Customers who took debt recast reluctant to use credit cards, says SBI Card CEO
A lot of these retail customers were revolvers and their reluctance to spend has impacted the industry.
The credit card industry is faced with the challenge of getting customers whose dues were restructured under a central bank regulation to start using their cards.
A lot of these retail customers were revolvers, and their reluctance to spend has impacted the industry. Credit card customers can be classified into two groups based on repayment schedules. One group is that of transactors, or those who pay the outstanding amount by the due date. The other is that of revolvers, or customers who pay a part of the dues to avoid default. Credit card companies earn more interest from the second category of customers.
“Only a few of them have evinced interest to take the card and start using it," Rama Mohan Rao Amara, managing director and chief executive, SBI Cards and Payment Services Ltd, told analysts on Friday.
India’s second largest credit card company on Friday reported that the percentage of revolvers has declined to 25% of its receivables in the March quarter, from 28% in the year-ago period. Transactors have increased to 40% in Q4FY22, from 35% a year earlier.
The revolve rate, or the amount of spends that is converted into revolvers, was marginally increasing from October 2021 to February 2022, according to an internal analysis by SBI Card. The credit card company ran some special campaigns that resulted in ₹3,523 crore of incremental retail spends compared with February and expects some to flow into revolving credit.
“Some part of it may get converted into revolver," Amara said.
The company has recalibrated the credit filters in FY22 and is gradually allowing entry of segments such as self-employed, Amara said.
“In terms of sourcing customers, self-employed sourcing has increased at least by 2 percentage points sequentially, which shows our increased appetite for this segment but it will take some time," Amara said.
The management said it will work with the regulator to understand the definition of activation in the context of RBI’s new credit card rules about activating a credit card within a stipulated time.
On 21 April, RBI said card issuers will have to seek a one-time password (OTP)-based consent from the cardholder to activate a credit card, if it has not been activated for more than 30 days from the date of issue. Under the new rules, coming into force from July, if the credit card issuer does not receive a consent, it will have to close the credit card account without any cost to the customer within seven working days from date of seeking confirmation from the customer.
SBI Card on Friday reported trebling of its net profit to ₹581 crore in the three months through March, on a year-on-year basis. Its receivables grew by 25% to ₹31,281 crore in Q4FY22 as against ₹25,114 crore in Q4FY21. Its gross non-performing asset ratio stood at 2.22% in the March quarter, down 278 basis points from the same quarter in FY21.
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