amount of assets and the right amount of interest-bearing assets, you'll find that our cost to income will start coming down. This is something that we're very focused on. It's just that the pace of the business requires that, at this point of time, investment is required. The normal, you know, economies of scale will kick in. Thank you, Mr. Nanavati. May we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities. Please go ahead. Yeah, hi. Thanks for the opportunity. I just have two questions. One is, if I look at the sourcing from under 30 years, this has increased to 51% during the quarter versus 24% at outstanding level. So if you can share some color as to how the spend share of this type of customers, like the age type, this portion of customers, how much contribution do they make in total spends? And what implications will it have on our overall spend growth and spend per card? As you have seen on the overall basis that the spend per card is now on a higher level and all, actually higher than pre-COVID, if we look at it, and especially retail spends per card. The reason why we go for more younger customers is that so that we are there longer with them in their lifetime. The earlier you get them at the stage of, let's say, 22, 23, as they have started their jobs and they are starting to get their salaries. The moment you start with them with a product which is, let's say, a INR 500 product, even if they are in tier two, tier three cities, over a period of time, as they stay longer with you, their incomes will rise, and we have seen that happening with us. Customers have been with us for almost 20, 15, 20 years, and over a period of time we will upgrade them. The income stream from these customers is not to be looked at from a more lifetime perspective, and this is what we have seen that these customers stick with us. Right. Safe to say that over the next couple of years from the time you are able to upgrade the spend per card and overall spending income line and we may lose some market share? No, no. See, spend per card and market share are two different things. As our MD sir was saying that market share is because of retail and corporate or B2B spends mix and their top line play at low margin is more B2B spends. On the retail spends side of it, these customers are actually quite good because younger customers are doing more online spending and we are, as you can see already, online spend share is upwards of 53, between 53% to 54% of the total spending, and they are more savvier. They do their transactions online. They also service themselves online. The cost comes down over a period of time. It is, on an overall basis, we believe this is, they are the right TG. In fact, our target TG has always been anywhere between 27 to 37. Okay. Got you. The other question is like the margins have come down sharply over the quarter. Mainly I understand due to the kind of revolvers and this is impacting our interest income. Now also the cost of funds has shown an increase. What is the like outlook on margins on like, you know, over the next couple of years? Yeah, you are correct. NIM has definitely recorded slight decline. It is actually a function of a composition where this sector balances now accounts for 37%. As the revolvers start, I mean, this also feels like a transfer balance is pretty expensive and converted into revolver. As increase of revolvers definitely the yields will improve. Of course, to maximize the income we were focusing on, in fact, the close, what you call close NPA or otherwise the EMI-based kind of loans, we were focus on amping up the PCA otherwise the En cash et cetera, and including subvention. We were able to keep pace with the growth in NPA. In terms of interest reason, the shares continued at 36%. Having said that, these are the kind of investment what we need to make and that to improve the NIM. NIM is only one part of it. Income is only like 45% to 46% of our overall revenue. We have the other major contributors by way of fee income and other income. There we were able to get good growth quarter-on-quarter. With that we were able to absorb the elevated expenses, particularly the operating. 22% increase was there quarter-on-quarter. That we were able to absorb that and just still able to maintain earnings before credit cost in absolute terms. I'm not talking about as a percentage, but you know, in absolute terms we were able to maintain the EBCC. This is the kind of investment what we are making now. We shall give the results in the subsequent quarters. Awesome. Thank you so much. On the cost of funds side, this is more of a play of averages. What we are seeing is our daily cost of fund is more or less the same. We think that we should be able to maintain this in the coming quarter as well. As sir said, it's more of a you know as the transactions start getting converted into revolvers, the yield would go up and therefore that's the play on the NIM side will come more from the yields rather than from cost of fund. Cost of fund would more or less be you know static. Sure. Thank you so much. Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead. Hi. Thanks for the opportunity. I have a question on credit quality. If I just run some computations, what I see is that this is the previous quarter, they are roughly about INR 550 crores to INR 600 crores. It is probably flattest quarter-on-quarter. How should we think about this going forward, while COVID levels obviously an uncertainty, but other things remaining the same, whether you expect this number to come off pretty sharply and normalize? If you were to look at our overall GNPA, they have been consistently declining quarter-on-quarter. We went 4.99%, we came down to 3.91%. This quarter we are down to 3.36%. As you would notice, a lot of our stress book is getting written off and running off. As more and more of the stress book goes out, we should see an improving trend. You're right, this should improve over, I mean, everything else remaining unchanged, we should expect this trend to continue. Okay. Quickly on that note, one, GNPA going down is also a function of write-offs. Yeah, I mean, going forward we expect this to improve. The other question was on, typically, how should think about the jaws between income and cost, I mean, say the medium term over the next two to three years. Do you expect to see sort of linearity in cost and income growth over medium term or how do you think or have you said that you will need to see this trend over time? You know, when you look at the income growth, as sir had mentioned, while you know the interest bearing assets, especially the revolver side, was on the lower side. We got the income from the fee and services. As we see higher spends continuing, the trends on spends continue, we will continue to get that income. It's just that the transactor conversion into interest bearing assets, whether into EMI or the revolvers, that could change the game. In the near term, I would say that cost to income will remain elevated because we would like to pump in a little bit more money into the market. One is the competitive scenario. Second is the rebuilding of the business because 1.5 years you've seen that the spends were moving you know it was not a clear line of growth. It was coming up, but because of some disruption or the other, it would come down. This is the first time we are seeing that the last four to ten months especially from June onwards there is a trajectory of growth. This is the time to invest into the business. The jaws on income and expense at this point of time, I would say that from the business side, we look at it time to invest. Even if the cost to income remains slightly elevated, that's fine. The moment these customer spend starts converting into assets and assets into interest bearing assets, you'll find that the cost to income and you know, the operating leverage, everything will start moving in a different direction. That's how the business will work. That's how we are looking at it, and that's how we are working towards investing into the business. Thank you, Mr. Iyer. We're gonna take a brief break to the question queue for follow-up questions. Okay, the next question is from the line of Dhaval Gada from DSP Investment Managers. Please go ahead. Yeah. Hi, thanks for the opportunity. I had two questions. First is just on the revolve rate. So, I just wanted to sort of clarify, you know, when do you see, you know, the company return to about 38% to 40% revolve rate, which we had seen pre-COVID? In your experience in the past, like how many quarters does it take to build up that kind of level for the current period from this point forward? The second question was around, you know, you've been working with some of these fintech companies on, you know, the small ticket products, and so on. Just wanted to understand, would you be able to give some size around your ticket size of business with these companies in terms of number of customers or the monthly volumes that you do with these partners today? Yeah, those are questions. Thanks. I think with regard to your query on the revolver, I think, last year when we compare asset composition as of last year, I think it is at an elevated level of 33% to 34%, mostly on account of moratorium, which actually like where no repayment was in the terms or no repayment was demanded unless and until voluntarily it was changed with the cardholder. That definitely resulted. Ideally also we would like to have a 1/3, 1/3, 1/3. Like, basically a kind of stable state, kind of composition. As we responded earlier to one of the queries, the last one and a half years, we have tightened the risk features in order to tackle the risk quality, automatically like brings in a kind of less risky customers who may have lesser propensity to revolve also. Though we are seeing like risk quality is improving steadily, we are recalibrating our updates in a gradual way. Obviously this will also permit likely a new segment of customers to get added to the revolvers. This is a journey. I mean, very difficult to anticipate whether it is so, whether we are going to come back to normal composition in two quarters, three quarters. We will never lose any opportunity to maximize the revenue. In fact, that is what we can say here. Like if a customer may not have a propensity to revolve, but then we will be offering a very, I mean, EMI kind of loans at competitive rates in order to maximize the revenue. Yeah. I think this was a fintech kind of response. We have no specific tie-up as of now with any fintech on doing small ticket because we are doing credit cards only. Only thing that we do here is that all our customers are able to, when they are making a transaction, we have tied up with lot of partners so that they can convert his spend into a pay later of three months or six months or nine months while purchasing the goods itself, and especially on the online. With that, all these facilities are available on Amazon, Flipkart, Paytm, almost all large top players. He has to have an HDFC credit card to avail that facility. We see very large volumes there. We have not declared the numbers, but the volumes are very large when in our customers itself who are utilizing this facility. These two will be part of our EMI book, is it correct? It's part of our term loan book. Yes. Term loan. Okay. Just one final question. What is the size of your EPP book now, and any provision that we carry on this account? EPP should be very small. EPP is insignificant and it's in the normal course of business. We don't even call it out. That was there in the first RBI RE. At that time, we were looking at converting the customers into EPP. Now it is not something that is happening. It's a very small. It's insignificant. Okay. Understand. Just technical points. You said revolve rate and revolver. I'll just clarify. What you see in the asset is revolver. Revolve rate is revolver over revolver asset over revolver asset plus the transactors. So our revolve rate is around about 43%, revolver at 27% of the asset. Just a technical point. Your question was still relevant. Yeah. Thanks. Thank you. All the best. Thank you. The next question is from the line of Saurav from Citi. Please go ahead. Hi. Two quick questions. One is, you know, how, what percentage of spend are travel and how much is it down, you know with? Sorry. Your voice is not clear from your line. Please check. Saurav, your question was how much percentage of your spends is on travel. Was that the question? Yeah. On page 10, the last category, what percentage of the spends are from travel segment and how much is it down, you know, versus pre-COVID levels? Look, travel typically on a pre-COVID, because I'm taking the whole category. Yeah. Travel, travel agents, airlines and such. Because there used to be a variation on a monthly basis, but would fall anywhere between roughly early double digits. It used to be that. At this point of time, as we have put in our investor presentation, it is lower than pre-COVID number. Travel, entertainment is actually the only category which is lower than pre-COVID. Rest, everything has gone up, and the best part is that the point of sale also has gone up versus pre-COVID. Travel and entertainment as a category is still down, primarily because overseas travel has still not opened up and international travel has to go up. Domestic travel we see is almost post-COVID. Yeah, how much is it down versus pre-COVID? I mean, can you quantify that percentage? It is around 2/3 to 70% of the pre-COVID numbers. Okay, got it. Second, sir, is on this pay later QR thing. You know, the other private banks have launched options, you know, for their customers. Will it be fair in assuming that if SBI would launch a pay later option that will rest within SBI Card? It will go through SBI Card or We cannot comment or we don't know what the strategy of SBI is in terms of BNPL. But as far as we are concerned, like a credit card bureau, always, it is always like a BNPL Plus. This is interesting. Definitely, a lot of buzz is there, a lot of activities happening, number of players that are in place and different space. We are watching it closely and, as a segment we feel like a, it's a different segment, right? Different from a merchant, but it is like expanding the market. It is like a mostly it is a new to credit kind of segment of customers. Typically, thin file in bureau, that kind of segment. Once they evolve, then they can become like a credit eligible for the credit cards, even credit cards also. We see it as a business opportunity. We are just observing, but we don't know much about SBI's plan. Okay. One last question, with your permission, sir. Basically, you know, on your credit losses, given we have almost gone through 18 months of COVID, and I'm assuming that under IRAC filters we could complete 18 months. Will it be fair to assume that as your, you know, this infrastructure rolls down and we come out of COVID, a forward credit cost should actually be lower than normalized levels of this 7%? We have always maintained that actually the trajectory of the credit cost will be correlated to the trend of IRAC. That's a reasonable assumption that as the IRAC share comes from further, you can expect some impact of improvement to happen. Thank you, Mr. Sarma. We request that you attend to the question. Please for follow-up questions. The next question is from the line of Antariksha Banerjee from ICICI Prudential AMC. Please go ahead. Yeah. Hello, am I audible? Yes. Thanks, sir. First set of questions is actually for [Sanan] and team both. I know revolver has been discussed. I just wanted to understand from a structural perspective as the amount of code and it's a medium term, right? Compare that to what it used to be pre-COVID. During this period, your sourcing has predominantly been more safe. If I look at this quarter chart, it's more from, I mean, it's less from category B having customers. It's much more from Tier 2. You're sourcing more from SBI's. Do all those have an implication on whether revolver rates will stabilize after COVID on a steady-state basis? What's the roadmap from this beginning from 2017 to the third phase of the strategy that you described? Also is the category of spends an indication in whether the transactions are converted to EMI or eventually returned? Second question, travel is the only one which is lagging. Is that also correlated with the fact that revolver balances are not Okay. Two parts to your question. I'll try and answer the first part. Actually the second part. Yes, there are certain categories which are more amenable to converting into the EMI products. These categories would be consumer durables, specifically in case of smartphones. This category would be large ticket size furnishings. This category would be personal travel, obviously, as international travel used to be in one of those categories where people would do it for leisure, would convert into and pay into installments. There are certain categories which are more amenable to this kind of EMI thing. However, what I would say is there are two tailwinds to this. The first is that, as the overall spending increases, you would and the customer spends more, there is a propensity to convert that into installment payments. The second is there are a lot of these categories, especially in Tier 2, are now opening up majorly. Smartphone penetration is going. People changing smartphones every year. A whole lot of that consumer behavior and their what I would put it as that their propensity to be comfortable with installment lending products is far, far higher. That consumer behavior change is very helpful in that sense. On the revolve piece, as our MD was also saying, yes, in last 1.5 years, we have been more careful in terms of our choice of customers. It's revolve rates will maybe not be as high as what we used to see in a pre-COVID level, but there is definitely an increase possible from the present levels. Aparna? Thank you. Mr. Rao, may we request that you return to the question queue for follow-up questions. The next question is from the line of Abhijit Bhutkar from Kotak Securities. Please go ahead. Yeah. Hi, good evening. First question is on the tokenized payment product. Just wanted to broadly understand what's been the user adoption of this particular product. Specifically, customers using SBI Card at an offline location and paying through a QR code specifically. The backend gets paid out using SBI Card, but the front end is essentially a QR code out there. Tokenization is. Well, I'll come to tokenization, but the simple one is, there are three trends. First, point of sale is growing and it's come back to pre-COVID. The second point which you mentioned was around the tap-and-go is now more than one out of four transactions on the POS is tap and pay with RBI increasing it to 5,000 because it helps quite a lot. People don't want to touch things, and the tap thing is working out quite nicely. On the Google Pay and Samsung Pay and wherever we have done the tokenization, every month we see a higher increase in the customer adoption in terms of numbers. The numbers are still not very high. It's still early stages. It is now getting in. We can send you the numbers later on, exactly what it is, but the numbers are at very early stages on this one. Second one is on reward points. What is the general utilization of reward points that you've seen over the years? The question is in the context of why don't we go into full cashback and offer some sort of an instant gratification? Related to that, do we, as a bank, have the ability to personalize redemption as per the customer's patterns of behavior that we've seen over the years? Okay. We do cashback, which is instant cashback at, with online place. Presently, there is a one which is running with Flipkart. You can go there and use your SBI Card to get a 10% cashback. I've done that multiple places. Online it is easier because instantly it is possible. We also do cashback offers which customers get later after looking at their spends. Why can't we get away from rewards? Only because rewards is given to the customers for all the spends. Cashback is not necessarily given on all the spends. The last part is about what people redeem on cashback. We have close to 400, 300-400 product offerings and vouchers, and customers can also convert into cash directly onto their credit statement. Direct credit to statement is preferred, but it is majority of the customers still like to have e-vouchers and points and plans because that they can give to others or do various things with it. Yes, we have the capacity to not only personalize this on an individual customer level, but on basis that we run programs also. We also try to change behavior because direct credit into the statement is from a redemption perspective more expensive to us compared to when the customer takes a voucher or points and plan where we enjoy some discounts. We work at changing the consumer behavior also in the long term also. Got it. This is helpful. Just one question on the write-off for the quarter. That will be all. Thank you. So six point six forty-seven. Yeah, you can work it out. Give the number. How much is the number? INR 647. It's about the write-off should be INR 670 odd. Thank you. Mr. Management, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead. Yeah. Hi. Good evening, everyone. Just two questions. One is, I see the subscription-based revenue line item being a little soft. Any color on what is happening around there? Question two is, on the investment that we're doing. Are we doing anything to improve our value proposition in the sense that, maybe come up with a digital card or make our app more funky with having the card linked on the app and make it more like a wallet, and maybe easier to spend online, using our card or QR, scanning QR codes? Lastly, on the provisioning bit, what would be the outstanding provisioning on the restructured book? Just a clarification, INR 200 odd crores, that is, INR 90 overdue in the restructured book is already a part of the INR 900 odd crores or 3.6% GNPA that we have, right? Yes. I think just a correction on the earlier one. I'd mentioned the gross item is 670. This should be about 6.3 odd. That's the right number. Now, in terms of provisioning on the restructured book, like we mentioned earlier, for the restructured book, anything that is between 30-90 days, we provide at about 65%, which is our normal NPA provision rate. Any NPA on the restructured book, we provide it 100%, and that remains unchanged. Yes, the RBI RE NPA is part of this 3.36 NPA that's given above. Correct. Anything on the 600-odd crore which is non-material overdue, and obviously not the remaining part of the 1,000-odd crore, does that have any provision or does that have the 230-odd crore of management overdue provision? Is that against that? Like I'd mentioned, for RBI RE, anything that is not the loan, we provide at the rate specified by RBI, which is 10%. Okay. That's the mandated provision rate. 30 to 90 is provided at 65%, and greater than 90 is- Got it. provided at 100. Perfect. Well understood. That's perfectly understood. Are there other two questions? One is the subscription-based fee, and the second is on the improving the customer feel on the app or maybe a digital card to get the experience better for the customer on the card. The question of subscription-based fee. You want to know the amount? Sorry, I No, we know the amount, but I'm thinking that the momentum on that, like pre-COVID and what it is today, the momentum of that same growth of subscription fee has come off a bit. I just want to understand, are we getting more cards with lower, at the lower end or is a lot of other still is the momentum for the free card a little higher? What is happening on the subscription fees? That's one. The second is on the digital card or the apps being a little more friendly and making it QR friendly or maybe like a wallet so that the customer uses that more often. That is what we understand. Subscription-based fee is comprises of two things. One is the membership fee, which we charge, which will be basically to the new sets of customers that we've acquired, and it will also have the renewal fee, which will be on the base. Renewal fee will be a larger number compared to the membership fee because membership fee only comes on the new accounts. The membership fee, it depends on the number of accounts that you're sourcing in a particular month or a quarter. Generally, if you source in, say, in one month one, then the membership fee starts coming from the second month onwards, because by the time you bill the customer, et cetera, it takes a month or so for it to start reflecting into these accounts. The other thing is that it gets deferred over a period of 12 months. All the changes that you see are gradual in this. One is how you're picking up the sourcing. Second is, you know, it's getting deferred over a period of 12 months. The rise in that will, you see, is gradual. As far as the fee is concerned, I would say that our sourcing of accounts has increased, so the fee will show a gradual increase. The premium portion of the total sourcing has also increased. That too will help the uptick in the fee. Like I said, since it gets deferred over a period of 12 months, you don't see a drastic change in a particular period. Thank you, Mr. Dave. May we request the next question? Hello. Sorry, the moderator asked the question. Mobile app. Yes, you're right. We are working on our mobile app, but we are looking at it more from a hyper-personalization perspective with respect to each customers, given that our number of customers is fairly large and people's requirements are different. Some people want it to be funkier, more wallet-like, but some people want it to be quite safe and have more security parameters built into it. Depending on how the consumer behavior is, we're wanting to look at our the UI, UX of the customer. As far as the QR code and other things are concerned, the Bharat QR thing is already available on the app. Whatever is from a payment perspective is available on the networks, which is either Visa, Mastercard, RuPay or Amex. We make that available on our mobile app. Be it the QR code, be it the tokenization. We've been working on that to give all, almost all the 100% of our servicing onto mobile apps. Today, the customer actually doesn't need to get in touch with us, unless anybody is wanting to report a lost and stolen, that too that you can do on the app. For most of the services, the customer can actually use the mobile app to service themselves. You're right, it requires, we'll have to continuously update it, and we are working towards the same objective. Thank you. Mr. Dave, may I request that you kindly wait for follow-up questions? Thank you. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the question queue. Next question is from the line of Rohan Mandora from Equirus Securities. Go ahead. Yeah. Hi, sir. Thanks for the opportunity. Actually two things. One was in terms of the employee costs, we are seeing a decline both quarter-on-quarter and year-on-year. Just want to understand, is there a reduction in employees or what is happening? Second, on the liability side, the borrowings from CTs have been coming down. Earlier we had indicated from an ALM perspective on the composition, in terms of the borrowings. Just a second. Okay. First let me answer about the salary employee cost. Now, a couple of things. You know, it has the cost of ESOP also. A bit of accounting related thing as to how much charge has come and nothing has substantially reduced the number of employees, etc. It is more the average headcount is a marginal change. It's more of an accounting related this rather than anything else. No reduction in headcount, etc. Yes, we haven't really increased the headcount. It's more or less stagnant at that level. It's more to do with that. Sorry, I didn't get the second part of the question. If you could repeat that. Sir, in the borrowing mix, if you look at it the commercial paper CP borrowing is at 60% in FY 2022. If you look at it, earlier part of FY 2021, it was around 15% to 20%. On the ALM perspective, as you had indicated earlier, CP does make sense because most of our assets are short term. Is there a change in strategy wherein we will have a lower CP increment and that would have on the comment? Yeah. Let me answer this. One is, when you say that our assets on the lower side, so one should borrow short term. No, it's not really like that. There is a core asset which is always there, so you need to borrow at different intervals as well. That's the first thing. CP again depends on, you know, how much, you know, we borrow largely on the working capital limits. We have a large working capital limits. Working capital limits, what happens is, if you look at it the last few quarters, our asset buildup was not so much, and that was mainly because of the COVID-related risk, while we had higher working capital limits. To avail of CP facilities y ou need to be utilizing your working capital limits to a certain specific percentage. If your utilization is lower than that, then the CP is not available. What we did was, since in previous quarters it was our working capital utilization was lower, we did not go to the CP market. We relied mainly on the consortium borrowing. That too was coming more for us at the similar rate what we were getting from the CP. From a rate perspective, we were not in any way got impacted. Instrument wise, yes, we changed. Instead of a CP, we took WCDL etc. Our WCDL etc. also hovered around a similar rate as the CP. From a rate perspective, i t did not impact us. The instrument was different. Thank you. We'll take the next question from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead. Yeah. Thank you for the opportunity. Sir, if we look at your 30-day activity ratio close to 50%, it's still about 45% below the pre-COVID levels. Over what period of time do you expect to reach that ratio? Related to that, if I look at your other operating expenses of about INR 1,200 crores, how much of that would be variable and linked directly to customer acquisition? Thank you. On the first part of your question, because a lot of those active customers were put into RE and blocked for future customer spending at that stage. That is why you saw the number coming down. What we already see is that on a like-for-like basis, we would already be anywhere between 52% to 55%, and this number is continuously going up. As you can see already, we're taking all those customers into consideration also. As I was mentioning in the last quarter's update also, that it is now 50. This is average of each month. This is July, August, September. It is an average of all those three months. It's running at 50%. It is What we have seen is that in the recent months it is going further up. This is on a continuous increase. Some of the segments, for example, Tier 1 also, we already see that they have already reached. Actually, some of them are higher than the pre-COVID levels also. Got it. Sir, on the other operating expenses, how much of this is directly linked to customer acquisition? We don't give that breakup, but customer acquisition cost for a card business is a substantial investment that we do. Two big lines of cost which are there. Which one is the stimulus cost, which comprises of cashback, reward related, and the other one is the acquisition cost. I don't give the breakup, but I can tell you both of these costs are considered a major portion of the operating expenses. Thank you. We'll take the next question from the line of Param Subramanian from Macquarie. Please go ahead. Hi, sir. I wanted to ask on something you mentioned, which was that the cost-based checkout financing, you're seeing good trends there. This is part of, you know, a larger trend that we are seeing across the industry. Do you see this taking away from the share of the percentage of revolver in your revolving receivables going forward since, you know, since it's a convenient mode of payment? Could this affect our targets of ramping back 27% revolvers back to 33% to 34%? That's question one. Secondly, I also wanted to ask, you know, on the revolver portion, you know, a lot of the BNPL tech players, their value proposition is, you know, largely targeted towards certain kind of customers who revolve with their credit card. How does that affect your revolver percentages? Those are my two questions. On your first part, these options have been available since a long period of time, but consumer behaviors can change, because this growth in, as you said, the checkout-based conversion into a term product or a loan product is there. One thing to be noted is that on a credit card, the average credit limits are fairly high, whereas some of these players, they give the limit. Now they have started experimenting with larger limits, but it's still not that high because the average limit on a credit card is upwards of INR 80,000-INR 100,000. As in those segments, I mean, once the customer has a card, it is the easiest option for him because it's at the point of checkout. It's single click. You don't have to fill any document. You don't have to give any name. You don't have to do anything. Anybody who has a credit card is actually will use a credit card, and we are seeing that. The game plan or strategy for us has to be that as these customers take these loans and build their credit history, we are able to give cards to them on a continuous basis and grow our portfolio so that they come to use a product which is more easier, gives them rewards, gives them cashback, can be used internationally, and also able to give them the benefit of the pre-closure option which is available. Thank you. Ladies and gentlemen, we will take the last question from the line of Roshan Chutkey from ICICI Prudential. Mr. Chutkey, please go ahead. Thanks for taking my question. Firstly, I just want to understand, shouldn't the instant fee drop when revolver proportion is increasing and vice versa? That's question one I have. Second, the second question is, in the ALM table, the one-to-three-year bucket, last two quarters, we have seen an inflow increasing there, almost consecutive growth last quarter and again this quarter from another 100-odd crores. What is happening? Why is the inflow in the one-to-three-year bucket increasing? That's second, question number two. If you can answer these and then I'll come back to you. Instant-based fee comprises of a couple of things. Not just the late fees. It also has over-limit fees. It also has check bouncing, check dishonor et cetera. While, yes, you're right that if there is an impact on the revolver side, the late fees would get impacted, sometimes it does get compensated by over-limit fees, et cetera, as well. It's a play depending on which side is up. Yes, in the normal course, late fees and revolver side would go hand in hand because late fees and revolver comes like that. That's one. Second question, Roshan, you'll have to repeat. I couldn't really catch. There was some, ALM one to three years. ALM one to three years has seen inflow last flow quarters, consecutive quarters, I mean, special inflow. What is happening there? In the ALM one to three year inflow slide, you have the EMI portion of our asset which is there. As we are increasing, if you look at it, even though our EMI percentage has remained at 32%, quarter-over-quarter, but that 32% has been maintained on a increased asset base. Also the kind of EMIs that we do, there is short-term EMIs relating to subvention Flexipay. Then there is a long-term one on the non-cash side, which is greater than one year and goes up to three and a half years. That one is also rising, and that's what impacts the inflows into 1-3 years. How should I think about the stage two assets number, the 11% odd number? How much of that is typically what is the extent, how much of it flows forward? Roshan Chutkey, can you repeat the question? The stage two assets number, which is about 12% to 13%, how does it, I mean, how is the behavior generally? How much of it flows forward? I don't think we really, we've not given that flow rate of it, how much of stage two goes into stage three. However, I think on a broad basis, I can tell you that, we've seen an improvement in the absolute stage two itself quarter-over-quarter. I think like we mentioned earlier, as some of our stress pool gets out, the fact that our stage three assets are in general coming down is because of two things. One, of course, is that the stress pool is getting out, getting written off, but incrementally, whatever we've been booking in the last 1.5 years, we have significantly tightened our credit criteria. The quality of the books of the last 18 months is actually quite good. Overall, we are finding that spillages in from one to two as well as two to three are showing an improving trend. Thank you. Ladies and gentlemen, that was the last question. I will now hand the conference over to Mr. Rao, MD and CEO of SBI Card for closing comments. Over to you, sir. Yes. Thank you, [Paivan]. With markets steadily reaching their pre-COVID levels, improvement in consumer confidence shows that Indian economy is on the recovery path, where consumption trends will be in the ongoing festival season are to increase. We will continue to follow healthy financial and corporate governance principles which form our core strength. Before I conclude, let me wish all of you a very happy festival. Thank you. Enjoy the festivities and stay safe. Thank you all. Thank you. Ladies and gentlemen, on behalf of SBI Cards and Payment Services Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.