Ladies and gentlemen, good day and welcome to the SBI Cards and Payment Services Limited Q2 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, sir. Thank you, Faizan. Good evening, everyone. I extend a warm welcome to all of you. Thank you for joining us for the earnings call for Q2 FY 2023 today. Hope all of you had a great Diwali! It was pleasing to see the full festive fervor in the season after two years of caution and restrictions. Driven by the festive zeal and driven by better sentiments on general economic situation and spending, the consumer confidence in the country has been on the recovery path. While the global economy continues to be turbulent, the Indian economy remains an oasis. Real GDP grew 13.5% year-on-year in Q1 FY 2023. Aggregate supply conditions have been improving. All constituents of domestic aggregate demand expanded year-on-year and exceeded their pre-pandemic levels. Supported by these factors, credit card industry has also seen encouraging overall growth. Credit card spend has been consistently crossing INR 1 lakh crore value for straight six months. Total industry spends were 53% higher year-on-year in September 2022. As a matter of fact, September witnessed over INR 1.2 lakh crore of spend due to an early start to the festival season. The total cards in force grew by about 19.5% year-on-year in September, but recorded marginal reduction on a month-on-month basis as the RBI norms on inactive cards kicked in. The industry has, in fact, seen interesting changes owing to new RBI regulations being implemented in two phases from July 1 st and October 1st, 2022, respectively. Industry witnessed a reduction in CIF numbers as millions of inactive cards got through. We, at SBI Card, have always maintained and pursued the strategy of fee-based cards. Since more than 95% of our portfolio consists of spend or balance active cards, the effect on our portfolio due to this new RBI regulation has been limited. Our fee-based model has helped us in maintaining our 30-day spend active rate at 50% plus consistently. Regulatory change on over the limit charges have come into effect from 1st of October, impacting the OVL fees from this quarter onwards. I mean, October, November, December quarter onwards. We have initiated measures to mitigate the impact of this change. In short -term, we will see volatility in industry card numbers, which is likely to stabilize in the next couple of months. The growth story of Indian credit card industry is intact, and the journey has just begun. Just to reiterate, credit card market remains largely under-penetrated. As per some reports, digital payments are accelerating in a big way and will constitute nearly 65% of all payments by 2026. E-commerce continues to grow. It is expected to grow at the rate of 25%-30% annually for the next five years. Most importantly, linking credit cards, particularly RuPay credit cards with UPI, will expand the use cases for credit cards. According to NPCI, UPI user base is likely to grow from current 250 million across to up to 750 million in the next five years, giving credit card customers more options to spend. As we see today, we have many exciting milestones to achieve as an industry in the coming years. Let's now look at SBI Card's business overview in Q2 FY 2023. I am pleased to share with you that SBI Card continues to deliver a healthy business growth and strong financial performance. Our spend growth has been robust. Overall spends have grown by about 43% year-on-year in Q2, reaching INR 62,306 crores. Our spend market share stands at 18% for the half year, but exited the September month at 19%. Retail spends continued to grow strong at 45% year-on-year and stood at INR 50,895 crores. Corporate spends stood at INR 11,411 crores in Q2 with 34% year-on-year growth. During the past few months, we had undertaken an exercise to calibrate and review our corporate accounts portfolio, basis which we had exited a few low-margin accounts, resulting in moderation of the corporate, card spend volumes. The increased e-commerce activity helped our online spends to grow. These now contribute a 57.8% share in the retail spends as of Q2, partly aided by the increased festival spends during the last 10 days of September month. In PoS too, we have seen a healthy growth, especially in categories such as electronics, hotels, restaurants, entertainment, and furnishings. Our revolver balances are rising in absolute numbers. However, the strong festival spends during the last 10 days of the September month has led to a buildup of transactions NEA, resulting in lower percentage share of revolver assets as of September end. We have seen a high conversion of the festival spends into term assets similar to past trend lines. We have over 14.8 million cards in force as of Q2 FY 2023, and we added about 1.3 million new accounts during the quarter, the highest ever during a quarter. The market share in CIF stood at 19.1%. Our customer acquisition has also been aided by end-to-end digital journeys implemented for both our ETB and the NTB customers, enabling customer acquisition at lower cost as compared to traditional channels. Our sustained growth during the quarter has been on the back of some key initiatives. We expanded our core card portfolio and introduced Cashback SBI Card, an industry first and most comprehensive Cashback credit card ever. The card witnessed a high demand from customers, and we see it as a strong addition to our portfolio. We also introduced 1,600+ festive offers pan-India. Along with the national offers, we had also extended a large number of regional and hyper local offers across 2,600 cities. Such initiatives have helped us maintain a higher share of active customers portfolio and more engaged customers. Our 30-day spend activity is at 50%+. Our spend per average card has grown from INR 1.42 lakhs in Q2 to INR 1.71 lakhs in Q2 FY 2023. What is heartening is the increase in the average retail spend per card growing from INR 1.14 lakhs in Q2 FY 2022 to INR 1.4 lakhs in Q2 FY 2023. At SBI Card, our customer-centric approach has always driven us to keep enhancing our customers' experience, and our SBI Card Sprint is the latest example. This end-to-end digital application platform enables customers to get a SBI credit card in less than five minutes. All these efforts have led to robust growth in receivables. Our receivables grew significantly by 41% year-on-year, reaching INR 37,730 crore. Receivables per card have grown to INR 23,445 in Q2 FY 2023 from INR 21,257 in Q2 FY 2022. SBI Card has been very active on ESG front. I'm extremely happy and proud to share with you that we have seen a significant improvement in first quintile in Dow Jones Sustainability Index Evaluation, leading to an improved performance overall by SBI Card. I would like to reiterate that we have always kept a sharp eye on the sustainability of the business, ensuring viable business practices throughout. We are committed to enhance our efforts in this direction so that we are able to positively impact more and more lives. Please allow me to take you through the financial performance in Q2 FY 2023. Our resilient business model embedded on strong fundamentals have helped us deliver healthy, profitable growth. The company has achieved a PAT of INR 526 crore in Q2 FY 2023, a growth of 52% year-on-year. Cost-to-income ratio at 59.4% is driven by investments to drive business growth in terms of higher volume of new accounts and to drive higher spends during festive season. The cost-to-income is expected to remain at elevated level as festive period is continuing in Q3 FY 2023 and with our continued focus on increase in new customer acquisition. In Q2 FY 2023, receivables stood at INR 37,730 crore with a growth of 41% year-over-year. Total revenue stood at INR 3,452 crore and have grown at 31% year-over-year during the quarter. On asset quality front, our gross credit cost percentage for the quarter is at 6.2%, up from 5.6% in Q1 FY 2023. The increase is largely driven by the increase in Stage 1 assets. Our GNPA has come down to 2.14% as compared to 3.36% at Q2 FY 2022 and 2.24% as at Q1 FY 2023. Net NPA for the period is at 0.78% as compared to 0.91% at Q2 FY 2022 and 0.78% as at the end of Q1 FY 2023. Return on average assets for the quarter ended September 2022 is at 5.4%, which is higher by 41 basis points as compared to 4.9% for Q2 FY 2022. Return on average equity is over 24%, which is again higher by 404 basis points as compared to over 20% for Q2 FY 2022. Our liquidity position continues to be strong, and the capital efficiency is at 23.2% for the period ended September 2022. We maintained the LCR at a healthy 82% through the quarter. Owing to rise in interest rates, the cost of funds has increased from 5.1% in Q1 to 5.4% in Q2 FY 2023. The full impact of higher rates will be further sized in the subsequent quarter. In conclusion, due to global disturbances, external environment continues to be volatile. Though the domestic economy has been able to deal with these disturbances, it is still pertinent to be watchful. We remain optimistic about the future and believe there is plenty of room to expand the company's portfolio, generate consistent profitable outcomes, and increase the value to all our stakeholders. With the festive season and the upcoming holiday season, we hope to also see a good traction in consumer discretionary spends. Having said this, we continue to maintain a cautious approach and take calibrated measures as the situation calls for in the future Faizan, now we are open 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 touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. 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. 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 on the NIM outlook. When we look at the NIM for this quarter, 12.3%, this is a multi-quarter low, obviously, reflection of the higher transactor and the higher funding cost as well. When we look at the drivers for the upcoming quarters, the funding cost is gonna rise and probably offset by improvement in the asset mix. Can you guide us how should we looking at the trend in this number, maybe over the next couple of quarters? When can we expect it to you know, maybe increase to 13% or more in the coming quarters? Yeah. Anuj, you are right. I mean, given the kind of propensity for the funding cost to increase further in the next quarter because the full impact will be felt in the next quarter. During the quarter, of course, there will be an opportunity to, I mean, transmit the increase in the cost of funding also to the extent possible, and some correction in the base or normalization of the base will also happen with the festival spends, maximum lasting up to end of October. Some repayments will be there, so some base normalization will be there. It will. We are confident that it will be more or less maybe with a 10, 20 basis points here and there, it can be around the same range. That is what we're expecting. Okay. In terms of cost of funding, I mean, is it possible to give what kind of number we can see, increase we can see in the next quarter? I did not get you, Anuj. Can you repeat? I said cost of funding, what kind of increase can we see in the next quarter? Sequential increase in the cost of funding. Cost of funds can increase by up to at least 40-50 basis points minimum. Of course, what is shown in the deck perhaps is also colored slightly by the base effect also. Base also has a weighting. While we have actually seen a 50-60 basis points as guided in the last quarter, full impact is not felt. It is only like a 5.1% increase into 5.4%, which is more of a base effect. Some of this effect will fade away. We are expecting another 40-50 basis points increase minimum in the cost of funds. Okay. Got it. Second question is on the Cashback SBI Card, obviously a very great product, and some of the best cashback available in the market right now. Two things there. One, is there a number in mind as on absolute side or as percentage of outstanding cards where you would like to cap the contribution from this card as percentage of, maybe or number of cards outstanding? And secondly, again, the question to Girish on the economics of this card, that is one of the key, you know, concerns, that this is gonna be ROA dilutive. Any color you can provide that. I think we are in the early stage. Our attempt is to first iron out all the kinks that are there in the journey and smoothen the process. And of course, we also need to figure out what is the right way of reaching out potentially to the new customers, NTB kind of customers. I think it's too early to speculate, like, what is the percentage. Definitely we would like the volumes to increase, and that's the reason we, I mean, put it on a scalable platform like a digital platform, but Girish will update on the ROA dilution. First of all, the numbers have just started. It's not. We already have a base of almost 1.48 crore cards. So 14.8 million is already there. This number is not even in, as of now, not even in hundreds of thousands. It will take its time to grow the portfolio. Second thing is, as we had updated last time also, when we were looking at the overall profitability of the product, we have put this product purely for customers who come through digital channels only and do straight-through processing. We are seeing the benefits of that also. Almost, the active rate, monthly active rate, even though this portfolio is very new, is upwards of 70%+ for these customers. These customers are very active. They are using the card. We are seeing better spends per card. When once we build a portfolio of at least 200,000-300,000, we will be able to see the behavior and accordingly take whatever, if there is required, any action which is required, we will take. As of now, as per our plan, whatever we are saving in the cost of acquisition, we are putting it back as a customer value proposition. 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 Nilanjan from Nomura. Please go ahead. Yeah. Thank you for the opportunity, sir. I hope I'm audible. A couple of questions. First is on the ECL. While you mentioned about, you know, the higher transactor leading to the Stage 1, but there's also a footnote which talks about, you know, some impairment. If you could explain that and the quantum of that. The second is if you can talk about, let's say, the revolver balance on a quarterly average basis. Basically trying to, you know, exclude the last 10 days of spends and how would that then compare to, let's say, the 26% that we reported in the first quarter. Also, if you can, you know, briefly touch upon how the spending in September and, you know, early October is converting between EMI and revolver. Finally, if you can talk about lower employee costs sequentially and if there has been a change in the headcount numbers? Yes, I will take this question on the revolver. As I said initially in my speech also, the last ten days of September witnessed a very good growth in the spends on account of our campaign with Amazon. If you normalize it, I mean, if you take off the kind of spends over and above the normal run rate what we see, the revolver share will almost equal to what we had at the end of the June quarter. So that way, it's stable. We have seen a kind of growth in the absolute amount also, but obviously, the growth is not in tune with the asset growth, overall asset growth. That is the reason for the decline in the share. A kind of some ballpark estimates do indicate like, the percentage of customers who are revolving is more or less, stable. Yeah, that's not a concern. Revolver being slightly stagnant is a kind of industry phenomenon. In terms of taking necessary steps, whether we have taken necessary steps or not, we have taken all necessary steps. You would have seen from the industry that also that we are permitting more of a self-employed and, Category B kind of, customers who have better propensity to revolve. We are hopeful, but the pace at which, we were expecting, obviously, that's not the case. It's taking a longer time like the, industry. Each question will be taken by Aparna. Yeah. If you're referring to the footnote on the asset quality page, that's a small number of INR 2 crores odd that relates to other assets, which is not the basic credit card receivables. It's some other operational assets that we can get. Right. There's also a de-recognition. What is that? These are security deposits. These are other assets where provisions have been demonstrated, so that's what it means. If you look at our overall impairment losses, out of the INR 996 crore for the half year, INR 994 crore related to credit cost. It's a small number. It's for other, some other operational assets that we get. That's all. Okay. The final one on the employee cost please, and the headcounts if you can. I think employee cost, if you're comparing quarter-on-quarter, the marginal reduction is perhaps pay out of PLP perhaps in the first quarter slightly would have. I'll just add to what Rama is saying. There's no change on head count. In fact, it's marginally higher. The reason you're seeing that a little lower is our C&B cost is largely flattish. There is a change in actuarial estimates on long-term employee benefits. This is what is causing this to come lower than last quarter. Any quantification, if at all possible? You have that 10 crore versus last quarter. Okay. Okay, thank you so much. Thank you. The next question is from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. Two questions. First is relating to revolver book. It's been you know like almost one month from the quarter end. If you would give initial perspective of conversions into EMI and revolver and so that would be first question. The second is on the sourcing. Could you just provide some color on how the September sourcing was? In terms of contribution of direct sourcing in that, since you just break it between BANCA and open market, just if you could split that into direct as well, that would be useful. What kind of run rate we ended the quarter and your commentary around, you know, how it's likely to move forward and the sourcing mix between direct and other sourcing. Thanks. Yeah. Dhaval, I will take the question on the sourcing. I think we entered the quarter, particularly in September, with a gross issuance of more than 4.70 lakh, 4 lakh 70 thousand cards. It was contributed from the SBI channel around 40% in the month of September. As we said, as we guided in the past, like, from the month of July onwards, again, the BANCA sourcing starts improving. We have been seeing improved traction. Both August and September, we had around 40%. Now it is actually trending at 43%-44% in terms of share in the overall sourcing. Coming to, of course, with regard to, like, what is the kind of numbers we are looking at going forward, our stated stance is like a... We wanted to target a net growth of 300,000 cards, which we almost achieved in the month of August, when we reached around 296,000 net growth. Later it is colored by some kind of attrition, where we ended up reporting like a roughly -3,000 kind of growth in the month of September. October onwards also, we are expecting the volumes will continue and our expectation that we will continue to have a net growth of 300,000 minimum. That aspiration is there and we're confident of reaching that. On the revolver. Yeah. Because this festive season started somewhere around September 23rd, 24th when the season sales started. What we have seen is the spends number is already updated. We have seen very good spends continuing in the month of October. Festival season has been very strong till Diwali. The percentage of spends converting into EMI is higher than normal because earlier, as we had said, we updated that we would see a 10% conversion into the EMI. This time it is because it's festival season as well as more discretionary spending and more consumer durable spending happens. We have seen a far higher conversion into the term balances. Revolve we will get to see in the month of November only because it has to take 40, 45 days and a payment cycle plus payment due date to be able to figure out how the payments have come back. We will be able to see that by mid of November to be able to report how much of that is going to revolve. As MD Sir mentioned, even in absolute terms from June to now, the revolve balances have actually grown. It is because of the denominator impact that the percentages are looking Understood. Thank you and all the best. Thank you. The next question is from the line of Ajit Kumar from Goldman Sachs. Please go ahead. Thank you for taking my question. A couple of questions. One, on the Mr. Ajit Kumar, sorry to interrupt you. Please use the handset mode. The audio is very low. Am I audible now? Yes, sir. Okay. First question is on the attrition rate. Your attrition rate in both set of portfolios, whether it is open market or SBI portfolio, has gone up significantly in this quarter. As you said earlier, impact of RBI circular on inactive cards has been limited for you. What is driving this high attrition in the portfolio? I think during the quarter you can make out like, the kind of volumes what we have given versus what was the cards outstanding, between both the quarters, last quarter and the current quarter. We have around more than 7 lakh card kind of attrition is there. Out of which around 3.6 lakh were on account of, I mean, the cards which are inactive for more than 12 months, we have closed. 3.6 lakhs. 3.5-3.6 lakhs. INR 3.5-3.6 lakhs. The remaining is an annual BAU attrition that we have on account of both voluntary as well as involuntary. Okay, thank you. The second one is on the interchange fee. Interchange fee as a percentage of spends has marginally gone down in this quarter to 1.38%. It used to be in the range of 1.5%-1.6% pre-pandemic. When the large ticket size spends such as travel is back, why is interchange fee not going up? I think interchange fee at the aggregate level is also a function of corporate card spends, which typically have a higher interchange. As you would have seen at a quarter-on-quarter basis, the share of corporate card spends have come down. That majorly explains. On retail, the interchange has actually gone up because the travel component is stable in Q1 versus Q2, and e-commerce has grown. On the retail, the interchange has actually gone up. The impact as per se is primarily because of the lower corporate spends. Okay. Any reason why corporate spends have come down? I think we said in the past also that, competition intensity is very much there and, it is impacting the margins also. We are revisiting our strategy for the last few months. We executed a few, low margin or a kind of negative kind of initiatives, and we are recalibrating our strategy. In the long term, or at least in the medium term, we would like to take the share again back to, 22%-25% of the overall spends. In a very calibrated manner, we'll improve the share of corporate card spends. Okay. Thank you. Thanks, Sir. Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Hi, sir. Good evening. My first question is on slide 10. If I look at the spend categories, especially the POS spends, at Category 2, 3, 4 are all lower on a year-over-year basis. Also, Category 4, which is travel agents, hotels, airlines, again, that is lower 5%. The total spends in that is lower 5% year-over-year. Why are these lower? The basic understanding was that spends are picking up across the board and also, you know, at the POS. Can you explain this? First I'll comment on the travel piece. April, May, June is typically where the travel season is there. The seasonality typically is that you will get higher spends in the April, May, June quarter and then again in the November, December, January period. That's a standard seasonality. What we have seen, however, is that the decline in travel has not been what it was used to be pre-COVID numbers. Actually, travel is doing fairly strong in terms of both lodging, airlines, and all these categories. 5% is hardly. What I would say is more or less stable in this category. Okay? On the point of sale spends. Sir, sorry to interject, but sir, this is Q2 FY 2023 over Q2 FY 2022. This is not a quarterly comparison, right? There would not be a seasonality impact here. I think there is a typo there that we will have to correct it. It is, I think, over Q1. Okay. Last quarter. Okay. Because overall, this is a total spends on each category is that. We'll. It's a typo, yes. Thank you for pointing that out. Okay, sure. What about POS spends? Again, that has come down quarter-over-quarter if this is quarter-over-quarter data. Yeah. Overall, if you look at it, POS spends has gone up. In this category, which is consumer durable, apparel, and because travel is mostly an online category. In consumer durables and apparel, most of it has moved to online. If you look at it, online growth in consumer durable has been 39% and 212% because a whole lot of e-commerce spends also gets categorized as apparel. Online spends is increasing there. Right. Just as a clarification, the interchange between online and POS would be the same, right? Because it's on an MCC basis, so. Yes, absolutely. MCC as well as the kind of card which is being used. Yeah. Perfect. Okay. That explains this. The second one, sir, is on yields. Now the drop in yields, partially it would be explained by, you know, the mix of transactor, revolver and all of that. There was also a regulation which said that you can't charge penal fees, late fees, et cetera, from the date of making the purchase, you have to charge it from the date it becomes overdue. Have those regulations also impacted your yield, overall? I think the measures relating to, I mean, which has some potential impact on the revenue, they came into effect only from 1st of October. RBI has given slightly extended timeline of three months for those measures. September quarter will not reflect any of those changes. Something to do with the capitalization, all that stuff, I think they came into effect on first of October. The full impact, I mean, September quarter results will not have that. We are yet to see, like a, unless we see considerable period in the quarter, October, November, December quarter, we will not be able to comment on to what degree this impact will be there. Definitely there will be marginal impact there, definitely. To what extent that impact quantification will take time. Sir, you would have done some sort of analysis or some sort of, you know, estimation of the kind of impact, because if you have to offset it, you would need to know what kind of impact is going to come. Any kind of ballpark, indication would be helpful. Materiality wise, we have called it out clearly because the OVL fee is the one where we saw a kind of impact. Yeah. In fact, it accounts for just, like 5%-6% of the overall fee-based income, where now there is an additional step involved before you permit an over-the-limit of taking an explicit consent from the customer. Initially, if any such kind of measure, I think unless the customer is aware, the consumer is aware, they will not be able to exercise the option. That one we have actually taken note of and called it out very clearly. It will take time to claw it back. Rest of the things, it's too early to comment. I mean, it's, we did not consider them to be very material. While definitely there will be some marginal impact will be there, negative impact will be there. The one which stands out is the OVL, where also, I mean, we are looking at kind of how do we create a kind of convenient customer journey where giving that consent or taking the consent from the customer becomes easy. We have been exploring. We are confident of clawing back most of the collections over a period of time. Got it. Just one quick question in OpEx. Is there any kind of one-off? No, nothing. Okay. No one-off. Just that, I think it has an impact of higher sourcing which is there versus last quarter. Our sourcing of new accounts has gone up. However, the impact is not in a similar range because, you know, our utilization of digital channels and overall COA can be lower versus last quarter. Thank you. Mr. Murarka, may we request that you return to the question queue for follow-up questions. The next question is from the line of Piran Engineer from CLSA. Please proceed. Yeah, hi. Thanks for taking my questions. Firstly, you know, you mentioned that 10% of your spend convert into EMI. Can you give a similar break up for, you know, how many convert into what percentage of spend eventually revolves? And also what percentage of your customers have ever revolved? On a percentage of spend going into revolve that there is no specific way to close that number because there are customers keep changing from transactor to revolver on a month-on-month basis. The payments keep coming back and these days because lot of EMI options are already available in front of the customer because from a payment due date. Customers revolve as a short-term funding requirements for themselves. The movement between customers changing from revolver to transactor it's quite substantial. Transactor to revolver also, both ways, is quite substantial. We have not declared how we internally handle, so we've never declared revolve customers or fully transactor customers, but there are set of customers who are, let's say, continuously transactors and there are a whole lot of customers do revolve occasionally. You can call it one time, two times, three times. There are some sloppy payers also who will forget to make the payment, end up revolving, come back in the next cycle. Some of that continues to happen. Got it. Perhaps the next question is maybe a very basic or stupid question, but now if someone has, you know, SimplySAVE or SimplyCLICK card and then he wants a Cashback card, you know, so do you then lower the credit limit on SimplySAVE or do you simply, you know, have to cancel one of the cards? Just want to get a sense of whether a lot of your existing customers itself will in a way upgrade to the Cashback card since it has an amazing launch. I think customer will have an option of flipping it if he feels like, he's better off actually closing the card and then opting for completely cashback card or otherwise they can split the existing limit or at the time of exercising this option if they're eligible for a higher limit, he will get that incremental limit on the new card also. It all depends on the customer profile actually. Broadly, if you could give a sense, you know, of the 100,000 or so customers you've given this card, how many are just from our existing base and how many are truly like open market? No, no. First of all, there is no 100,000 number at this point of time. Let me clarify, okay? We have not given the numbers out as of now. The point initially being made was that this Cashback card portfolio is not substantial enough at this point of time to make an impact on the overall portfolio. That is point number one. The second point here is that as Sir was mentioning, the customers, it is a choice of the customers. Second, you also have to note that SimplySAVE and SimplyCLICK cards are at INR 500 annual fee and Cashback card is at INR 999. The spend-based annual reversal is also at a higher value. There will be customers who will be switching over and taking it. In our whatever trends that we are seeing for the initial lot of customers, we do not see more than 10%-15% of the existing customers coming in. Most of the customers are new customers which are coming in. That was the whole idea. We were targeting customers who have e-commerce specific cards with other banks and they are taking one card with one bank, another card with another bank and third card with third bank. It is to that population, younger segment that we have targeted this card that with one card you should be able to utilize this benefit across the e-commerce platforms. Thank you. Mr. Engineer. May we request that you return to the question queue for follow-up questions. Thank you. We'll take the next question from the line of Karthik Chellappa from Buena Vista Fund Management. Please proceed. Yeah, thank you very much for the opportunity, sir, and belated Diwali wishes to the management team. Two questions from my side. The first one on the revolvers. Assuming we normalize it for the spend side, it is stable quarter-on-quarter. Could you give us some qualitative color on when you look the cohort of revolvers, those who revolve. Sir, the audio is breaking from your line, sir. Please, check. Sure. Is this any better? Sir, it's still the same. Hello? Okay, give me a minute. Is this any better? I'm actually increased the volume to almost the full. Okay, great. Sir, my question is basically on the revolvers. Even if you normalize for the spend increase towards the end of the quarter, when you look at the cohort of the revolvers, those who revolve once a year or three times a year or five, six times a year, at which cohort do you think the deterioration has been the steepest? that it's even across all. I don't, there's no one particular category where there's. It's still in line with the overall distribution. There's no particular one that we call out and we've seen any, more than normal decrease or increase in that. Okay, got it. To the point on the new sourcing mix where you are actually seeing a Category B rising as well as self-employed rising. If I couple that with let's say your 2.14% gross NPA and a provision coverage north of 60%, can we say that your credit risk appetite is actually improving at the margin? That if you recollect, that is something we've been saying now for the last one or two quarters, that whatever cushion that we have built up on the credit cost, we are using that to test certain segments and that is evident with the increased self-employed or the Category B sourcing. That's a conscious decision. However, I think it's important to note, like you said earlier, this will always be calibrated. We will test the segment, see how it does and only then expand it. We are not going to do anything in a very rash manner. Thank you, Mr. Chellappa. May we request that you return to the question queue for follow-up questions. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go ahead. Yeah. Hello, sir. Am I audible? Yes, sir, you're audible. Okay. What explains this INR 200 crore jump in operating expenses on a quarter-over-quarter basis? Roughly 19% quarter-over-quarter and if you look at any other parameter, whether your spend or whether your new card origination or your loan book, that's not increased by the same margin. From where this extra OpEx is coming in this quarter? As we said earlier, it's driven by two things broadly. One is our new account sourcing has gone up. It's up about 44% versus last quarter. Second, is our spend-based cost is running higher because we participated in the festive campaigns with e-commerce partners. Those two are the factors which are driving the cost to be higher versus last quarter. Right now we are, I think you are up at 59% cost to income in this quarter, right? Yes. Once let's say your new additions comes down and all these festive offers are over, do you think you can manage your cost to income at roughly 55%-56% which was like pre-Covid levels? I think sir indicated initially that you know the festive period this year is continuing from Q2 and extending to Q3. The cost income will remain elevated. That's what was initially mentioned. However, you know, as the festive period comes down, our cost income should come down because our spend, its cost will come down. However, our focus on new account sourcing will continue and those costs will come in. We'll see efficiencies coming in because our new account sourcing is coming at a lower cost compared to past due to our focus on digital sourcing. One more question about your credit cost. It has gone up by roughly 50 crore-55 crore quarter-over-quarter. Though your you know overall mix of you know revolvers are still down quarter-over-quarter. Though it's up on absolute basis, but as a percentage it's down because it's now, right? What explains this extra credit cost during the quarter? You have to look at two or three numbers together, okay? Credit cost is only one of the indicators. Yes, the credit cost has gone up quarter-on-quarter. The way to look at it is two things. One, the new book that comes in, the Stage 1, we will obviously provide for it. The repayments will obviously take a few. Some of it will come only over a period of time. However, we will be booking up the Stage 1 provision. Okay? The other piece is that as we have recalibrated our risk appetite, we have seen some degree of increase on the Stage 3 also. However, please read that number in conjunction with the SK number as well as the ECL rate. If you look at our ECL rate, which is a better indicator of what we're expecting in the future or the quality of the portfolio, the ECL rate has been stable at 3.3% now. Pre-COVID, that number used to be in the range of 3.5%-3.75%. Like I said, we have been taking a few steps in terms of expanding our risk appetite. However, you know, nothing has yet impacted the quality to that extent. The way to look at credit cost is more on a range basis and not at a number at a particular quarter. That is the point we've been making. We used to operate at 6.5% pre-COVID. We will see the number move in a particular range over the next two quarters. Thank you. Mr. Agarwal, may we request that you return to the question queue for follow-up questions. The next question is from the line of Param Subramanian from Macquarie. Please proceed. Yeah. Hi. Thanks for taking my question. My question is actually an extension of the last question that was asked. On provisioning, on percentage basis, why has the credit cost increased quarter on quarter? Basically, I picked up some, you know, explanation on Stage 1 assets, but, you know, that has inflated your denominator as well. I didn't understand why the 5.6 has moved to 6.2% quarter on quarter. And also, you know, 6.5% was your pre-COVID credit cost, but that was on a revolver base of like 28%. Considering it's at 24% now, it should be much lower. That's my first question. I'll come back on it. I think, Param, the Stage 1 is provided at 1.7%. Though the Stage 1 is a kind of transitory which may either revolve, some part of it may revolve, some part of it may convert into some kind of fixed rate limit-based loan. Most part of it may get repaid during the quarter, during October, December. Still, we provided 1.7%, which in annualized terms has an effect of almost like a 6.8% over a base rate of 5.6%, whatever was there in the previous quarter. This has an effect of, I mean, momentarily increasing the percentage cost. sir, if I understand correctly, this should reverse over the next quarter, right? Because we've seen a very abnormal last ten days, right? Is that the right understanding? Absolutely. To the extent Stage 1 NEA comes down, so to that extent you automatically get a relief. Got it, sir. My next question is on the over limit fee. You touched upon that, saying it's 5%-6% of the fee income. You know, any analysis you've done on how much could be the EPS impact that we could see or because of this coming into effect from Q3 or more? Also on the OpEx trajectory, how much of the increase in the OpEx trajectory that we're seeing is more structural, considering we've moved to a higher run rate of net issue? Yeah, those are my questions. Thank you. I think we have not computed anything on the EPS front. You are talking about the impact on the EPS. I gave a kind of quantification based on the current run rate, what we see as a monthly, which we did not disclose earlier. That's the reason we wanted to clarify that, 5%-6% kind of OVL is there. This is not permanently lost, Param. I mean, as I said earlier, we are figuring out what is the right way of, I mean, right, creating a right journey which is convenient for the customer to express his or convey his mandate. We are confident of drawing it back. Of course, we will also be constantly looking for opportunities to realign our pricing in line with the competition wherever opportunities are there. Already you would have seen like we have already come out and communicated to the customers around charging some fee income for the rental, which is in line with other players also. Those opportunities anyway we will explore. Overall, we don't feel it is a complete loss or anything, but it will take some time for a complete comeback. 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. The next question is from the line of Nitin Agarwal from Motilal Oswal. Please go ahead. Yeah. Hi. Good evening, everyone. I have a question around the revolve rate on the self-employed segment. Now, as a strategy, we have been increasing the mix of self-employed. This segment share is at 30% for the quarter versus 17% at the portfolio level. Just curious to know what is the proportion of revolve rate in this segment so as to better understand how this approach can help. Nitin, the self-employed portfolio tends to revolve higher, and that's something that we've noticed, and that's generally the case, whether it is the second tier salary or the self-employed. The propensity to revolve is higher, and that's continuing. That's one of the reasons why when we said we've gone back and recalibrated the risk appetite, we brought some of these in just to be able to see how they perform. Right. Aparna, I understand that, but sorry, if you can just indicate some range as to what is the typical revolve rate in this self-employed category that you have seen over the last couple of years. We haven't given the segment level revolve rates. Like I said, it is higher than the salaried. Again, even within salaried, obviously, the government is lower and the second tier salaried is higher. Self-employed is higher than that. We haven't really given the segment level revolve rates. Okay. Sir, a very small question is on the economics of your newly launched cashback card. How do you really see that? Will this product take longer time to scale up on the profitability curve? Any thoughts around that? As we had stated earlier, when we looked at the economics of coming out with a card like this, in the present scenario, we looked at the cost which had to be incurred. For example, cost of participating with a co-brand partner, payout to the co-brand partner, cost of acquisition, we took all that and decided to convert it into a customer value proposition. Okay? That is why this card is only available when the customer applies on their own through digital channels. Thereby we save a majority of our cost of acquisition. We are also saving monies which could have been a potential partner payout, which is quite substantial in these days. The third part is that it also gives us strategic freedom to be able to tinker with the product at some date looking at the way the consumer behavior is happening. Given these three parameters, we came out with this product. When we look at internal parameters, we see that the profitability is similar to what we see on a SimplySAVE or a SimplyCLICK card. Now, you have to also note that SimplySAVE and SimplyCLICK card are an INR 500 product. This product is now available at this point of time first year free till March 31, but it has an annual fee of INR 999. Thank you. The next question is from the line of Rohan Mandora from Equirus Securities. Please go ahead. Good evening, sir. Thanks for the opportunity. Sir, could you share what was your fresh delinquency during this quarter, and also the provision number if you could split between Stage 1, Stage 2, Stage 3? If you just go to the asset quality page, we've actually given the provision number also on that. I'm not sure I understood the question. The question is on what is the delinquency? Fresh delinquencies. Fresh NPA creation during the quarter. Fresh slippages. The increase in Stage 3 is largely made up of, you know, mostly fresh slippages only. We've not given the split. If your question is on the slippages, then we'll get back to you with the specific number. It's not part of this. However, overall, if you look at the GNPA, the number is at 2.14%, which is down slightly from last quarter. Sure. I'll touch base separately for the fresh delinquency number. The provision that you have done in this quarter, how is it split between Stage 1, Stage 2 and Stage 3? I think that given the rates, if you look at it, the Stage 1 book, we normally provide at 1.7%, and Stage 2 is about 5.2%, and Stage 3 is at 64%. That's the breakup. It's already available. If you look at, we've given you the breakup of the stage of the receivables as well as the provision rate. That breakup should be very easy to calculate. Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead. Good evening, sir. Thank you for the opportunity. Sir my question is on subscription bills fee share, we share which is standing stagnant if I compare both sequential as well as on annual basis so any color on this vis-à-vis your new account company sourcing or should we attribute this to any spends based reversal that might have happened? Shweta, question is not clear. If you can ask again. Shweta, I think we answered this earlier also in the last quarter. This is linked to the higher share of spend-based reversals which is coming in due to which the subscription-based fee is marginally low. Sure. Sir, final, second question. You mentioned because of the new RBI norms, 95% is where you're standing in terms of you know, active portfolio. Do we see some year-on-year on the CIF improving month-on-month basis, and that the impact is almost behind? Yeah. In the month of September, we have taken, if you'll notice that we reported a steep decline of almost around 3,000 cards. While we did, as Hemant mentioned, 470,000 plus new cards. In the month of September itself, we have taken the complete impact of the RBI guideline and closed all those cards. From now onwards, October onwards, you should see an increase and we are targeting at least 300,000 net growth on a monthly basis. Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead. Hi, sir. Thank you for the opportunity. Could you please split out the revolvers into accidental revolvers, periodic revolvers, and chronic revolvers with their loss rates? The second question is around the category four, where the travel, hotel, airlines has come off even on a quarter-over-quarter basis. All these rates have actually gone up. If you look at the airport survey data, the domestic arrivals, the international arrivals, departures have all increased on a volume basis. All the hotel rates across travel websites are at their peak. It seems quite out of whack that the category four spend should come off even on a quarter-over-quarter basis because the group has also gone up. The travel tickets have escalated even on a quarter-over-quarter basis. If you could throw light on these two facts, questions. Thanks. I'll first answer the travel category. The category for here is travel agent, hotels, airlines, railways, entertainment, and restaurants. We club this all together as more of a travel and entertainment category. However, travel itself and lodging itself are the large components of these. Okay. While in the April, May, June quarter, the travel bookings, a whole lot of travel bookings happen at least 30-45 days prior to when the people are traveling. This seasonality, what we have seen is what you see actually on the ground, the bookings happen slightly earlier on that one. In the past, what we have seen is pre-COVID, that May, June, and November, December are the high seasons of ticket booking. Ticket booking starts on April or so, and by the end of May and early June, most of the ticket bookings get done. Similar trends you see by November also. Regular travel, emergency travel, all that stuff will continue, but the children holidays and the leisure travel typically follow these patterns. Right. The first question? First question. We've not really shared that split of revolvers into those categories in the past also. I think we only shared it on a total basis. All right. Thank you. Best of luck. Thank you. The next question is from the line of Mohit from BOB Capital Markets. Please go ahead. Yeah, yeah. Thanks for the opportunity. My first question is around the active rate. If you look at the active rate for the quarter was 50%, which was, you know, the same as the previous quarter. Because of the festival season, we haven't seen any increase in the active rate. Any, you know, expectation from that which would not have been met. Active rate in September has gone up, but because we have given out the quarterly number, and we saw higher activity in the last 7-8 days in the last quarter. If I talk about July, August and September, August was better than July and September was better than August. That has been the trend line. Okay. Just giving one more. If I look at the retail and corporate spend. Earlier it used to be around say 70%-77% retail and 22%-23% corporate. But as you said that you are We can't hear you, Mr. Mohit. Please repeat your question. The audio is not clear from your line, sir. Hello. Yeah. Is it better? Yes, sir. Please proceed. Seeing that the share of retail and corporate, if I talk in terms of spends, you know, used to be around 75-76% retail and the balance 20%-24% corporate. Now that your certain corporate spends have come off, the ratio looks very skewed at 82% retail and, you know, 18% corporate. Going forward, should we expect that this ratio will continue? No. As I said earlier, we are targeting it into again improvement and taking it back to the earlier level, but in a calibrated fashion. Because as you said, because of the competition intensity, some relationships are not working. More like a, they have become more like a cash burn, and we don't want to be in this game. That's the reason we have actually exited some relationships. At the same time, we are building the pipeline. We are confident of taking the share back to the earlier level over a period of time. Thank you. The next question is from the line of Jai Mundhra from B&K Securities. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. I wanted to check, sir, on your cost of funds, which you had said that you are expecting 40-50 basis points rise. Is this your total cost of funds or you are saying about the cost of funds from banks? Specifically, sir, would it be fair to assume that all your bank loans would be on, I mean, would this be on MCLR or you would be drawing from T-bills or maybe EBLR? I think, our sourcing in particular, we have given the profile 35%, 34% is from long-term and the remaining are short-term. Short-term is bank loans which are linked to external benchmarks. I mean it can be a treasury bill or it can be a repo kind of rate also. Short-term is mostly linked to the treasury bill kind of rate. Depending on the movement and depending on the tenor at which they are rated, they will get reset. With regard to your other question on the cost of funds, which we have given as 5.4%, that is the cost of borrowing, on average for the entire portfolio. Right? You wanna add something? Yeah. I think just to add what sir said initially was that 5.4% also is little colored because of the base effect of the last one week. As we said in the last quarter, so after tax, it should be in the range of 5.7% for this quarter. For next quarter, sir has already said that it will be higher than 50-60 basis points. Thank you. The next question is from the line of Mohit Surana from CLSA. Please go ahead. Hi, sir. I just have one question is how has in your open market sourcing what is the percentage of customers that are new to credit? If you can also comment in terms of how it has changed over time. Generally, it will be very low because generally we get more of NTCC and NTC from the BANCA channel, where we have the comfort of looking at their financial transaction profile, et cetera. In case of open market, it is negligible. Mostly it will be either to some extent it will be NTCC, but predominantly it will be like a credit-tested kind of customer. Okay, sir. Thank you. Thank you. We'll take the last question from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead. Yeah. Sir, thanks. Just two clarifications. One relating to, you know, the full year cost to income. I remember, you know, in the fourth quarter call, you mentioned that this 57% kind of zone is where we target, and then there could be quarterly volatility in the cost to income. Is that, you know, the same thought process that you have at the moment of give or take some percentage point or it could be meaningfully higher? Just some clarification around that. The second one is just on cost of funds. Again, just to be a bit more clear, in terms of where we ended this quarter, we should see another 50-odd basis points, 50-60 basis points increase in the next quarter. Is that correct? Yes. Coming to your cost to income, I mean, when we guided in the past, let's say couple of quarters back, obviously, the kind of increases what we have seen in the interest rate scenario and the NIM compression, that was not even there in the reckoning at that time. So we are confident about the range, but it will have an upward bias. I think 58%, perhaps 57.5%-58.5% kind of range perhaps we can think of. That's over a period of 12 months. I'm not talking about quarter to quarter. Because as I said, like if actual trends again are spilling over to the month of October, November, December quarter as well. Obviously we said like it will continue to remain elevated, but that will not be the case coming to Q4, then it will be lower. Over a period of 12 months, when you average it out, it will be hovering around maybe 50 basis points here and there around 58% actually. Understood. On the question of cost of funds, 50-60 basis points quarter-over-quarter increase. Is that correct? No, I think what sir said was that, you know, 5.4%, which we are seeing, is a bit colored. The actual number, you know, taking out the last week's borrowing and the denominator effect will be 5.7%. On top of that it will be 50-60 basis points up. Okay. Sequentially, you could see like around anywhere between 80-90 basis point increase quarter-over-quarter. That's the kind of magnitude we could see. Yeah. Dhaval, you have to think it from the perspective that in Q4 we were at 4.9%. Right? What you are seeing right now is 5.4%, which is just a 50 basis point higher in six months. However, the rates have gone up by 190 basis points already. So the impact is not visible and it's colored as we are saying because of the last week's borrowing. Right. The full borrowing cost impact has not come in the quarter. That's the reason it's 5.4%. However, it should be in the range of 5.7% for the quarter. You know, in next quarter will go further higher. Understood. We are saying the NIM to be stable because of the optimization on the mix to offset the cost of fund impact. Hence, NIM could be ±10-20 basis points on a sequential basis. What I alluded to was more like we're confident of managing it around 12%, at least we're confident of keeping it around 12%. But definitely, it will be lower than 12.3%, given the kind of pressures what we are seeing. Got it, sir. Very, very clear. Thank you and all the best. Thank you. Ladies and gentlemen, that 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. Thanks, I would like to thank my colleagues at SBI Card for their continued commitment, hard work and support that have contributed greatly to our continuous success. I'm also grateful to our shareholders, investors and business partners who have believed in us and supported us through. Lastly, I would like to reiterate our confidence in our agility and adaptiveness, which has helped us ensure sustainable and profitable growth. Wishing you all a wonderful festive season. Yeah. Thank you and good night. Thank you. Ladies and gentlemen, on behalf of SBI Cards and Payment Services Limited, that concludes this conference call. Thank you for joining us and you may now disconnect your lines.