Encouraged by strong show in 2021-22, SBI Cards and Payment Services Limited (SBI Card), the country’s largest pure play credit card issuer, wants to accelerate its pace of business growth in 2022-23 even while being prudent, its Managing & Director & CEO Rama Mohan Rao Amara has said.

This credit card issuer expects to ride on the increased consumer confidence post the economic recovery seen since June last year. Banca channel, which was subdued in April-May 2021, started contributing in a big way and helped source 1 million new accounts in each of the quarters of December 2021 and March 2022. Overall, SBI Card added 3.5 million accounts in 2021-22 and in aggregate has about 13.8 million accounts, up 17 per cent over the previous fiscal.

Aided by write back in provisions to tune of ₹76 crore and lower credit cost, SBI Card reported a 231 per cent increase in net profit for the fourth quarter ended March 31, 2022 at ₹581 crore (from ₹ 175 crore). For the entire fiscal 2021-22, net profit came in at ₹1,616 crore, up 64 per cent over net profit of ₹985 crore in the previous fiscal.

“Our fourth quarter strong performance is the result of continued activities through the year. The elevated spend of Q3 rubbed off positively on Q4. Q3 spends are usually higher because of the many festivals. Surprisingly Q4 is not much lower. It is sequentially lower by 2 per cent. In a way, Q4 spends has defied seasonality factor and is almost in range of Q3,” Amara told BusinessLine here post the Q4 result announcement.

High corporate spend

He said that SBI Card in 2021-22 benefitted from the strong surge in both corporate and retail spends, which together grew over 50 per cent. Corporate card spends saw over 100 per cent increase in 2021-22 to about ₹39,000 crore, he noted.

Asked if SBI Card can sustain the Q4 financial performance, he said that if one were to take out the write back amount of provisions of ₹76 crore and look at “core profitability”— it can be sustained so long as there are no external headwinds or disturbances (like the pandemic induced lockdowns).

“We want to press the accelerator for growth while being prudent — not one at the cost of other. The containment of credit costs and stable external environment gives us confidence that we can grow at an accelerated pace. We want to also be mindful of customers and ensure active portfolios,” Amara said.

SBI Card, which clocked a net customer addition of 2.4 lakh in March 2022, is now aiming at growing this monthly rate by 20 per cent to arrest the decline in its market share.

“We want net growth to increase. We want to stabilise and take it up by 20 per cent to address market share decline and eventually claw back the market share”, he said. Amara said SBI Card was confident of sustaining return on average assets of 5.2 per cent and return on average equity of 22 per cent (achieved in 2021-22) in the current fiscal as well. 

He also said SBI Card’s RBI restructured portfolio, which used to be 9 per cent of overall portfolio, has now come down to just 1 per cent and could even get extinguished in a month or two. 

UPI competition

Asked if strong growth in UPI and growing new age solutions like Buy Now Pay Later (BNPL) were posing an existential threat to the credit card industry, Amara replied in the negative. Just as UPI spends are growing, sredit card spends are also growing. “Average transaction size in credit card industry is also growing. But credit card penetration is still low in India at about 4-4.5 per cent,” he said

For small value spends, UPI is popular, but for consumer durables and big ticket items, mind recall of credit card is always there for the customer. I think UPI and credit card industry can co exist,” he added.

On BNPL, Amara noted that once such a customer exhibits good behaviour, he can potentially move to a full service credit card which has an aspiration element and value proposition. 

“We don’t see BNPL as a threat or expect it to eat into our business. BNPL transaction size is small at ₹3,000– ₹4,000 and it essentially caters to underserved segments like students, housewives and millennials who don’t have credit history opt for BNPL for convenience. As a product, the credit card value proposition is strong. I do see BNPL turning into a feeder channel for credit card over a period of time,” he added. 

He also said that EMI loan products are emerging as a big growth driver for SBI Card and its share in overall portfolio has moved up from 29 per cent to 33 per cent. “We are benefitting and seeing a positive ruboff from changing customer behaviour to EMI loans. We don’t want to miss that opportunity in EMI loans,” Amara added.

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