Credit card spends have also followed suit, with monthly spends having stayed over INR 1 trillion since. The credit card industry, which has shown consistent growth despite changing economic environment, is undergoing a positive shift, with many conducive regulatory changes being introduced in the past few months. As per new RBI master direction, some changes are already in force from first July 2022, and some have been deferred to September 30. All the guidelines issued by RBI are progressive and basic approach is cardholder convenience and protection. At SBI Card, we are complying with all the guidelines which were to be implemented on first July 2022. We have already sent the relevant communications to portfolio inactive cardholders in line with the RBI guidelines through various channels. Whereas the percentage of such customers is low. Moreover, we expect a large percentage of such customers to be retained. With respect to the guideline of 30-day activation for new customers, implementation deadline has been extended by three months, and hence the same will be rolled out by first October. Further, RBI has given multiple options for considering a customer to be active. Another change, relating to over limits, will come into effect from first October 2022, which will also be based on customer choice. This change is similar to online transaction switching activation. There is a possibility that initially customers may find it difficult to adapt to the change, but as is the case of online transactions, we expect that the change in OTL may stabilize over a period of time. Another change introduced by RBI, enabling RuPay Credit Card transaction on UPI. Discussions are going on with various stakeholders in this aspect. We are working on technology integration while NPCI is in discussion with other stakeholders on MDR. This is expected to be resolved shortly. As the industry evolves and grows, SBI Card continues to be one of the significant contributors to the growth. Let's now look at SBI Card business overview in Q1. We were able to deliver a healthy business growth with strong financial performance during the quarter. Before I proceed with the details of the business performance this quarter, I would like to share two key recent honors with you that we have received as an organization. I am happy to share that SBI Card has been certified as Great Place to Work from March 2022-2023. A key milestone for us because our employees are our most valuable asset. It is also a testament to our efforts in creating a healthy work culture focused on integrity, respect, transparency and trust, which is conducive to the growth of our employees as well as the company. As a brand, we continue to be recognized in the industry for our initiatives and efforts. We have recently been recognized as Best BFSI Brand 2022 by The Economic Times for the third consecutive year. As you can see, we entered this fiscal year on a positive note, and the same is reflected in our business indicators for the quarter as well. In Q1, we achieved the milestone of 14 million cards in force that contributes 18.4% of the market share in the industry. This milestone is an indicator of our consistent growth trajectory. This quarter, we sourced over 900,000 new accounts, which is a tad lower than 1 million mark, which we recorded in the previous quarter. However, the small drop in the last quarter is due to cyclical bank acquisition variation. We have already started working on fresh set of leads in NADA and the July numbers are much stronger. Our overall spends continue to see a healthy growth and has grown by 79% year-on-year, standing at INR 59,671 crores in Q1 versus INR 33,260 crores in Q1 FY 2022. Our spends market share as per the information available in the public domain as of today is 18.6%. Retail spends stood at INR 45,488 crores versus INR 27,098 crores in Q1 FY 2022, an increase of 16% year-on-year. Online spends continue to grow consistently and now contribute to over 55% share in overall spends. Noticeably, it's heartening to see that key spend categories have crossed the pre-COVID level, including travel and entertainment category. While categories like departmental stores, health, utilities, education, consumer durables, furnishings have seen a steady growth of 7%, travel and entertainment category has seen a growth of 31% in total spends in Q1 FY 2023 versus Q4 FY 2022. Corporate spends are at INR 14,183 crores as compared to INR 6,162 crores in Q1 FY 2022. However, in the month of June 2022, we have reviewed and reduced some B2B spends on certain low-margin corporate accounts. This is in line with our continued focus on sustainable and viable growth. Most importantly, our spends for average card has seen a significant growth. It has risen to INR 1.7 lakhs in Q1 FY 2023 from INR 1.1 lakhs in Q1 FY 2022. This is a good indicator on customers growing preference for SBI Card as a payment option. It has been driven by various attractive and relevant discount offers and initiatives that we have offered to our customers. Our revenue streams remain healthy and diversified. The revolver mix has grown to 26% in the current quarter from 25% as of March 2022. EMI mix has also grown to 35% as compared to 34% in the previous quarter. To further improve our revolver mix, we have been recalibrating our risk appetite. During the quarter, we continued to augment our product offerings to our customers and expanded our program portfolio with the launch of Adani SBI Card, one of the most rewarding lifestyle credit card in partnership with Adani Finance. Please allow me to take you through the financial performance in Q1 FY 2023. All the positive business indicators have supported our financial performance. Our resilient business model embedded on strong fundamentals has helped us deliver healthy financial growth. During Q1 FY 2023, our revenue performance continues to be led by healthy interest income and strong fee growth. The company has achieved a PAT of INR 6.7 crores in Q1 FY 2023, a growth of 106% year-on-year, and 8% quarter-on-quarter. In Q1 FY 2023, the disbursals stood at INR 33,215 crore with a growth of 36% year-on-year. Our total revenues stood at INR 3,263 crore and has grown at 33% year-on-year during the quarter. In spite of a 25 basis point increase in cost of funds, our NIM remained constant as the interest income yields also improved. In the rising rate scenario, we are hopeful that the impact of the same may be partly mitigated by increasing the share of interest-earning assets. On asset quality, our gross credit cost percentages have considerably declined to 5.6% from 10.4% a year ago. The net credit cost percentages has also declined to 3.8% from 9% in Q1 FY 2022. Our GNPA has come down to 2.24% as compared to 3.91% at Q1 FY 2022 and 2.22% as of March 2022. Net NPA for the period is at 0.78% as compared to 0.88% as at Q1 FY 2022, at 0.78% last quarter. Return on average assets for the quarter is at 7%, which is higher by 247 basis points as compared to 4.5% for June 2021. Return on average equity is over 30.8%, which is higher by 1,417 basis points as compared to 18.7% for Q1 FY 2022. Our liquidity position continues to be strong and capital position is robust at 24.7% as of period ended June 2022. In conclusion, as mentioned earlier, prevailing external environment poses some challenges. However, thanks to the domestic consumption story, India is seen as a strong contender to be the world's fastest-growing economy over the next few years. India's digital economy is going to play an important role in the growth, and it is expected to reach around $800 billion by 2030. Notably, digital payments in India are expected to reach $10 trillion in value by 2026 from around $3 trillion now. This presents a strong potential of growth for credit card industry. As we continue with our preparations to make the most of this opportunity, we remain vigilant in the current situation. I would like to reiterate that at SBI Card, we have built a robust, reliable and a resilient business, and we are committed towards delivering value to our shareholders, employees and customers. This is it. Now we are open to 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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question and limit their questions to two per participant. 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. Please go ahead. Yeah. Good evening, everyone, and thanks for the opportunity. The first question is with regards to the sourcing mix on the new accounts. We have seen a very dominant presence of open market. I think you did talk about some issues on the banking side as well as some recalibration of risk appetite. Can you please elaborate on that? Are we consciously going slow on banca acquisition? And secondly, what does it imply for the credit costs going forward? Yes. Yes, the share of banca has come down in the month of June quarter. Generally also the banca contribution, particularly in the month of April when it is a busy audit period for the branches, SBI branches, which actually play a critical role in terms of sourcing, they are preoccupied with audits. Month of April is always like a contribution is low. But as you know, like a data refresh works on, I mean, at certain intervals, we get the data. We mean like a branch's dashboards are populated with the data. In one cycle there was a delay which has actually resulted in slight slowdown in terms of sourcing. We also clarified that, I mean, the position got rectified in the month of July. Now we are seeing a usual run rate, usual contribution from banca channel. As a strategy, there is no change. We continue to look for a 50%/50% contribution from both banca as well as open market. Rather, when we were faced with a situation of slightly delayed or a kind of lower contribution from banca, we were able to ramp up the open market channel, which shows our resilience in terms of maintaining a monthly run rate of 300,000, which we always advocated for. There is no recalibration of risk as such. It is only like a tactical move. The quarter two will reflect most probably the same contribution mix as we always maintain. Okay. Got it, sir. Yeah. Yeah. The second question is regarding the cost of funding. Obviously, the impact has started to flow through in our P&L. When we look at for the next three quarters, what kind of cost increase should we be factoring in? I think it all depends upon, as you know, like 65% of borrowing is short term. When we call it short term, they have a different frequency at which they hit reset. Our understanding or estimation says like a bulk of the impact will come in Q2. Unless and until, again, the external benchmarks or the repo rate changes, there may not be further impact to the same degree in the subsequent quarters. We feel like in Q2 the pressure will impact or increase in the cost of funds. But at the same time, you would have seen the shift in the composition of assets, where we are consciously increasing the share of EMI loans, which have been steadily increasing. Revolver has also started responding, albeit in a very small way. We are hoping that the share of interest-earning net assets will continue to increase, and this will help us actually to kind of take care of or mitigate whatever the negative impact will be on account of increase in the cost of funds. Okay. Got it, sir. Any quantification, sir, about second quarter, what kind of increase we can build in? For me that will be, I think the full impact it will be range bound between 5.6%-5.8%. That's it. Okay, great. Thank you very much. Thank you. The next question is from the line of Tushar Chaudhari from Prabhudas Lilladher. Please go ahead. Hi, sir. Congratulations on good set of numbers. I had three questions. First was relating to the net card additions. We talked about, you know, your aspiration to have INR 3 lakh net monthly card additions. I just wanted to understand when do you see this sort of run rate being sustained with the achieving and sustaining any color that you can provide, you know, are we two, three quarters away or any color around that would be useful. The second question is relating to revolver share. We've seen, you know, increase this quarter. Just wanted to understand, so, in terms of, you know, the sort of bottoming out of revolver share, is that behind us and, gradually, given our incremental sourcing moving towards, you know, potentially higher category of revolver customer base, do you see, you know, it gradually increasing, you know, quarter after quarter? So just some color around your confidence on this, you know, upward shift that we're seeing in the quarter. Last question is relating to, you know, spend-based fee. So we've seen, you know, the T&E sort of spend come back. I was hoping, you know, the spend-based fee as a percentage of the spend also, you know, start to move up. They've been around 1.4% level. Pre-COVID we used to be about approximately 1.6% level. If you could give some perspective around, you know, is it a new normal or we should see that increasing and what could drive that? Yeah, those are the three questions. Thanks. Yes. As I said earlier, our initial idea was like a gross card issuance of minimum 300,000 per month. That was always there. Then a gradual increase in this within the kind of this category what we have, and then the capacity of the channels. Our increase was evident in the last quarter, where we increased or ramped up the gross card issuance where it crossed 1 million. That effort will continue, despite whatever small hit we have seen in the June quarter. The effort on increasing the gross card issuance will be aided by the continuing expansion of the partnerships and even the new digital channel what we have launched, like a end-to-end digital channel outsourcing the NTB. This will also help. Of course, the net growth is also a function of attrition. Attrition, I think we are taking a lot of strategies in terms of addressing the attrition. I think month of July or August, a couple of months because the master direction is coming into effect, that can actually have some impact on the attrition. But I think once this impact is absorbed, then definitely, it will be like, again, the net growth will be on a growth strategy. Net growth in the card will definitely be increasing. The 300,000 net growth, it continues to be an aspiration. Definitely it will be there, and we are sure, like, upcoming quarter we will be in a better position to reach that number. In regard to revolver, what we know, Girish, can you. Okay. With respect to revolver, we have seen not only an increase in the asset, but this asset has also come on account of number of customers. Fundamentals look to be in place from a percentage of asset on the revolver portfolio. We get the confidence that this is going to sustain in that sense. The other good part is that we continue to see an increase on the term book, which is now up at 35% of the overall assets. If you look at actually in the last quarter, the interest bearing asset has moved by two percentage points up to almost 61%. We see while we continue to get more interest-bearing asset on our part and also focus on the quality of customers that we are getting in, so that our future revolve book is built accordingly. Both the things are working in tandem, so you can see them from both the data points. That was on the revolve share. On the spend-based fees, you are right. While it will not go back to the original number because during the COVID period, a whole lot of new category of spends has got added, which is in terms of either utilities or insurance payments, fuel has increased. Some of those categories are at a lower interchange. However, from the point where we are, we are seeing an increase in travel. In fact, in our investor presentation this time, we have presented that the travel has also crossed the pre-COVID numbers. Both travel, lodging, entertainment, all those categories in Q1 have crossed that and they continue to show very good growth. We should see a upward trend from where we are, maybe not at the original number of COVID, but somewhere in between it will, it should land. Got it. Thanks and all the best. Thank you. Thank you. you. The next question is from the line of Abhishek Murarka from ICICI. Please go ahead. Hi, sir. Good evening, and congratulations for the quarter. Thank you. Few questions. One, when you, in your opening remarks you said that you have recalibrated some risk metrics to get more interest earning assets. Can you just give some examples of what exactly you have done? That's question one. Question two is on this co-branding with Aditya Birla Finance. Can you just share some details in terms of how it will work with respect to data sharing and what are the, you know, commercials of the tie-up, and how do you expect this to scale up in the next two to three quarters in terms of, let's say, you know, card issuances or whatever? Finally, on commercial spend, you said you ran down some B2B accounts. What does this mean? Is it a product that you are finding pressure on in terms of the profitability, or is it a group of corporates which is not remunerative? Can you please explain that? Thanks. Those are my questions. On the first point in terms of recalibration, I think that's something we've been saying now for the last two or three quarters. As our overall credit cost has started coming down, the principle we've been following is to try and optimize our credit cost. Even on an ongoing basis, we are constantly looking at segments where we believe we can recalibrate the risk appetite, and that has been happening now for the last two or three quarters. You would see that even in terms of the number of self-employed that's gone up in recent quarters. This is an ongoing exercise. There's nothing specifically that we've done in this quarter. A lot of these actions do start to bring in that kind of customers who have a higher propensity to revolve. That's all. I don't think you can change the risk appetite and start getting in more revolvers. It's not that simple an arithmetic. Right. Okay. In your explanation, is there like a lead time or what do you expect? Maybe two, three quarters and it could translate into some more revolvers? See, really it's a question of what are the actions that we can take, and there are mostly sets of actions that we've been taking. We have obviously revamped our risk appetite to start bringing in more self-employed, second tier salaried customers. We've also tried to bring in some of the thin file customers with additional data, because we now have rebuilt our models, we have access to alternate data, so we are bringing some of those customers also. There's a lot of other activity that is happening on the marketing side to induce spends, try and get more of the discretionary spends and things like that. It's a set of actions. We have to wait and see how that pans out. Got it. On the Aditya Birla Group, we tied up with them and the model that we are going to use there is because they are also a regulated entity, so we have done a very detailed DRE exercise with them. We have already qualified and selected certain set of customers where we can give the card without taking any documents. We are intending to use our newly launched straight through processing SBI Card experience that you would have seen, that journey, for these set of customers, so that we are able to give the offer to these customers and be able to get these customers. In this case, it should be easier for us because Aditya Birla Group being a regulated entity, we don't need to collect another KYC of these customers. We are working at seeing whether in certain cases where we collect the KYC or where we would not, so that make even life simpler for the customer. That's the model that we are going to use with Aditya. What is the profile of these customers? They are basically asset customers of Aditya Birla Finance, so which would have taken either a set of various kinds of loans being offered by the Aditya Birla Financial Services. Okay. [Ampersand Capital Partners]. On the commercial spends that you asked, it is not a specific product. On the commercial cards, there are some corporates who do B2B spends or vendor payment spends or some kind of statutory payments. Now, in some of these cases because some of these spends go through various aggregators if the costing keeps changing or the pricing moves in a direction where it becomes non-profitable. On review on certain of these cases and some of these trends, we saw that some of that spend was not in line with our expectations. All the time we have curtailed some of that and reduced some of that because it's not only about the top line, we also intend to be looking at the profitability from these trends also. Got it. Thank you. Thank you. The next question is from the line of Bhavik Dave from Nippon India. Please go ahead. Yeah. Hi, good evening, sir. Congratulations on a good set of numbers. Sir, a couple of questions. One is, you mentioned that the term loan book at this point in time? There are actually three portions of that. One is a kind of almost a loan which is given on top of the credit card limit. There the term is almost 33-34 months. On the spend which is converted into term product, there it is almost close to eight and half, nine months. What will be the broad proportion if you're comfortable, if it's 35%, how much of it would be more than like couple of years or 30 months? You can go through our ALM and have a look at that because there we declare that more than 12 months. Okay. I think is there. All right. Otherwise, we have not declared these specific numbers separately. Perfect. All right. No problem. Sir, secondly, I see that you've come up with that Sprint offering, and I think I'm assuming that this is the end-to-end digital origination that we were planning, and we started some bit for the banca customers and now I think this is more for the open market. I just wanted to understand what, how exactly has the banca experience been, and how do you think that this can help us again make the onboarding journey more efficient and cost effective. Anything on that that you would like to highlight? Sure. You're spot on and this is Pradeep answering on behalf of Girish Budhiraja. Basically this new journey is launched for the open market space. As you are aware, for our digital sourcing with respect to State Bank, we already have an existing integration on similar lines in the YONO app. Now, through the YONO app, you know, accounts have already been coming for a while. You know, and the whole architecture is designed in a way that, you know, once the customer consents, data is automatically integrated into our system, so data gets picked up automatically, gets passed over to us. There is however a KYC leg that currently we do even for the banca customers so that gets done on our side. You know, by and large the digital route for those customers already existed. that's on the integration with banca. what we are gonna do now is since here you know we've integrated this whole app and launched it for the open market space. This new app gives us a lot more capability, you know? The first and the foremost is that the user experience is pristine here. It's completely seamless. KYC is completely digital. what we've also done is the decisioning on the account is real time. As well as all the checks and balances in terms of photo match, which is done using artificial intelligence. we also do our fraud checks, which are also completely online. Net in approximately four to five minutes in one single journey, you know, the customer can get a card online. Numbers have started coming in on this new app. Some of the features here which we are in an early stage on the open market side, we will also bring onto the YONO platform. That's a separate effort once the success is proven in the open market space. Some of these built features that you know we like will also get rolled out on the YONO side. In a nutshell, what I wanna say is that, you know, the path for our company moving forward is gonna be digital centric. You know, the new account acquisition strategy is gonna have a digital first approach. This digital first approach, we will adopt both on the banca side as well as on the open market side. Sure, sir. Sir, last question on the sourcing bit, and I see that Tier 3 and Tier 4 cities incrementally adding to almost 50% of our incremental sourcing, which used to be 25, 30-odd%. Anything that we are seeing there, are the customers better? I know we've discussed this previously on the type of spends that they do and the kind of revolvers that they can generate. But is there enough or is there lesser competition in that market? Do we have a more right to win kind of a proposition with these customers considering the familiarity with the brand? Or how does it work, and what would be the economics? Like in the sense the cost of acquisition, would be similar or will it be lower for a Tier 3, Tier 4 kind of customer? That's all. Thank you. The three or four things I will take for Tier 3, Tier 4. Yes, the cost of acquisition is lower because primarily we are sourcing through banca channel in Tier 3, Tier 4, where the cost of acquisition we have seen earlier also stated is lower. The second point is that in those cities, State Bank of India brand is SBI Card brand because SBI is another brand. SBI brand is very strong. The brand attractiveness and the pull factor is very strong. On the consumer behavior side, what we have continued to see is that the online percentage, even though the spend is slightly lower than Tier 1 city, but the online percentage because the delivery now of the large e-commerce players in the country is now easily there in almost all PIN codes, we see this 55% is almost similar in Tier 3, Tier 4. That behavior is being seen. The spends at the point of sale, because the availability of point of sale as it increases in Tier 3, Tier 4, we believe that that should also help increase the spends further. That is some color on the Tier 3, Tier 4. The spend categories are usually the same. There is a bit of a difference in terms of travel and lodging, where the travel spends are slightly lower compared to Tier 1 cities or also. If you talk about primarily utilities, your fuel and other non-discretionary spends, it is broadly the same. The average spend would be lower. Monthly spend would be like half of a Tier 1, Tier 2 or like any proportion, or any number that you would want to talk about, like if a reasonably seasoned customer who is spending X in urban or Tier 1, Tier 2, would be spending at least 40%, 50% of him or lower. We have not given the exact breakup, but it is what I would say anywhere between 60%-90% of that, depending on the city it is. All right. Sorry, sir, last question is, the yields on the term book or the EMI conversion book would be around 16%-17% or maybe more? We've not declared the yields on the term book as yet. Okay, sir. No problem. Thank you so much. It can be calculated from the portfolio yield overall, the transactor revolver and its overall portfolio yield. Actually, you can calculate it because you have the full base and we have given the transactor revolver and EMI breaker. The revolver is at the product rate of 3.5% per month, so the balance you can calculate. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your questions to two per participant. If you have a follow-up question, you may rejoin the queue. The next question is from the line of Param Subramanian from Macquarie. Please go ahead. Hello. Yeah. Hi. Thank you for the opportunity. My question is on incremental card volume market share. If I'm looking at card volume market share, it's down about 100 basis points, you know, over the last 10 months or so. Is this something you are concerned about, and could this translate to spend going forward, or do you think this is more a low value spend card being added by the industry? Is this Is this something that you're concerned with? I mean, one thing is the gross card issuance of the industry has increased over a period of time, so obviously, that has an effect. Should we mimic what others are doing? We always maintain a stance of a kind of sustainable growth and looking at our return on equity and capability is a benchmark to challenge. I think the kind of numbers what we said while responding to other questions around what is the net growth target we are aiming for, I think that should help us actually in terms of arresting this decline and actually start gaining some share. This will be a very temporary diversification, but we have plans to ramp up both the gross card issuance and address attrition also in a meaningful way. Because our attrition will be definitely slightly higher than the industry because we issue only largely PB-based cards as compared to competition. That factor is always there, but that also helps us in having a better activation in the portfolio of cards. We'll take all these things into account, but we'll try to balance between the market share gain versus I mean ensuring a sustainable growth also. Got it, sir. Thank you very much. If I could ask again related to that question, is there an aspiration to be the number one player on a volume basis for SBI Cards? You obviously have the percentage, the brand, the bank's customer base. What is holding back SBI Cards from being the number one volume card issuer, in the country? As I said, we have strategies and we are aiming, I mean, for improving the market share. That's very much there. Definitely the kind of sourcing that happens from the bank, we also revisit and always look for opportunities of maximizing it. But we are also mindful to see new master direction puts a lot of responsibility on acquiring the right customer because if there is any default or otherwise, any kind of miscommunication to the customer, that may not result in any activation of the card, which anyway will have to be affected after that period. We need to look at the profile and we need to do the partitioning and targeting the customer in the right way. Definitely, increase in the market share is at a cost and we will do it in a calibrated way. Got it, sir. Thank you very much. All the best and congratulations on the quarter. Thank you. Thank you. you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah. Hi. Good evening, sir, and congrats on good set of results. Two questions. Firstly, again, around the borrowing cost and margins. In respect to that, besides the mix of like revolver and EMI customers which has increased this quarter, how much flexibility do we have to increase the interest rate for our customers, mainly the EMI customers, so as to protect our margins? I think, as you know, the kind of EMI loans are all fixed rate loans, to the extent there is a healthy disbursement. It gives us an opportunity for each disbursement to price it appropriately. Of course, we will look at our cost of funds, and we will look at what is the ideal risk-based pricing. Of course, we also look at what are the offerings from the competition. It offers an opportunity for each new disbursement to pass on some increase to the extent market absorbs. Of course, the other side, other effort will be to increase the share of interest bearing EMI overall, while ensuring that revolver doesn't dip from the current level. That will also help us in terms of increasing the portfolio. Okay. Secondly, like, on the subscription-based fee, if I look at it on a per card basis, this is trending downwards, though not any major decline, but for last two years also there is a down trending that is there on the subscription-based fee. How do you really see this playing out in the medium term and any new products that we are looking to launch to counter this trend? Subscription-based fee is primarily our membership fee, and that's linked to the new account acquisition cost. On a per card basis, it would be stable. Hello? Sorry, sir. Sorry, can you repeat that, please? I think subscription-based fee currently includes our membership fee. On per card basis it will be stable. Maybe I also see a like small decline single-digit though but it's been around like if I look at year-over-year it's a 4% decline and in prior year very marginal decline is there. Is it to do with the mix where you are originating more from the Tier 2, Tier 3 cities because of. That's going to there are spend-based revolvers as well. You know, our customers as they touch the spend-based limit, they don't get to pay the fee. The spend-based reversal percentage because that keeps going up as the customer profiles improve. The membership fee on the renewal side will start coming down. That would be the contributor. Right. Got it. Thank you, sir. Thanks so much. Thank you. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead. Good evening, sir. Sir, do you think, you know, RBI allowing credit card on UPI rails will benefit the industry? RBI has allowed RuPay Card, RuPay Credit Card to be used on UPI. As of now, if we look at it, we have almost more than 1 million plus cards already on a RuPay platform. I'd share we are one of the largest issuers of RuPay Cards in the industry. We believe that there are three, four benefits which are very clearly there. One is the whole acceptance fees of credit cards into the E2E space for RuPay, for UPI merchants that should increase. These are the merchants where if the acceptance happens, we would get incremental spends from the same customer. One can get more share of spending, which the customer today is doing on UPI can shift on credit cards for, specifically for rewards, because rewards and other value proposition benefits are there. Market penetration increases. We also, as was being mentioned earlier, in Tier 3, Tier 4 cities, UPI is already very well penetrated. In those cities we are going, we are very strong, and we are issuing RuPay Cards there. There the customer starts using, we get to it. We should be able to see increased spending patterns there. In any case, if the customer has one payment mechanism and he uses it for all the areas to make the payments, that it increases loyalty also. We believe that these are the three, four areas where the benefit is there. There is completely a discussion around what would be the commercials, what would be the interchange and MDR which would be there. That discussion, NPCI is already having that discussion with all the member banks. You would have read the interviews also of NPCI CEO and MD. They are already in discussion. We believe that something which is right should happen in due course. Sorry to interrupt, Mr. Agarwal, there is a lot of background disturbance which is coming from your line. May I request you to mute yourself when management is answering your question? Am I audible? Yes, sir, you are. Please go ahead. Sir, there was I think somewhere it was mentioned that on small value transactions there might not be any kind of MDR. In that context, do you think that there could be some cannibalization where merchants shift some of the credit card transactions to UPI? You know that India is a Jugaad country, right? Where, you know, merchants can play their game. You are right, and I think these are the topics of conversation which are actually precisely happening with NPCI, that how the mechanism has to be done. If there are benefits which has to be given to the merchant for certain categories with a small merchant, how will that be monitored? What will be the control mechanism? To what level? What ticket size that transaction should be allowed for? There are these questions which are there, and I think that is what NPCI and other banks are discussing before they come to the final conclusion. Okay, sir. One last question. In the last cycle, you know, your cost of funds had gone up to 8%-9%. I think somewhere between 8%-9%. Do you think it can go back to those levels? Or structurally, your liability mixture has changed so that it will remain, you know, around the current range? Difficult to predict the trajectory of interest rates, but as of now, there is this upward bias definitely because of inflationary pressures. Over a period of time, what we have done is we have seen like the share of long term really coming there. In a focused way, we have been increasing the share of long term. We have been looking for opportunities to lock into long term at a right rate. This journey will continue. Even though it is slightly positive as compared to short term. This will help. Of course, to the extent, even if there is an increase in the cost of funds, to the extent we are able to increase the share of overall, the interest bearing NIA and to the extent the revolver helps, I think that can actually mitigate. Thank you. Ladies and gentlemen, request to everyone to please limit their questions to one per participant. The next question is from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead. Yeah. Thank you for the opportunity, sir, and congrats on the quarter. My question again is on this UPI on credit card for which the negotiation is still underway by NPCI. I'm just trying to get a sense, maybe this is a bit of a theoretical question. How much of the unit economics actually hinges on the MDR? Is that something which the industry is quite particular on? Or to ask it in another way, if the MDR were to be lower, would you still go ahead with the product and tinker other cost elements to keep the unit economics the same? Or do you still feel that you need a certain degree of MDR for the product to be successful? You need MDR, and there are three reasons for it. The first reason for it is credit card is up to 52 days of credit-free period. There is a cost of funds which as an issuer we incur. The second thing is a customer uses credit card also because of the rewards and the benefits and the value proposition which the customer gets. There is a cost of value proposition, and then there is a cost of rewards also. Now, you can tinker with if there is a high premium end of it, where we get higher interchange, then you can give higher rewards to those customers. At a lower end, you can give lower rewards and you can tinker with that. Not having rewards at all and having just a base payment product will not encourage the customers to have either loyalty or spend large ticket items on the product. That's the second piece which is critical. Thirdly, obviously it is a credit product, so there is while the credit loss you can still look at in terms of from the interest income and other things. There is a set of fraud loss also which happens, which is borne at the initial stages, even though that is very low because of the RBI guidelines of second factor authentication and generally a very secure environment of chip and PIN. It's very low, but there are those costs which are different in credit card compared to any other simple payment product where the money is going from your bank account. Got it. Sir, just one clarification to the point that you made earlier to a question on incremental market share, which has actually slipped quite a bit. What do you think will it take for SBI Cards to possibly reach a 400 or a 500,000 card issuance per month? Do you think it's the technology back end which you still need to strengthen in terms of capacity? Or do you just think it is underwriting appetite which will improve as the economy actually improves? Because the inherent demand seems to be very high. I think it's a combination of everything, and we have been making efforts. Of course, the declining credit cards which we have demonstrated over a period of time definitely gives us some maneuverability to experiment more with some pilots, which we have been doing. We also talked about having the ability to consume alternate data for underwriting the NTC and NTB customers. That definitely is helping. Of course, technology wise, we said like, STP, the journey is already there. This is only for the organic inflow. This platform has to be extended now to the entire partner ecosystem. That will also help us in terms of ramping up the numbers, but it will at the same time reduce the cost as compared to the current business model. It was a conscious move. I mean, technically, you can even get those numbers even in the current business model, but the cost of acquisition will be high. Incremental returns may be less, so that is the reason we are making calculated moves. Thank you. The next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead. Thank you, and good evening, everyone. You know, just to start with, first on the spends per card in retail, which we understand is about INR 130,000 per annum, which seems to be, you know, the highest that we've seen. Just wanted to understand, I mean, where can these spends go from here? You know, particularly in context of the, you know, income that your customer would be earning. So that’s, you know, question number one. Question number two is, you know, again, going back to the market share point, you know, if the market share is incrementally coming under pressure, then what levers do we have to keep increasing the spend? If in case, you know, the spends per card start to kind of, you know, flatten out. Those two were questions around just to understand the you know movement forward in terms of the spends market share, et cetera. You're right. First of all, on the spend per customer, okay? Now, we've been stating that the spend per card or spend per customer has actually been increasing over a period of time. During COVID, it went down because certain categories were not available. We had stated at that time also that those categories have come back and the new categories, the existing categories like travel, lodging, hotels, they were bound to come back at some stage when the normalization happened, and which they have come back. We are seeing that increased spend which is happening. The second thing is this digitization process is actually picking up further speed. You'll see more and more new categories coming up into the forefront. There are school and education as a category, health is fairly deep in now. Rentals which were not there, let's say a year- or- a- year and a half back, is a fairly large category now. Utility bills, otherwise insurance payments. You will have deeper penetration because when these categories come, the first thing, not everybody picks up those. Out of 14 million customers that we have, not everybody is spending on all the categories. We keep increasing the depth of categories within our customer base to get that spend increase. There is a standard segmented offers campaign that we continue to do to get that piece. On your question on market share, you're absolutely right. If the market share on cards does not increase over a period of time, it will put pressure on the market share on spends also, because both of them typically are in tandem. Overall spend share will work on number of cards and the spend per card. It's a standard mathematical formula. The first step here is to get the market share on the card fees to increase. That is what we are working on. You know, as was stated by Rama Mohan Rao Amara that while we are working on in calibrated fashion, but the numbers, we now have a straight-through processing which we have launched for our open market. We are also trying to link it to our banker sourcing so that we are able to get benefits there. This should be completely incremental. New program is completely incremental, which is going to come. In the existing fees, we are working on a lot of productivity increase measures and efficiency increase measures so that we are able to, at a lower cost or at least keeping the cost same, get the productivity up and be able to source more number of cards. Those things are in progress, and we have seen some very good results in the month of June. We believe that those should continue further growth over a period of time. This growth of market share should come back to us. That's on the cards piece. While on the spend piece of it, there is a corporate card piece which we have always talked about. We want to be very careful with where we go there because there are those two portions there. Retail has been running strong. We want to continue to keep the corporate card also in the play, but still at a profitable and at least at a marginal profitability level should be maintained. These are the two portions that, on which the working happens. Thank you so much. That was very helpful. Just to follow on, one is in terms of the spends, when you look at these spends, vis-a-vis the, you know, the income that your customer or the, you know, the spender would be earning, what would that be? Any sense can we get, what would the average annual income of your typical customer? Who's spending INR 130,000. So, uh- Yeah. Okay. Not connecting everything to income here does not work, okay? Because if income is important, for example, in Tier 1 cities, it's actually the consumption spending pattern which is more critical. When we look at the customer database or when we look at some of the customer profiles, while credit limit which is being set is based on some bit of income estimation and increase or decrease basis, the income estimation done by the credit team, but spends in various categories. For example, everybody today spend on fuel, okay? Whether it is especially if they have a credit card, they will spend on fuel, whether it's a two-wheeler or a four-wheeler or otherwise. The quantum will be different. You approach it from a spend category perspective. As we have earlier seen, we look at it from a non-discretionary and discretionary. People, non-discretionary spend, people will do. People will go to departmental stores and buy their regular groceries. Whether they buy it on a card or cash is a choice which they have. We have still not reached that level that the monthly income, the spend is crossing the monthly income by a large margin. That those things have not happened as of now. Thank you. The next question is from the line of Adi Jain from Ampersand Capital. Please go ahead. Hi, sir. Congrats on a good quarter. I just had two questions. The first one was actually on NIMS. I've noticed that our NIMS have fallen from around 15%-16%. Sorry to interrupt you, Mr. Jain. We cannot hear you clearly. Hello, am I audible now? Yes. Yeah. Hi, sir, I just had a question on the NIM. I noticed that our net interest margin has fallen from 15%-16% pre-COVID to currently 13%. I just wanted to know what could be the reason for that. One thing I noticed was that our revolver share has fallen. Is there any particular change in consumption pattern or customer behavior towards revolvers? Are you noticing any of that? What could be a sustainable NIM range for the medium term? You are right. I mean, the decline in NIM is mainly attributable to the lower share of the revolver. But the way to look at it is how we have been managing the costs overall. Even when the revolver is at 25%-26%, still we are able to generate a return metrics of return on average of 7% and ROE of 30%. I think the revolver to consumption is a very linkage we can see now. Of course, there will be some tendency like when they are buying a consumable item or otherwise make a big-ticket purchase like a travel, et cetera. There is, I think there is a better propensity to revolve. But barring those categories, keeping it to consumption is a better term. Revolver is more to do with the need to pay in full. If it is not there, then obviously they will choose an option of if it is a short-term kind of cash flow mismatch, they will think like in a month or two, they will roll over and they will pay. Or if they're comfortable paying over a period of time, they will opt for EMI kind of loan. Thank you. The next question is from the line of Deepak Sinha from Haitong Securities. Please go ahead. Yeah. Thank you, sir, for the opportunity, and congratulations on a great set of numbers. Just wanted to understand profitability. I mean, if we compare our online spends versus offline, that is, spends at POS. If you compare the profitability in terms of, like, let's say, net profit per spends. On blended basis, we are reporting around 0.8%-0.9%, right? If you split that profitability base between the online spend and offline, can you give us color on this? Okay. Profitability from the category of spend does not vary. It is dependent on more on category of customer that you are getting. Premium customers with high spenders are more profitable. On MDR front, because on whatever interchange that we get, whether it is online or offline, it actually depends on the kind of spend. If travel, if you do, whether you buy it from a point-of-sale or you buy it from online, one of the players, we get the same interchange. There the variation is not there. From an income stream perspective, there is no difference. The profitability is actually more customer dependent rather than the online, offline. Thank you. The next question is from the line of M. B. Mahesh from Kotak Securities. Please go ahead. Good evening, sir. Just two questions. One, how much of your incremental cards or outstanding cards would be on the base of a secured credit card? In the sense it's backed by fixed deposits or any other liened instruments. We don't have the number, but it will be insignificant. Very little. It will be very small. In the sense that we've seen some competition kind of introducing this being a very good source of getting into customer segments which are tougher to crack from an income segment. What is your sense of this as a product? We've built this product for two to three years. The attrition rates are very high. Even within the first year, because customer is, as it is, marginal and his need for breaking the FD can happen at any point of time between three to nine months. We saw a whole lot of them wanting to break their FD after six to nine months. The life of the customer with the product was not very long. Hence, automatically, the profitability gets impacted majorly because you incur a good acquisition cost upfront and if a customer does not stay longer with you, then the opportunity to have revenue from that customer is limited. Perfect. Second question, sir, this is to Aparna ma'am. Ma'am, this INR 450 crores of provision that you're doing there, this still continues to remain of customer base which are, let's say, pre-COVID or these are a business as usual kind of a credit cost that we have hit now of the incremental spends that is coming in? Now, the credit cost is being largely, and if you look at our ECL rate that we've given out, it's at 3.3%, which is actually lower than the pre-COVID rate. A lot of the IRAC book is almost finished. We have got INR 150-odd crore of that left. There is just INR 61 crore of discretionary provisions. Whatever you now see is PA. Okay. These are customers who have originated, let's say, pre-COVID or these are, let's say, customers who are still coming out of the incremental book that you originated. I'm just kind of going in that direction of the question. I don't think it's a question of it has been four pre-COVID. This is the standard expected credit loss model that we have that looks at similar data, and we are able to project what would be the losses. For the high-risk segment, specifically the RBI RE, we had made specific provisions. That is now finished. Whatever you see is a standard provisioning model now. Okay, perfect. Some of them could be in recent times, some could be older, but this is the BAU model now. Perfect. Understandable. Thank you for this. Thank you. The next question is from the line of Saurabh Mehta from East Lane Capital. Please go ahead. Yeah, thanks for the question. I have two questions. First thing is I wanted to understand volume-wise the mix of the corporate and retail spend. Like, how much percent of our cards are corporate and retail? And a follow-up to that is, what is the retail spend per card, and, how long you think a retail customer could reach, say, an INR 2 lakh spend, and what will be the drivers for that? Thank you. In corporate, the number of cards is very minimal. We would not have more than 50 thousand-60 thousand or so. It's basically a large spend coming on one product. Whatever you see when we say 14 million-plus cards, it's essentially retail cards that we're talking about. We have declared the retail spends also on quarter-by-quarter basis. The average spend you can calculate. The number you talk about a particular number. All we can say is that, as I was mentioning earlier, that different new categories have come. We have seen the increase in the customers' spend per card. If we go by vintage analysis, because newer customers take some time to build their spend, actually the spends of some of the older vintages would be closer to that number. So it is, as we are adding more cards or new cards when they come in, initially, their spends are lower, and then they build up over a period of 18 months to 24 months. So this is a continuous cycle because customer also gets comfortable with the product. We also educate them. We also tell them about various offers in various categories. Once they start using that product, they use it with multiple categories. So it's a progressive exercise that happens. If you see customers who are pre-2015 or so, a whole lot of those customers would have already reached that number. It is not about that, but it's how the weighted averages move. What you see today as a number is a weighted average of the overall portfolio. Thank you. Ladies and gentlemen, this will be the last question, which is from the line of Rohan Mandora from Equirus Securities. Please go ahead. Good evening, sir. Thanks for the opportunity. Sir, a housekeeping question that I had was, in terms of the new categories which have come up post-COVID, what will be the contribution in total spend from them? Or what are the use cases where the spend momentum has improved? See, if I take rentals, some of your insurance bill payments and utility, these categories can contribute anywhere between 10%-30%. 10%-30%. Okay. Sir, secondly, what. On a month-over-month variation is there. Sorry? On a month-on-month basis, there will be variation because certain categories, insurance, is more due towards March versus some other months. Monthly variations will be there, but that is the range. Sure. Sir, what will be the average difference in the spend per active card in banca versus non-banca and also the revolve rate? Actually, spend per active card in banca versus non-banca is almost similar. In banca, we have to work slightly more towards getting the activity percentage of the customers active to be higher. The customer will start using the card, fortunately start using at almost the same level. It is about getting more number of customers to start using the card and use it fully. That is and use it continuously in a month. Because we want our customers to use the card every month, and that is the critical part. Sir, Actually lower in banca as compared to. No, I'm talking about the revolve rate. You were asking for the revolve rate in banca. It is slightly lower as compared to open market, but you also have benefits there. Basically by way of having access to the operating account. Collection and recovery, you don't spend that kind of cost, and automatically you will have better benefit of lower delinquency, credit cost as well. I think, we need to look at overall. I mean, while it may not revolve, it will also not lead to complications, downstream in terms of collections and recovery. Sure. Lastly, the spends which are getting converted into EMI, what will be the average ticket size in that? Like, what kind of spends averages get converted into EMI, some ballpark range? It's around 20 thousand-25 thousand. 20 thousand -25 thousand. Sure, sir. Thanks a lot. Thank you. Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. Rao, MD and CEO of SBI Card, for closing comments. Yes. I would like to thank my colleagues at SBI Card who have been the drivers of our success and have helped us achieve growth and innovation irrespective of the environmental conditions. I would also like to thank our shareholders and business partners for their continuous faith in us and their strong support. I would like to reiterate that as an agile and adaptive organization, we will take all measures to safeguard our business while pursuing sustainable and profitable growth. Stay healthy and stay safe. Thanks to all. Thank you. 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.