Ladies and gentlemen, good day, and welcome to Q1 FY 2024 Earnings Conference Call of SBI Cards and Payment Services Limited. 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, MD and CEO. Thank you, and over to you, sir. Thank you, Yashaswi. Good evening, everyone. I am pleased to welcome you to the Q1 FY 2024 earnings call, along with my senior management team. I also take this opportunity to introduce Mr. Shantanu Srivastava, our Chief Risk Officer. This quarter is special to us, as it marks a key milestone in the organization, the organization's history. As you are aware, SBI Card celebrated its silver jubilee on 15th May, this year. Through these years, the company has exhibited business resilience and strength to stand the test of times. Our customers' patronage and trust have been instrumental in our success, and we remain committed to delivering value and growth to all our stakeholders. As we meet today, the global economy continues to be impacted by the prolonged geopolitical tension and volatility in global financial systems. However, India is well poised to sustain its growth momentum. In its annual review report, Ministry of Finance has said that Indian economy appears to grow more durably than before. India's GDP has grown by 7.2% in FY 2023, as against an earlier estimate of 7%, owing to a strong Q4 performance. It is reassuring to know that India continues to be the fastest growing major economy, should remain so in the next few years. Digital payments continue to grow at a fast pace, with transaction volume growth of 56% year-on-year in FY 2023, which is expected to grow four times by FY 2027. Indian credit card industry continues to grow at a steady rate. As per RBI June 2023 data, there are around 89 million cards outstanding in the country. In June 2023, credit card spends have been at INR 1.37 lakh crore, marginally lower than record high, INR 1.4 lakh crore achieved in May 2023. Coupled with highly underpenetrated nature of Indian credit cards market, this underlines the continued relevance, attractiveness, and long-term sustainability of the credit card business. Many progressive regulations have also reinforced the growth prospects of the industry. These have balanced the healthy competition in the industry with customer-friendly measures. RBI Payments Vision 2025 outlines that card acceptance infrastructure will increase to 250 lakh touchpoints, which will further boost transactions in India. Being the largest pure-play credit card issuer in India, SBI Card is at the forefront of industry growth by driving up the penetration of credit cards in the country. As an agile organization, SBI Card continues to assess and explore opportunities that can support the growth momentum. With improving consumer sentiments and stable macroeconomic conditions, our aim has been to leverage this window to test and expand the variety in customer base while being prudent. During Q1 FY 2024, we have introduced ATM SBI Card on the RuPay network, thus offering more choices to our valued customers. We have started rollout of SBI Card issued RuPay credit card on UPI platform on a limited number of TPAPs, and will soon be expanding it to other app vendors. Over a period, we expect this to be a significant contributor to our transaction volumes. We continue our investments in technology. Our app platform, available both on Play Store and App Store, was revamped this quarter by enhancing the UI and UX to provide ease of navigation, with access to several exciting features like digital KYC and profile features. Our app has been downloaded by 13 million customers, with 7 million unique monthly logins by customers. It has been rated 4.5 out of 5 on Play Store and 4.6 out of 5 in App Store. The app is being revamped in a phased manner. Several more features to be rolled out over the year. Let's now look at SBI Card business overview in Q1 FY 2024. During this quarter, SBI Card pursued and achieved strong growth across most key business metrics, once again demonstrating resilience and sustainability of our business model. We crossed 17 million Cards-in-Force milestone. Our CIF stands at INR 1.73 crore, with a growth of 21% year-on-year. CIF market share is at 19.6% in Q1 FY 2024. Our new accounts in Q1 FY 2024 stand at INR 10.97 lakh, with a healthy 22% year-on-year growth. The current quarter saw a moderation in growth in line with our experience during Q1 for any fiscal. Our share of new account sourcing from Banca and open market channels in Q1 FY 2024, stands at 54% and 46%, respectively. We continue to leverage the network and the customer base that SBI has to offer. We endeavor to keep our market share in net card addition at around 20%. Our card spends growth has been strong, registering a growth of 24% year-on-year at INR 73,913 crores. In fact, spends in Q1 FY 2024 are the highest ever quarterly spends for SBI Card, surpassing the performance we achieved in the previous quarter. Retail spends have contributed INR 58,347 crores with 28% year-on-year growth, thus making it the best ever quarter for us in Retail spends. Corporate spends have been stable and have contributed to the INR 50,565 crores, with a 10% year-on-year growth, in line with our measured approach for the segment. Our Spend per average card has grown from INR 1,70,000 in Q1 FY 2023 to INR 1,73,000 in Q1 FY 2024. Specifically, we have seen a healthy growth in Spend per average card for our Retail spends, which have grown from INR 1,30,000 in Q1 FY 2023 to INR 1,37,000 in Q1 FY 2024. During Q1 FY 2024, spend growth has been driven by growth in categories such as travel, dining, and entertainment, apparel, education, and utilities. Online spend continued to be robust, with a share of around 55% in Retail spend. Cost witnessed faster growth than Online in Q1 FY 2024. Our market share in card spend stands at 17.8% in Q1 FY 2024. With robust card spends, we have also seen a healthy 30% year-on-year growth in receivables too. Our receivables have grown to ₹43,271 crores as of June end. I would like to highlight that our share of interest earning receivables has grown to 62% in this quarter, versus 61% in Q4 FY 2023. Our revolver assets stayed stable at 24%, and the EMI receivables were at 38% of the portfolio. Most importantly, our receivables per card have grown to 24,949 for Q1 FY 2024, versus INR 23,202 in Q1 FY 2023. Coming to the financial performance in Q1 FY 2024, our total revenue in the quarter is at INR 4,046 crores, registering a growth of 24% year-on-year. Q1 FY 2024, our revenue from operations is INR 3,912 crores, with 46% year-on-year growth. Interest income offers a significant share of our revenue from operations, which has been growing steadily. In this quarter, interest income contributed 46% share and has seen a growth of 30% year-on-year. Our tax for the quarter, that is Q1 FY 2024, stood at INR 593 crores. Our cost of funds during the quarter increased to the 37 basis points. We expected the short-term rates to be lower and ECL cover to normalize. However, higher than expected short-term rates and opportunistically borrowing more long-term rate as long-term rates in drop, resulted in our cost of funds being higher by 37 basis points for current quarter. The long-term borrowing, as a result, increased from 35% to 37%. Given the predominantly short-term nature of our assets, we will be comfortable with the long-term borrowing at the current level. During the quarter, we were also able to mostly transmit the increase in cost of funds to our asset group, resulting in increasing the yield on loans by 20 basis points, helping us keep our NIMs almost as stable as at Q4 FY 2023. We expect the cost for the cost of funds in Q2 to be marginally higher by 5-10 basis points from Q1. NIMs is expected to be stable next quarter. Our asset quality, as of Q1 FY 2024, GNPA marginally increased to 2.41% from 2.35% as of Q4 FY 2023. Our Gross Credit Cost increased to 6.8% in Q1 FY 2024, from 6.3% in Q4 FY 2023. As we shared with you in the last quarter earning call, our credit costs were elevated on account of stress emanating mainly from the 2019 COVID. We have noticed that the delinquency behavior for the 2019 vintage has been relatively worse, considering its weightage in the portfolio. The lifetime delinquency behavior for this vintage deviates from the expected lifetime behavior. We have identified the stress segments and have taken total portfolio action. We have also intensified our collection efforts for this cohort. While the overall new sourcing quality is within the desired delinquency band, we have proactively discontinued sourcing of less profitable low risk cards, terminated a few pilots based on early signals, increased documentation and verification requirements for certain low bureau score segments, and reduced sourcing from certain channels. We also took portfolio actions on potential high-risk segments by reducing the credit limits and tightening eligibility criteria for cross-sell to these customers. The collection efficiencies for the industry, particularly in the later cohorts, have not come back to the pre-COVID levels, which can be partly be attributed to the change in customer behavior. We reviewed our collection strategy and intensified efforts, including enhancing the field team in geographies with higher stress portfolio. Our collection teams continue to leverage digital tools available. We are certain that the Gross Credit Cost have peaked in Q1 FY 2024. The improved prowess in the month of June, that is June 2023, resulted in lower credit costs as compared to April and May month. Initial trends in July also indicate continued improvement, and we expect the credit cost for the coming quarters to be on a downward trend. In addition, the delinquency for our recent sourcing vintages is better and in line with the expectations. As the weight of these recent better quality vintages increases in the portfolio, the overall portfolio quality will also improve. As you would have noticed, we have increased the sourcing from self-employed and tier three and tier four segments in the last few years. The delinquency behavior for these segments has shown an improvement trend over the last few years. The increasing prosperity and therefore the increased consumer demand from tier three and tier four cities in India will continue to drive growth for the financial sector. Government initiatives, growing consumption, and thriving SME enterprises in these cities encourages us to focus on these cities. Access to Yes Bank network in these cities gives us an edge over other players. We are closely monitoring the performance of this loan segment and will calibrate our approach as and when appropriate. With the steps taken in Q1 and encouraged by the results, we expect credit cost for the second half of FY 2024 to trend back into our target range of 5.8%-6.2%. Our cost income for Q1 FY 2024 is at 56.4%. We saw an improvement in cost income ratio to 56.4% versus 58.1% in Q4 FY 2023. Our profitability ratios continue to be robust. In Q1 FY 2024, despite an elevated credit cost, our return on average assets was at 5.1% versus 5.4% in Q4 FY 2023. With steps taken to reduce the credit cost and increase share of interest costing over the next few quarters, we expect to maintain a healthy ROA going forward. In summary or in conclusion, India's growth story remains intact and the domestic consumption is encouraging. At SBI Card, we have always maintained a balanced approach and taken well-calibrated measures to ensure sustainable and profitable growth. We embark on this fiscal year on a positive note, as it is based on our strong performance across most key business parameters. Amidst the ever-evolving macro environment, we stay focused to take advantage of the immense growth opportunities that the digital card market continues to offer. Yes, actually, we are now 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 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. Also, participants are requested to restrict their questions to two at a time. They may join the queue back for follow-up questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Mahrukh Adajania from the Nuvama. Please go ahead. Hello, sir. Hi. My question is on credit cost. The 2019 customers, what would be their rough contribution to current outstanding? Any rough idea? Yes, this is Sanju here. The current composition of our portfolio, is about 16%. 2019 sourcing is about 16% of our income. Okay. What would be the range of credit cost in the near term? Obviously, you've taken a lot of portfolio action. Say, for the next 2-3 quarters, for the rest of FY 2024, what is the range of credit cost we can expect over the next 3 quarters? As I said in my speech, I think we started seeing a positive trend now, in the sense like we started seeing decline. Month of June, we had a benefit of looking at the entire month of June. It was better than the previous month, like April and May. It essentially means like a peak in the Q1, up to May. The credit cost monthly, we are monitoring now very closely, it started declining. We are confident that the kind of measures that we have taken and initial trends, what we are seeing, after September quarter, we will be back to our target range of 5.8%-6.2%. You can actually estimate, like, where we will be. We are at 6.8% in this quarter, but after a quarter, we will be in the target range, so you can estimate, like, how it will trend. Okay, got it, sir. Got it. Sir, my last question is on margins. Say rates are cut at some point in time, not immediately, but the RBI cuts rates, how will your margins behave, not only from a cost of funds perspective, but from yield? How soon do you pass on rate cuts to your customers in terms of yield? How will the yield side of things move? If you look at our past record, whenever the rates were declining or whenever the rate environment is a very benign rate of environment, we have always been the beneficiary in terms of improving yield. That has been the case. Because of the lag effect, like the way what you are seeing now, when the rates are increasing, our liability is getting retried to faster, but it takes some time for us to transmit the rates fully to the asset side, but exactly it will work in our favor when the rates are declining. Any declining, but I, I'm not asserting any case here. When the RBI is declining, I mean, reducing the rates, but that will be very positive for our margin. Okay, sir. Thank you. Thanks a lot. Thank you. We have our next question from the line of Anuj Singla from Bank of America. Please go ahead. Yeah, thank you very much for the opportunity. Good evening, everyone. First question is on, again, the credit cost. We talked about we have identified this 2019 cohorts, where we are seeing stress. Can you talk a bit about what is the profile of these customers? What went wrong there? What confidence do we have that the incremental sourcing we have done, maybe in the previous years or the years after that, we are not going to witness the same or similar stress, in those cohorts? Because this is something that we've been very focused on, in the last, 3-6 months. Incidentally, I joined, just about three months ago, and ever since I've been here, we've been running diagnostics of the problem and, collectively thinking about the actions to be taken. Some of them were already underway even before I came. They take the time, take some time to execute, and then results also take some time to show up. That's been happening, and we're seeing green shoots on them. To answer specifically what was, what you were seeing in 2019 working was, that the behavior of this cohort was somewhat different from what we noticed in the prior or subsequent cohort. In terms of both peaks that this particular cohort witnessed, which is around the 30-month mark, the level of that peak and the speed at which that peak was crossed and the delinquency behavior then tapered out. That took a somewhat different trajectory compared to the other cohorts. This is not very different from what we would have expected from the model, but it took some time for the discrepancy or anomaly to show up because it was coming just after the pandemic. That's one more time to distinguish this portfolio from the others, was not... distinction of this portfolio from the others wasn't very easy. But as and when we did it, we started taking those actions in terms of line decreases and/or intensification of collection efforts. In terms of the other subsets of this segment, some of the charts are available in the investor deck. You can see that alongside this 1 in 19 portfolio, there is a component of our portfolio that comes from self-employed. This duration in the last 3 or 4 years, the contribution of the self-employed segment has gone up by about 4 percentage points in the 3-year period. Similarly, at the same time, the delinquency behavior of this segment has actually improved. There are 4 other similar subsegments of this our portfolio that we call risky, whether it's category versus category in our family segment or the other 30 portfolio. All of those have moved towards, I think, moved towards a higher component as we try to generate revenue. The riskiness of each of these segments has improved in the last 3 or 4 years. That's a heartening trend. As the portfolio matures and we get higher and higher component from our more recent sourcing that we find is more suitable and giving us much better delinquency performance and from bank side behavior, we are encouraged that the overall delinquency of the portfolio will improve, and it's from that basis that we are giving you the comfort that Anita just spoke about a few minutes ago. Anything specific here, is it self-employed? Was it open market or banker sourcing, which the cohort came from? Any color you can share there, or it's a mix? It's actually a mixed bag. We can't really point out towards only one component, but whatever subsegments we've seen, whatever cohorts we identified and the lookalikes of those cohorts that we see in the rest of our portfolio, those are the ones we're taking actions on from our portfolio action point of view, or from our marketing action point of view, or from our collections action point of view. Got it. Okay, the second question is with regards to the growth trajectory. Mr. Rao talked about this intervention as well. You've also put in slide 6 to focus on profitable segments, cutting off credit limits, you know, and also sourcing maybe some of the pin codes we are not sourcing for. How do we see the 1 million net card addition target per quarter in that context? Should we be expecting a lower number in the coming quarters? Sure. I think we are still mindful of talking about the 300,000 per month and about a period of a quarter, 1 million kind of thing. Only, as rightly said, like, some of the steps, the recalibration, et cetera, what we have done. We think the seasonality, what we see in Q1, combined with the delinquency, that is the result. There is no change in our aspiration, but only again, it will take a month or two before we hit that kind of mark again. I think the initial aspiration will be to reach 300,000 in a couple of months, and then, of course, gradually increase the run rate. We'll try to be more careful, and we will try to balance it with how the credit card is also behaving. We'll be mindful of both. Got it. Got it, sir. Thank you very much. All the best. Thank you. We have our next question from the line of Piran Engineer from CLSA. Please go ahead. Yeah, hi. Thanks for taking my question. I just wanted to understand your delinquency chart on slide 15. How exactly do I read it? All of them are up, you know, they reach their peak in 24 months, you know, on book and then go down, but they're also saying this is ever 90+. Shouldn't that just always be increasing? This is standard industry side, and you'll notice the shape of the curve is very similar to what you might have seen elsewhere. No, I meant- Shape of the curve. No, sir, I, I just meant that, say, the 13-month on book number should always be higher than the 24-month on book, which should be higher than 12 months on book, because this is ever 90+. I'm not sure if I'm understanding this chart properly. Yeah. Here, this is an incremental number. You are right. If you actually do cumulatively, it will continue to grow. The point here that we wanted to show was that it the maximum peak after buildup of asset happens at around 24 months, and after that, the incremental number of people coming into 90 plus keeps on going down, and you just manage that portfolio. That, this chart is representing that number. It's also index, so it's not the absolute value, index value. Got it. Got it. Okay, so it's an incremental number of 90 plus. Okay. Yeah. In that case, the dotted line, which is CY 19, now it's been, like, 4 years, right? Since it's CY 19. That, that number has come down anyway, so I don't see why it should impact us in 2023. What about 16%? It's about 16% of our assets, and about slightly over 20% of our NPA. That's a slightly positive number. The incremental amount of based on that we carrying because of this particular port is about 40 basis points. No, no, sir, I, I don't think I've communicated my question well. I'm just saying that if I compare the CY 18 line and the CY 19 line, they're probably pretty similar. Last year we did not see any sort of hit due to the CY 18 line, but this year we are seeing the hit from the CY 19 line, I'm not really understanding why. Yeah, it's the composition of the cohort in the overall asset. CY 18 ran off quicker, and it is not contributing significantly to the overall risk cost because it's much smaller in value. 19%-16% in our value. Got it. Okay. The chart that you see on the slide, Virag, is for the at the portfolio level, doesn't show the, as Shantanu pointed out, the percentage contribution in the portfolio. It's just behaving a portfolio behavior. It's a behavior of putting a ever 90%, 90-plus in percentage. Got- When you put this in context to the percentage of this vintage in the portfolio, that's where it starts to show up in a higher way. Most of the other point of putting this chart was to also show you that the vintages which are belonging to 2020, 2021, 2022, which are the latest vintages which we have acquired in last three years, are almost on an index level at the peak of around 0.59 or 0.6, compared to what we were acquiring earlier. As these new vintages build up assets, automatically the weighted averages will start to come down. The point of arrival is that the subsequent cohort are peaking earlier and delivering faster. Okay, got it. Got it. The second one, just for Rashmi, now, if RBI does not hike, any more, cost of funds should be stable, or do we see that increasing? In the last 1 year, how much have we increased our EMI yield by? EMI yield has gone up about 120+ basis points. The EMI yield, the yield on our EMI book would have gone up by about 120-150 basis points. Even if the RBI doesn't increase the rates any further, as Mr. Rao called out, we do expect the cost of funds to go up this quarter as some of the other liabilities they come up for repricing, both on the short term and also on the long term as well. Remember, Remember, our long-term book, which you would have borrowed 3 years back, is at a much lower price. Factoring all of that, we've called it about 5-10 basis points increase in cost of funds in Q2, and moving towards that as, you know, the rates kind of become normal, for the second half of the year. Got it. Got it. Okay, that's it from my end. Thank you, and all the best. Thank you. We have our next question from the line of Abhishek M from HSBC. Please go ahead. Yeah, hello. Thanks for taking my question. I had a follow-up on this yield on EMI. How much of the 120-150 basis points would have translated already? And how much would, you know, get repriced as we go along? The number that I called out is the translation of the cost of funds going. The increase in cost of funds will pass on the EMI book. No, I meant the increase in yield on the EMI book, 120-150, that would be applicable only the book sourced through over the last, let's say, three, two to three quarters, right? There would be a part of the EMI- That's the idea. Okay. What you would like to know is? What I would like to know is that what part of the TMI book is yet to reprice? Oh, we can't reprice our existing book at all. The EMI knows the fixed rate loan. Okay, see, Abhishek, what happens is, you know, the nature of the business is we extend only fixed-rate kind of loans, so they will be fixed for the period or tenor of the loan. Every month we make certain disbursements, the principal payment coming into loans or otherwise, some encash kind of loan being given or Flexi Pay or BT balance, et cetera. That gives an opportunity to transmit the rating rates. It takes a few months for the entire portfolio, because considering the life of the portfolio, which is around maybe 11 months or less than a year, it takes that kind of time to reach rate for the entire portfolio to get repriced. Got it. 11 months to, is- Yes, slightly more specific, on the Flexi Pay and subvention, more than 80% of the book would have already got repriced, because it is, as such that it is average tenor is 9 months, so it's only some of the 18-month book would be left. Cash is where the repricing is still continues to happen, because they are the average ticket size, average seller is close to 33 months. exactly. Okay, how much of that encash book would have been at new rates? Let's put it that way. Anything in the last two quarters, basically? Actually, less than 12 months is fairly less, because personal loan ticket size is primarily 24 months and above. The new addition that is happened into that book or incremental book is at a higher rate. The replacement, I think, will continue to happen over a period of time. Got it. What part of the TMI is on encash versus the other two, Flexi Pay and subvention? We have not declared the breakup of the, all three. Got it. Got it. Okay, no problem. So that was on yields. The second one was on this collection teams which were enhanced in certain geographies, et cetera. Do you think this will have a sort of follow-on impact on costs on an overall basis? On OpEx, I mean. My team is a customer. We are mostly focusing on the three channels, you would have heard earlier. What the, what we do there is a fee, and that's what is based on variable cost. We only kind of pay when the money comes in. This entire addition is actually done on the three channels, which is variable, which is basically a variable channel, actually. We are not While the absolute collection costs may go up. There are obviously benefits coming in as well as better collections and better recoveries as well. We are mindful of that number. Got it. Okay, thanks. Thanks. Those are my questions. Thank you. All the best. Also better collection efforts are need to lower NPD as well, that helps with your trade cost. Sure, sure. Thanks for that. Thank you. We have our next question from the line of Bhaskar Basu from Jefferies. Please go ahead. Yeah, good evening, everyone. I just had a follow-up question on this 2019 cohort. I just wanted to understand, I mean, before these accounts left, and I assume that these are spends made by those customers now, they would have ideally slipped into a revolver book and then subsequently become an NPN. Why haven't really been seeing any impact on revolver because of this whole slippage? Why do they continue to be there in the system? I mean, they should ideally probably be decked out after they become an NPN. That's all from my side. I think, Bhaskar, I mean, the behavior what we have seen with regard to this cohort is, while they have been maintaining some record, payment record, the moment they become stressed, particularly with the moment they cross 30+, we have seen behavior very different trade flow, practically. That means our ability to normalize from the segment was limited. That is what we have noted. That means you will not see... It is not like a the regular revolver where they continue to pay maybe more than 5%, 10%, 20%, but it is just like a inability to pay, which will be more like a wash in the revolver. That's why you won't see a significant increase in the percentage of revolver, because asset is also growing on the other hand, the other side. You won't see a kind of very big impact on account of it. It is only the segmental behavior when you track only, then only you will come to know that actually there is some, it is not a revolver, it is more like a different revolver. The fact that we continue to see that stress, does it mean more and more borrowers from that pool continue to default? Is that how it works? Is it the same borrower making some payments, continue to make higher spends? Is that the reason why this number continues to be elevated? For, for the last 2 quarters, as we identified these accounts, we did see some increase. We, you know, if you look at the slide, which talks about the actions that we've taken, obviously, we've taken the steps to now make sure that the utilization of the credit card limit, and therefore the addition to the stress reduces. That's where we are hoping that as that stress reduces, and the collection efforts help us in recovering the already lent out money, is where it will help us reduce the credit card. We are very careful about 2019 segment. There is a, a deeper consciousness as if the customers have to revolve, we go after that customer at the initial stages itself. As said, if they are going through collection efforts are more, are higher, trying to identify, digitalize, do credit declines, credit limit declines in some of those segments. There are multiple actioning which is happening. We are restricting ourselves from cross-selling products to these, these customers at this stage. That, and that's how the whole asset percentages has come down to mid-teens for this segment. It will continue to go down in vintage as we grow the good asset, which is coming, as you can already see from that slide 15, which is coming from 2020 onward vintages. Okay? That is the way that we are looking at it. Those new vintages, as you see, they are peaking at a lesser rate, but, and also along with it goes is that their revolve rates are also lower, which we are fine with, because the idea is to keep the revolve rate, if we have the revolve rate at 24% and get the credit cost within control, we can continue to grow from that while working on the term lending portfolio. Okay. Okay. Got it. Thanks. That's all from my side. Thank you. We have our next question from the line of Shweta from Elara. Please go ahead. Thank you, sir, for the opportunity. Any sale to ARC this quarter or anything anticipated in near future? We keep looking at these opportunities. As and when we think it makes more sense to sell our portfolio to the ARC, we will do that. Nothing as on today? If your question is, did we do anything this quarter? The answer is no. Okay, okay. My second question is somewhat pertaining to the previous question. look, if I, if I look at systemic delinquencies on the credit card portfolio, and they have been clearly rising, at least for the banks. In such a scenario, I mean, we did highlight the fact that incrementally the new portfolio has been showing a decrease in delinquencies. Then in such a scenario, generally, it tends to be like that, that in, in a scenario where delinquencies tend to rise, your revolver book tends to pick up. Can you just give a color on how the revolvers look like from here on? Your question is that the delinquencies are increasing, and therefore the revolvers should go up? Yeah. No, that, no. The way that you look at it is, if it is, we only look at... What is a revolver? Revolver is a customer who pays up to 5% or more on the outstanding balances. Okay? These are the people who are current also, and they pay interest. They are the people who are good revolvers, and that is what we have been stating in earlier calls also, that these days, even that revolve behavior has changed. Earlier, people used to be, they would be revolving six, eight, nine times in a year. Now, people revolve maybe two or three times as and when the short-term fund requirement is there. Okay? People keep moving from transactor to revolver, revolver to transactor, so that happens. If the customer becomes delinquent, misses a payment, in any case, after a point of time, whether it is a 45th day or 60th day, the card gets blocked. We will not allow the customer to spend further onto the card if the earlier payments have not come. In any case, after 90 days, it becomes stage 2, stage 3. That is a very different value compared to the overall amount that you look on revolver. Revolver is a very different ballgame altogether. How is the color on the revolver book going forward? We are currently at 24%. We have been around that percentage for a while now. How do you see this going forward? Good point. On the revolver book, what we have seen is that even when we look on a month-on-month basis, it is stable at around. There's not much variation. It is hovering at around 24% or so, plus minus 20, 30 basis points in that value. Actually, we have seen as the new portfolio also maturing, because as you've seen those 2020, 2021 book customers maturing. This is a trend which was shown in five fifteen or ninety plus. We are seeing revolving behavior in those segments also. This time, the revolving behavior is that the customer would revolve for 1 or 2 months, and then again become a transactor. Which is a very good sign. It is stable at 24%, at this point, at 24%. We don't foresee any change, at least going further to the, in next 3-6 months. Then we will, we will keep you people posted as if we see any changes in that behavior on the positive or other side. Sure, that helps. Thank you. Thank you. We have our next question from the line of Prashant Kothari from Pictet. Please go ahead. Yeah, thank, thanks for your question. I just wanted to understand the life cycle of the customer. I mean, why does it take so long time to even kind of understand that this was the, kind of the, bucket of customers, which is doing bad, like, the portfolio, which kind of started in 2019. It's 4 years old, and now we are, understanding, recognizing, realizing that, this was a bit of a weak bucket. Why, why is the feedback mechanism so, kind of, slow? Secondly, if, if, if this is the case, that will take about 2, 3 years- Sorry. Hello, sorry. Can we couldn't get the last part of your first question? Yes, the question is, why is the feedback mechanism so slow? Because, what I assumed was that the feedback would be very fast in the credit card business, that you will know which customers are bad or, are good, and therefore you can take corrective actions much sooner. Why is it so slow? That was the first part of the question. Second, related to that, is, if the feedback mechanism is this slow, really, then how do we kind of keep the incentives aligned in the business? Because people are getting rewarded maybe on, I don't know, maybe on monthly, quarterly, yearly performance. If the problem takes another three, four years to actually align properly, then how is the incentive system aligned instantly? I think the first part of the question, because this was correctly. The question was, why does it take so much time to identify the problem areas and for the actions to be taken and the results to be seen? If that's the question, then that's especially true for the 2019 vintage from the chart that we were just looking at. I explained some of that reason earlier, but I'll elaborate further. See, until that portfolio was peaking at 2019, between the 24 and 21, 38 month period, the aberration wasn't there. The aberration was the way that, that curve has then flattened out or come down. That, that was the aberration, and that we should have picked up sometime in 2022. Because we are coming out straight up after the pandemic, November 2021 was still a pandemic year. That is the year in which, technically it happened. The early part of 2022 is when we, we have potentially found the problem and then acted on it. Wasn't so apparent at that point of time because the entire portfolio was doing well straight at that point of time. This aberrant behavior, became more apparent later in the year, and that's when the action was taken.... That slight delay is on account of us coming from pandemic period to a non-pandemic or normal situation. I hope that answers some part of your question. Okay. Yes, thank you. How do you keep the incentives aligned? I mean, if it takes two, three years first to understand whether the underwriting is right or wrong, how do you keep it incentive aligned? Right. You are asking about the incentive for the sales people? Yeah, incentives for the sales people and incentives for the underwriting team, that they are taking the right decisions when they are getting the customers in. Okay. Underwriting teams are not on, variable incentives or anything. Not an individual decision. On the, on the incentive, the sales people are on, are on incentive, and there are strict metrics that we measure their performance on, and their payouts are made only after a three MOB, four MOB performance of the account that has been sourced by them. The underwriting team is not on incentive, but there is no, there is no individual decisioning that's happening in the underwriting team. There are scorecards and models that are being used for underwriting our customers. Mr. Kothari? Yes. I'm better. Thank you very much. Thank you. Ladies and gentlemen, we request you to restrict your question to one at a time. You may join back the queue for follow-up questions. We have our next question from the line of Carl Rizwan from Schroders. Please go ahead. Hey, sir. Thanks so much for the opportunity. We are unable to hear you clearly. Please use your handset. Am I audible now? Can you go ahead with your question? Yeah. Thanks so much. Just some data keeping questions on this 2019 cohort, just want to understand a little bit more. Can you provide us with, number one, what's the revolver rate of that cohort as of this quarter? And number two, what's the credit cost of that 16% book for this quarter, please? The second question is, we want to know what is the credit cost for the 16% 2019. Regarding the first question, you want to know as to what is the... What's the revolver rate? Book revolver rate? Revolving rate for the 2019 credit card. We do not- Yeah. We do not usually give out revolvers by vintage. I think that's something that, we won't be able to share with you. The second part of the question is, I think we answered earlier as well. The 2019 vintage contributes about 16% of our assets and over 20% of our NPA, and is adding about 14 basis points to our credit cost as we speak in the, in the current quarter. Okay. Sorry. Okay. Sorry. On the revolver rate for the cohort, I appreciate that you, you can't share the number, but, generally, is it higher or lower than the overall book level? Please give us time. We'll look at the data and tell you. Just give us time. Yeah, sure. Thank you. Somebody from the investor relations team will reach out and share the data information with you. Thank you. We have our next question from the line of Rahul Jha from Bay Capital. Please go ahead. Yeah. My question is the guidance that you have given on credit cost, is it on the gross basis or on net basis? Gross, gross basis. Okay, got you. Thank you. Thank you. We have our next question from the line of Saurabh from J.P. Morgan. Please go ahead. I just want to know, what is the approval rate right now for, you know, new credit card sanctions in the open market book? What was it, let's say, pre-COVID? That's my only question. Thank you. We usually don't give segment-wise or open market versus banker approval rate. Yes, we can tell you that the open market approval rates are higher. They run anywhere between, on an average, 55%-65%. They will continue to go in that range. They are broadly similar to what we had pre-COVID numbers. Okay? You have to also look at this in light of that the sourcing pattern and the way the customer acquisition has completely changed now. Okay? At the initial stage itself, after taking some four or five feeds from the customer, we are able to either give a soft approval, soft decline, or a referred status to the customer. After that, once the application is fully filled, then you look at what is the status of the customer. It is not about, it become a two-step thing to be able to start digitally to reduce the cost, so approval rates have to be looked in a very different light also. Okay. during 2020, 2021, fair to say that this would have been, maybe lower, 30%-40%? No, no, nothing of that sort. It is actually, these days, the... Filtration, we try to do upfront itself, the modeling status, and then we try to do after four or five fees. If the customer is credit tested or he has a, he has, let's say, a seven score already, whole lot of models go upfront itself to be able to see whether we want to go ahead with that customer or not, rather than waste our time where we don't want to go through. Okay, your approval rates haven't changed through 2020, 2021, even today? No, the point I'm trying to make here is that they have, they have changed, however, the context and the situation has completely changed. Today, for example, if you look at completely only online, the approval rate would be in the range of, let's say, 10%-15%. Okay. Okay? The other thing is, just to supplement, in addition to the bureau score, I think we also started looking at some alternate data as well. Wherever it is available, maybe through the partnership or otherwise. At least we've started looking at even account data. That way, I think the percentages will keep going back up, but, otherwise, it, it has changed over a period of time as compared to people, the kind of extra due diligence, which we do for some, maybe, segments having low scores, et cetera. We do that extra due diligence in terms of validating the information or being sure about the product. Okay. Thank you, sir. Thank you. We have our next question from the line of Dhawal from ASP. Please go ahead. Thanks for the opportunity. Just one clarification. You said about 14 basis points is due to the 2019 cohort. Is that correct? About INR 60 crores. That's right. Okay. Okay, and, and the subsequent... Hello? Sorry. Yeah, go ahead. Go ahead. Yeah, and, and the other point was just, so, the next quarter, you expect, somewhere between, 0-14 basis points, as the impact, and, and the following quarter, it should be back to BAU. About 6.2%-6.3% kind of Gross Credit Cost. Yeah. This quarter, after this quarter, we expect to come back to our target range, the current quarter. Okay. September quarter. Right. My point is that it won't, so 14 basis points is the maximum impact that we can see in the September quarter. If that's the point I'm trying to make. I think the trajectory will be very fast, it's going to be coming down. In order to reach even the target range, it has to come down in this quarter itself, which we have already shared, like, month of June, we have seen good rates, and again, July also is holding good. Because the confidence will say like September quarter, overall growth rate was lower than June quarter. Reaching the target range will happen only by OAD. We believe it has reached in the month of May, and it has started to come down. Got it. Got it. Thank you, and all the best. Thank you. We have our next question from the line of Krishnan ASV from HDFC Securities. Please go ahead. Yeah, hi. Very good evening. My question is partly related to what Prashant asked earlier, which was about the feedback mechanism being too long compared to what conventionally we would think, given the kind of science and the, and the kind of analytics that's now available on credit cards. I thought this feedback loop would be shorter. Having said that, if you say that this was indeed not something that you were see-- I mean, to one of the earlier questions by Anuj, you said there wasn't too much different about the 2019 cohort in terms of origination. It was a mixed bag, both open market and bank card. The cohorts that we originated thereafter, did we get them right just by pure accident? You know, I mean, it seems, it seems like if there was nothing different about the 2019 cohort compared to the others, then what is it that we got right and how accidental was that? 2020, if you recall, was the COVID year. Therefore, like every other organization, we also had tightened our credit norms. Therefore, you will see that 2018 and 2019 behaved almost similarly. 2018 peaked a little higher than 2019 and has now obviously came off earlier, and the% contribution was lower as well. The benefit that we got was that the COVID made us all tighten our credit norms, and as a result, you see 2020 perform better. Learning from 2020 helped us fine-tune, and we also fine-tuned our models post the COVID once the market opened up, and we also started sourcing from the market. We fine-tune our models, taking in the inputs from the COVID period and prior to that as well, and that helped us in the quality of the portfolio post that being better. Sorry, Krish, I think my, my, my limited point was, I mean, given that, given that much of the market has matured towards early warning signals, right? 4 years apart is kind of far too long for a portfolio to be, to be, I mean, bleeding and us not knowing about it in terms of why, why is 2019 cohort behaving very differently? What is it that we did, and where is it that you tweaked it tighter? That, that, that was the limited point I was trying to get to, given, you know, I mean, all those. It's not that Sorry. It's not that we did not see the EWS. Obviously, we have a strong EWS, mechanism, and, we do work on that. As Shantanu pointed out, that the early years on this particular portfolio, you know, it was also colored by the COVID behavior. Remember that we were required to give a restructuring to our, to our customers, et cetera. As a result of that, that behavior, in a way, because of the restructuring and the, and the COVID, it camouflaged the, the, the real behavior of this portfolio. Last year is when, and we called that out in the early, in the previous earning call as well, at end of last year, calendar last year, is when we realized that, the signal of the EWS for this particular portfolio is giving us, is telling us that the behavior is not as per where it should be, 36 MOB, and that's where we started taking, actions on it. Thank you. Through the cycle of the customer, we do keep monitoring the EWS, but as we said, it got camouflaged under the RBI RE and the COVID period. Thank you. We'll move on to the next question from the line of Subhranshu Mishra from Phillip Capital. Please go ahead. Hi, good evening. When we speak of the tier three and other cities, how many total cities are here? Do we plan to change these Visa, Mastercard cards with RuPay credit cards, which are acceptable on UPI, given the lack of peers in infrastructure in these cities? That's question one. Second is, in the open source customers, how many customers already have a credit card? If we have a similar number for, SBI source customers. Thanks. On the second- Third, third. On the second one, on the... The sourcing strategy of open market is to leverage the existing carded customers. Today, now, primarily, we target customers who have been carded by the industry. We do not really disclose, or we do not really publish the data around the percentage of carded customers in either of the segments. Primarily, the strategy is, to, A, use the digital channels, use the co-brand sourcing channel, to, to provide these customers with an alternate value proposition, which is compelling enough for them to have an alternate card in their wallets. Similarly, for the banca channel, the strategy is to also reach out to some of the non-carded segments because of the relationship with the bank, you know, which makes it compelling for the bank to have another relationship, apart from Karta or any other relationship that they have. On the tier three, tier four, we are already giving cards there, which are RuPay cards. Customers that now with the new draft guidelines of RBI, the customer preference will also get taken into consideration. As Nandita mentioned in the opening remarks, that we are, we are already going live with UPI on RuPay cards, and we are testing it. We have not opened it for the last tier three, on RuPay portfolio, the testing is taking place. Once that happens, we believe that we will get more transactions in tier three, tier four towns from these customers. How many tier three and other cities are we catering to? That question is still unanswered. How many cities are there? We, we go close to around 200, 250 cities in overall scenario. Okay. These days, the definition of tier one, tier two, is that tier one is the top 10, and tier two is what we look at the state capital. Beyond that, we say tier three and below. That's also a graded approach, so it's not that, you know, you're fully operational in every city. We keep revisiting that strategy, you know, every now and then, depending on the penetration and the portfolio quality. Sure. Best of luck. Thank you. We have our next question from the line of Abhishek M from HSBC. Please go ahead. Yeah, hi. Thanks for taking the follow-up. Just on this business development incentive income, like, last quarter also, a lot of conversation happened. What I want to understand is, when does the measurement start? Does it start at the beginning of the year, and then, you know, your partners see how much volume you are generating for them, and then they pay you an incentive? From when does this measurement start? On the business development incentives with these partners, some of these deals are long-term deals, which are four, five years in period. There are certain set of milestones. On achievement on those milestones, there is a set of income streams which follow. Those, that, that is how it typically works. We have usually constructed those deals so that we are able to achieve at least one milestone in a year or so. That's how it gets constructed. There are some deals which, where we are able to get business development incentives for some specific activity to be done, let's say, in three months or six months or nine months. Okay. The reason for this kind of fluctuation would be that you got a big milestone payment, maybe in the Q4, and then you're now getting the usual regular payment. Is that correct? Then as you progress through the year, it should take a higher trajectory or it could go lower as well? I can't give you an estimate around that. Usually, what starts to happen is that there is some amount of evening up which happens, because as for Indians, you look at a whole period and look at income streams in, in that way. There are some opportunistic arrangements for business development that you can get for a period of time, that we also, we keep on lookout for. Thank you. We'll move to the next question from the line of Pankaj Agarwal, from Ambit Capital. Please go ahead. Hi, good evening. These cohorts originated post CY 20, are they behaving differently in terms of spends and revolve rate, et cetera? You are right. The spends that we are getting from these cohorts is higher, that is how you are able to see our average spend per customer continuing to go up. The revolve rates are lower, they are still happening, so we are now stabilized at 24% on the weighted average portion. This is how the behavior is: higher spend, slightly lower revolve, but we are getting good EMI transaction structure in these cohorts. Thank you. Second, this competition in the sector, is it leading to-? Mr. Agarwal, I request you to strictly ask one question. Thank you. Participants are requested to stick to one question, please. We have our next question from the line of M. B. Mahesh, from Kotak Securities. Please go ahead. Hey, hi. Just 1 question. This chart on exhibit 15, you do it by number of customers, or is it by outstanding loans or by spends? How do you do this? Which chart? I didn't get the question. Which chart have you referred to? This ever 90 plus data that we always have been asking. How do you make this chart? I think this is the value-based chart. How do you do it as in value? Because the customer has been could be a revolver, he could be EMI customer, he could have he could have been generally been a normal customer who is paying on time. How exactly do you have you created this chart? Mahesh, the way to look at this chart is, this is ever 90 plus. Okay. This is... a customer, when he goes into 90 initially, when the customer comes on board, the way to read it, in the first six months, very few customers will go into 90 plus. Okay? For that cohort. You will have the people will come, they spend on the card, they will pay, very few will go 90 plus. Broadly, people who are will be wrong selection might go into that, that area. As the portfolio builds up, people start spending on the card, some people will become transactors, some people will become, as you are saying, revolvers. People who are revolvers, they are typically paying more than 5% of the outstanding balance. Some people, when they don't pay anything or below balance, below of the outstanding balance, you get called as revolvers because they are paying interest, but they go into 30 plus, 60 plus, 90 plus. When they go into 90 plus, this is where they stop, sir. Okay. Sir, just one question. Is there any possibility that, you know, we could have also, what is the kind of customer base that was acquired during this period? In a sense that, during that period, was the activity levels of origination more towards the below prime segment, which has caused this problem, or you think that they transferred into below prime eventually after COVID hit them? Mahesh, I think as Shantanu has been saying earlier also in the call, these customers were behaving as per. If you look at the chart, 2018, 2019 broadly looks similar. Okay? It looks similar till the time for till 30th month. That time, COVID was also happening, so even now, so there were some, there were very similar, but whether it was because of RBI or because of the customer behavior, it, where it, I think that was tweeted out. It is 6 months back, we were very clear that this is the segment which is causing us issues. Last call, we declared that, and the actioning has already been on, on these customers. As Shantanu was saying, I think it is, we believe that it has peaked out in May, and it is now on a downward trend. We should see that in the next quarter, automatically, the overall thing should start coming down. Thank you. We have our next question from the line of Ajit Kumar, from Nomura. Please go ahead. Thanks for taking my question. If you can quantify, what percentage of your card base are having limits, let's say, less than INR 30,000, and whether that proportion has increased or decreased in last few quarters? That's it. Can you repeat the question? What percentage of your card base are having limit, let's say, less than INR 30,000, and whether that proportion has increased or decreased in last few quarters? We have not declared the credit limit breakup of our portfolio. I can only tell you that the average credit limit of the customer is more than INR 90,000 for the full portfolio. That's where the average is. Medians are slightly lower, but that's the average. Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Rao for closing comments. Over to you, sir. Thank you. Let me thank all the shareholders, investors, and business partners for their continued trust and support. I would also like to thank my colleagues at SBI Card for their unwavering commitment to ensure the company's success. SBI Card has and will continue to steadily move ahead on the path of sustainable and profitable growth. While we cannot control the external factors, but we do believe that our strong business model, our agility as a business, and adaptive approach, equips us well to keep fueling our growth in the future. Thank you all. Thank you. On behalf of SBI Cards and Payment Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.