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Earnings Call Analysis
Q2-2024 Analysis
SBI Cards and Payment Services Ltd
Amidst a challenging economic environment, the company has strategically navigated to ensure asset quality with a Gross Non-Performing Assets (GNPA) standing at 2.43%. The gross credit cost is reported at 6.7% for Q2 FY '24, which reflects a descending tendency due to proactive portfolio management and robust collection strategies. More specifically, newer sourcing vintages are outperforming and contribute positively to the portfolio's health, which bodes well for future performance. Despite industry data indicating increasing stress, the company's credit cost has reduced quarter-over-quarter, showcasing effective mitigation efforts.
The organization maintains a careful balance between growth and cost efficiency. The cost-to-income ratio for Q2 FY'24 is at 57.1%, with a marginal increase attributed to higher corporate expenses. Nonetheless, Return on Assets (ROA) has achieved a healthy 4.9%. With a robust domestic market and heightened activity during the festive season, the company is optimistic about maintaining its strong performance and is committed to creating value for all stakeholders.
The company's portfolio now comprises close to 10% RuPay cards and demonstrates rapid growth with each passing month. As a significant issuer of RuPay cards, the company is making a strong start in capturing this market and looks forward to increasing this number and the related spend across the portfolio.
Actions taken to stabilize the 2019 cohort, which previously showed stress, are now yielding results. While anticipating further reductions in stress, the company acknowledges a broader economic influence on asset quality, not isolated to specific cohorts. This wider market sentiment has been a factor affecting the current credit scenario, yet the company sees no major forthcoming escalation in credit costs.
While margins have seen a slight shift of around 14 basis points, the company attributes this to changes in product mix rather than changes in interest rates or cost of funds, both of which have remained stable. This exemplifies the adaptability of the business model to fluctuating market conditions.
Recognizing the variability in market trends, the company has not provided specific guidance on margins for the coming quarter. Nevertheless, they continue to monitor the performance of installment lending products, which have seen strong uptake at points of sale, especially for consumer durables purchased through e-commerce channels. Interest rates for products have been held steady, reflecting confidence in the company's pricing strategy in the face of evolving market forces.
The company remains vigilant with a credit cost of 6.7%. This is viewed as not overly concerning when considering the possibilities and actions taken. The executives reiterate that while the trend has not met their aspirational trajectory, they don't foresee a large-scale increase in credit costs. The business adapts to reflect the changing economic atmospheres and echoes broader concerns seen in consumer loan portfolios across the industry.
Delinquency rates for FY '21, '22, and '23 sourcing vintages remain lower than average, indicating satisfactory progress and reinforcing confidence in the company's sourcing approach. The 2019 cohort, which had higher delinquency, has improved and is trending downwards, aligning with expectations. This is a positive sign, as it reflects the efficacy of the company's risk management strategies and the inherent quality of its recent client acquisition efforts.
The company employs a strategic approach to portfolio management by reviewing bureau data and monitoring customer credit behavior across various lenders. This includes keeping track of incrementally added trade lines and repayment behaviors. The insights derived from this data inform differentiated actions, including adjustments to collection strategies, to preemptively address potential credit risks.
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Ladies and gentlemen good day, and welcome to SBI Cards and Payments Services Limited Q2 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Abhijit Chakravorty, MD and CEO, SBI Cards. Thank you, and over to you, sir.
Thank you, Good evening, everyone. I'm pleased to welcome you to the quarter 2 of financial year 2024 earnings call, along with my senior management team at SBI Card. While the world's economic recovery remains uneven and uncertain, Indian economy broadly continues to stay resilient. India's GDP growth year-on-year in Q1 FY '24 was [7.8%] RBI estimates India's GDP growth in FY '24 to be [6.5%]. As per later RBI survey, consumer confidence is also at a 4-year high. India's digital economy is playing a critical role in enabling this growth. Digital payments have grown at the rate of 58% year-on-year in FY '23.
With Indian -- estimating the share of digital economy to be over 20% of country's GDP by 2026, the quantum of digital payments is expected to increase significantly.
Amidst this growth, credit card continues to be one of the popular digital payments instrument, having grown at 30% year-on-year in last fiscal year. September 2023 has seen a number of credit cards in circulation increasing to around 93 million. Card spend reached a new high of INR 1.48 trillion in August 2023. While the growth has been strong, the industry also needs to sustain this with care.
Credit card uses have gone up by 30% year-on-year to INR [2.18] crores as of August 2023. Amidst a strong growth, the regulator has been highlighting the need for prudent risk management. The industry data from credit bureau to suggest some deterioration and delinquency in credit cards and personal loans.
The regulator continues to focus on customer-centric approach and the recent circular arrangements with card networks for issue of debit, credit and prepaid cards is another secular direction. We have built an intensive and extensive reach when it comes to card and merchant network and continue to enhance this, offering our customers easy access and opportunity to use their SBI credit cards for varied transaction. In line, we already have partnership with all major card network platforms, Visa, Mastercard, RuPay and American Express.
Let us now look at SBI Cards business overview in Q2 FY 2024. In Q2 FY '24, SBI Card registered a strong business -- growth in business performance while underlining the strength of its business model. The business continues to exhibit resilience even amidst a dynamic environment. During the quarter, we added net 5,03,000 cards.
[Technical Difficulty]
Sir, sorry to interrupt you, there is a slight distortion coming from the line.
Is it okay now?
[Technical Difficulty] Ladies and gentlemen, thank you for your patience. We have the line for the management connected. Sir, you may go ahead.
Sorry for a bit of glitch here. So we were stating that during the quarter, we added net 5.3 lakhs cards. On a gross basis, we added 11.42 lakh new accounts. Our total attrition for Q2 FY '24 has come down on a year-on basis, but slightly increased on quarter-on-quarter basis due to -- owing to KYC-related attrition. Our cards in force reached 1.79 crores in September '23, showcasing a 21% year-on-year growth. SBI Cards market share in cards in force stands at 19.2%.
Q2 FY '24 has seen very strong growth in card spend with SBI Card achieving the highest ever quarterly spends, which stands at over INR 79,000 crores. Card spends have seen a growth of 27% year-on-year. Notably, our overall average spend per card has also grown year-on-year from INR 171,000 in Q2 FY '23 to INR 180,000 in Q2 FY '24. With around 18% market share in Q2 FY '24, SBI Card continues to be the second largest credit card issuer in terms of card spends for the quarter.
During the quarter, our retail spends have seen a strong growth reaching INR 61,446 crores while witnessing a 21% year-on-year growth. Corporate spend too witnessed healthy growth, registering 55% year-on-year increase to reach INR 17,718 crores. During the first half year, first half of FY '24, we have seen good growth in both costs and online spends across various spend categories that include departmental stores, health, utilities, education, travel, entertainment and restaurants among others. In fact, cost spends across all key categories, including consumer durables, furnishings and hardware, apparel and jewelry, et cetera, have increased significantly, indicating consumer strong preference for offline shopping experiences as well.
Online spends continue to be strong and contributed 57% of total retail spend in Q2 FY '24. I'm happy to share with you that during Q2 FY '24, we introduced the functionality of UPI on SBI Card issue to RuPay credit cards, which enables SBI Card users with RuPay cards to make transactions using UPI-enabled apps. It has been one of the key initiatives for SBI Card and is aimed at enhancing our customers' convenience to ease of payments, seamless transactions and increased accessibility.
We have received an excellent response within a few weeks of its introduction. Already 9% of our RuPay cardholders base have enrolled for the UPI usage. As expected, department stores and grocery, utilities and [sales] have been among the top categories for UPI expense. Interestingly, restaurants and consumer durables also feature among top spend categories.
Our monthly average UPI spend per account has already reached INR 11,000. With 19% year-on-year growth, our receivables have grown to INR 45,078 crores as of September 2023. I would like to highlight that our share of interest earning receivables has been stable at 62% quarter-on-quarter in Q2 FY '24, while increasing from 59% in Q2 FY '23. Our receivables per card are stable at INR 25,220 in Q2 FY '24 versus INR 25,445 in Q2 FY '23.
Besides UPI functionality, we rolled out various new initiatives during the quarter too. We introduced new features on our super premium card AURUM. The card now extends enhanced benefits to card users and offers more rewarding and richer experience.
Another key initiative has been the launch of SimplySAVE merchant SBI Card on RuPay platform that is curated for MSMEs. The card has been designed to cater to short-term credit requirements of MSME merchants while also offering them various benefits.
We continue to bolster our digital customer acquisition capability. We have extended the SBI Card end-to-end digital acquisition platform SPRINT on YONO platform of SBI. The access is currently in COG for testing, and we expect it to be rolled out during this quarter. This will enable the SBI Bank customers to digitally apply and get a new SBI Card on successful approvals and KYC verification digitally. As you are aware, in July '23, SBI Card ESOP Scheme 2023 was approved by shareholders. The core objective of the scheme is to enhance the culture of ownership and performance in the organization along with retention of key talent. We plan to make grants to identified employees during this quarter.
Coming to financial performance in Q2 FY 2024. We continue to see healthy revenue and profit growth. Our total revenue in Q2 FY '24 has been at INR 4,221 crores, registering a 22% year-on-year growth. In first half year -- first half of financial year '24, our total revenue stood at INR 8,267 crores with 23% year-on-year increase. In Q2 FY '24, our revenue from operations was INR 4,087 crores with 24% year-on-year growth. While in H1 FY '24, revenue from operations has been at INR 7,999 crore with 25% year-on-year growth.
Interest income has also grown to [47%] of overall revenue from operations. Our PAT for Q2 FY '24 is INR [603] crores with 15% year-on-year growth. Our cost of funds have been stable at 7.1% versus previous quarter. We benefited from the increased long-term borrowings taken in previous 2 quarters, limiting our repricing risk this quarter, hence had a stable cost of fund at 7.1%. However, with short-term rates again experiencing volatility, we expect cost of fund for new -- for next few quarters to be marginally higher.
The yield is lower marginally by 14 basis points in the quarter, owing to a large share of short-term interest-bearing term receivables in the overall [IBNA]. The quarter has seen NIM being slightly compressed by around 10 basis points. On asset quality, as of Q2 FY '24, GNPA is at 2.43%. Our gross credit cost is at 6.7% in Q2 FY '24, lower as a result of actions taken at portfolio level and collection strategy. While we will continue to grow, we will continue to take portfolio actions to mitigate them.
Collection intensity has also been restrategized with different swim lanes. Our newer sourcing vintages too continue to perform better. And going forward, we'll continue to be appropriate measures as well. Our credit cost has reduced quarter-over-quarter, although industry data is showing stress. Our cost to income for Q2 FY '24 stood at...
[Technical Difficulty]
Sir, sorry to interrupt you again, there is slight static from the line.
Can I continue? Can you try all the others to be on mute [indiscernible]. Okay. Can I continue?
Our cost to income for Q2 FY '24 stood at 57.1%. The marginal increase is owing to higher corporate spends, pass back and cashback costs. In Q2 FY '24, our ROA has been 4.9%.
In conclusion, India's economy continues to be resilient and has been at a sturdy growth path while domestic consumption remains robust. And with the current festive season period, we are confident of witnessing a healthy volume of spend across categories, including discretionary. It is encouraging to see that we have been able to maintain the momentum of strong performance across most key business parameters since the start of this fiscal year. Keeping all current and foreseeable macroeconomic dynamics in mind, we continue to take a balanced approach with a focus on sustainable and profitable growth. And while doing so, we are committed to create value for all our stakeholders.
So now we are open for questions.
[Operator Instructions] The first question is from the line of Gaurav Kochar from Mirae Asset.
Three questions from my side. Firstly, you mentioned about RuPay cards. You said about 9% of your card base -- RuPay card base has enrolled for credit on UPI. So I just wanted to understand what would be the proportion of RuPay cards in your total cards? And if you can give, what would be your market share in RuPay cards?
So the proportion of RuPay cards in our portfolio is close to 10% as of now. It is increasing with every new month acquisition that we do. We wouldn't be aware of the market share because the data is not available or is there in the public domain. But we are -- we know for sure that we are one of the larger players of RuPay issuance.
Sure, sure. And in terms of, let's say, right now, the enrollment is 9%, but have you identified set of customers who would be enrolling and by, let's say, year-end, can this number be 30%, 40% of the total card base? Do you see that as possible?
So this number is as of September end because that is what we have declared. Every passing day, we see more number of people getting their RuPay cards attached or as a source of fund for doing UPI payments. This number is growing rapidly. Where it finally lands up at the end of Q3, we will declare in the next call, but we see that rapidly increasing.
Okay. And in terms of spend as a percentage of total spend, is this meaningful? Not maybe as of now, but going forward, do you believe this could be meaningful?
Well, that is the intent. Because as of now, it is just a start, but it is a good start.
It's a good start. Okay. Okay. Sure. And my second question is with respect to the credit cost, gross credit cost, you mentioned around 6.7% in this quarter. Write-offs were elevated even sequentially. And despite all this, the Stage 3 still remains at 2.4. So just wanted to get some sense on where are these slippages coming from? Is it essentially the 2019 cohort which is causing the pain? Or is it beyond that? And secondly, if that pain is largely behind and incrementally, one could see probably lower slippages? And in that context, I mean, your credit cost guidance for the remaining half?
So 2019 cohort, I think, we have sort of controlled. And we had -- in our earlier calls, we have stated that what kind of steps we have taken over there. And those portfolio level actions have done us good. And we were expecting good results out of that during the quarter. Trajectory should have been lower. But where we find ourselves in the present credit card scenario is somewhere the unsecured loan environment prevailing in the ecosystem. Somewhere we are finding that we are not untouched from the sentiments on unsecured loan scenario. So while we were expecting better trajectory -- downward trajectory from where we were in Q1, we are finding slight stress in the -- not any particular cohort. But generally, there are customers who are under stress are not able to pay in the -- during the period.
This somehow has offset whatever gains we would have got, not only on the 2019 cohort because somewhere we found that those type of cohorts would have prevailed during the subsequent years also. But then the portfolio actions was uniform, and we were expecting better results out of those portfolio. But then somewhere we are not untouched out of the overall unsecured scenario prevailing, which is quite prevalent and well known.
Sorry, just to add to -- more color to what MD sir mentioned. In terms of the composition of the NEA, the '19 cohort has actually come down in weightage in terms of our NEA. It used to be 16% last quarter. It's 14-odd percent right now. And the newer vintages, that is ['21, '22, '23], they now together account for more than 50% of our NEA. That's also moving up in the right direction. And the early delinquency numbers for these new vintages are more benign. And we -- on the back of that, we are quite hopeful that, that will improve the quality of the asset mix.
Okay. So in the second half, can we expect moderation in credit costs and overall stress loans?
Difficult to say entirely for the second half, but Q3, we expect the levels to remain elevated.
Okay. Okay. If I were to just ask a little more on this. I mean, what has led to this? Is it the open source underwriting, the open source -- open market sourcing that we did or the share of self-employed that were increased post COVID. Is it -- I mean, can you give some color as to any particular pockets where the stress is coming from?
As I said, we are not attributing this to any particular cohort or any particular segment. We are seeing individuals -- certain individuals are under stress. And we believe it is part of the overall ecosystem. It's not particular to any specific sourcing or any specific cohort or any specific vintage. We are not really seeing that. But as we stated in our earlier -- during our speech that the new onboarding has been good. We see better quality over that. But then there is no specific indication of any vintage or cohort. It's somewhere, we are finding that certain individuals, certain customers may be under stress. And we believe it is due to overall ecosystem prevailing.
[Operator Instructions] Next question is from the line of Nitin Aggarwal from Motilal Oswal.
Sir, 2 questions, sir. One is like what you think the stress is in the certain segments with certain customers...
[Technical Difficulty]
Sorry, but we are losing your audio. Your voice is breaking. Can you please come in a better reception area?
Is it any better now?
Slightly.
Sir, the first question that I have is on like the stress, which you're indicating that is in certain segments and customers, you can see that. But then how are we to look at really the revolve rate and the mix of overall EMI customers? And should that not also move higher in line with the stress and the overall delinquency that you are witnessing?
Nitin, I'll first talk about the revolve rate. You have seen the revolve rates have been fortunately stable for the last 4, 5 quarters. So we are at -- around 24% or so. There has been -- we have worked towards getting the EMI balances up so that the overall interest-bearing asset is up to around 62% or so, okay? Now what is being mentioned is while there is -- in an overall sense, if you look at a long-term scenario, there will be people who will go into x 30 and further buckets will initially be looked at as a revolver. But after 90, it is -- they are not looked at as a revolver, okay?
So that is not a condition which is there. Second -- and that number has been fairly stable if we've been declaring that number, that number has been fairly stable at 24%, while your credit costs have been moving up and down. So you can't exactly say that if one goes up by 10 bps the other will also go up by 20 bps. That kind of thing does not exist in this scenario.
What MD sir has been reiterating is that the overall portfolio at this point of time, while we have done a lot of actions to get this whole thing credit cost to come down, there is -- what we see is that there is a generic sense in the environment also, which is working as a headwind also at this point of time, and not any specific cohort related. When it was a cohort related stuff that was also declared in the last quarter. And as Shantanu mentioned, the action and weightage -- because of the action, the weightage of those cohorts have already come down.
Right. And the second question that I have is on the margins. We are seeing a very calibrated fall this quarter, again, a [12-odd] basis point fall. How have you been looking this trend going on? Are we expecting more decline from here and has there been any change in the interest rate to our EMI customers to accommodate for higher risk that we are witnessing?
So on the margins, you have seen that the overall change in the margin is around 14 bps or so. While I think some amount has been contributed by cost of funds, but very -- cost of funds has been stable, okay? Whatever we have seen on the yield side of it is essentially the -- because interest-bearing asset was 62% last quarter also. It is 62% this quarter also. There is a marginal movement in -- because all the asset -- term assets books have different rates.
Our Flexipay has a different rate compared to what we get in the subvention versus what we get on the personal loan and cash kind of a portfolio, okay? The mix can change in a quarter on a certain way. Because in the -- for example, in the month of August, we did a lot of -- we did an Amazon sale. So you get a lot of subvention. It might show as a lesser amount in the yield because it is at a slightly lower rate, but you also get an interchange income because of the incremental sales volume, which is not showing here. So there is no change in the rate of interest that we have done with any products in the last quarter. It has [indiscernible], it's just about the mix, which has led to this.
The next question is from the line of Mahrukh Adajania from Nuvama Wealth.
Sir, my first question is on margins again, and then I have a follow-up question on credit costs. So we've seen the list of festive offers from SBI Card. It's well highlighted. And the scale this time in this festival looks much higher than in the previous years. So how would that impact, if at all, your margins or OpEx in the coming quarter?
The coming quarter.
So you're right. And this we have been stating earlier also because the cash back costs when it goes up, your OpEx to revenue or OpEx to CV, whatever you look at, will also go up, and that has been a trend in and seasonality, which is seen in every festival quarter. Last year, this was over 2 quarters because it started in the last week of September. This time, it will be only in the -- it will all be in the Q3, okay?
On the margin side, we won't be able to give you a guidance as of now because now we see a very strong pick up on the -- at the point of sale when people are purchasing consumer durables from the e-commerce website, we see a lot of tendency to convert them into installment lending products. But the overall mix as how it will land up, we will -- because -- there are other things in the play here also, we would be able to tell you only later. The only thing I can say is that we have not changed the interest rates for any product, not reduced it. They're all at the same rates as they were earlier.
Mahrukh, that we've already stated -- and MD sir stated in the speech as well, and we do expect the cost of funds to go up marginally over the next 1 or 2 quarters. And that could impact the NIM a little. But as Girish mentioned, that on the asset side, while we haven't changed the rates, the mix could impact the overall yield.
Got it. And you did mention about credit card delinquencies rising in addition to other unsecured loans. Sir, is that an industry-wide thing because we've heard only about unsecured loans BNPL.
No, I don't think we said anything about credit card delinquencies increasing. What we are saying is in specific query to our credit cost, we are saying that we -- all of us have read what is being stated in the domain, what is happening in unsecured loan scenario. So what we are saying, we are not untouched. We are not saying that industry-wide, there is -- we won't be able to comment on that.
Next question is from the land of Bhavik Dave from Nippon India Mutual Fund.
Two questions. One is on when you see the mix being quite stable, like you mentioned, the earnings [assets at 62%]. Just want to understand with the kind of delinquencies or the customer behavior that we are seeing, is it worthwhile to look on the pricing front, considering the [indiscernible] around. So are we pricing the product right in terms of the EMI as well considering the revolvers are not going up and they maintained that 24%. On the EMI side, is it worthwhile to maybe look at the pricing?
And second question is on the write-offs. The write-offs seem to be quite elevated at INR ¨ crores plus, like almost INR ˜ crores to INR [ 670 ] crores that we've clocked for a few quarters in a row are INR 1,000 crore kind of GNPA group. So I just want to understand the trajectory that we are -- in terms of writing off loans. I understand it has to be written off within 120 days to 180 days. But just that this number seems to be quite high. And what are the risk management practices that we are taking to maybe control incremental business that we are doing and like the previous participant asked, we have been reasonably aggressive this time around in festive season. So how do you risk manage our book to ensure that we don't go out of proportion?
So on your -- the first question, which is about driving the term loans -- term loan book, yes, you're right. The term loan book typically because the product and cash, we give it to people after we have seen their behavior for at least 9 months on both. And even the Flexipay or subvention products or the conversion of spends into EMI is within the already approved credit line of the customer. So we see a better behavior on the installment products on -- from a credit perspective, it's obviously better because customer is showing his intention -- his or her intention to pay us back from the installed -- by booking the amount into installments.
So which -- so that's a lower rate, which is there, and we want to push that. The second part of pushing that is also -- we also want to keep our interest-bearing assets above a certain percentage because the revenue profile is also very, very critical. So that is the second part on which we work at. But it is not -- on the revolver front, there is no -- we are not looking at that. There's no actioning from a portfolio that we are doing to push the customer to become a revolver that as of now, we are not doing any of those activities.
Sir, just my question was on pricing the...
I'll answer that. On the pricing front, there are 2 triggers that will make us change the pricing on the EMI product, which is, one, of course, is you have to always keep the industry in mind. We can't be out of the industry. So you have a very high pricing or a lower pricing as well. And second, we are also driven by as a trigger -- funds. So there has to be a rationale for us to be increasing the pricing to the customer as well. So we keep both of these things in mind as we look at the pricing to the end customer on the EMI loans. And as required, we have been taking actions. We've shared that with you in the past as well. As an when, it warranted us to change the pricing. We have done that in the past.
Sure. And on the risk management side, considering you are aggressive this time around and the write-offs have been quite high. So if you could just throw some light on...
I'll add some color to what MD sir mentioned earlier. So write-offs can't be viewed in isolation. You have to view write-offs in relation to recoveries also and to the other element of credit cost, which is changes in our provisions. The net effect of all of that is what finally feeds into what is called credit cost, and that number has trended positively for us. It's come down in the sense by 13 basis points in the quarter. So we can't look at right-offs just in isolation. Also, in terms of actions that are being taken, they straddle the entire continuum of the customer life cycle management. So that includes underwriting, standards. It includes portfolio management actions. It includes marketing decisions and marketing campaign related decisions. And, of course, collection strategy.
So all 4 elements are being worked upon, and we've given color to you on this subject in the previous call. These include things like, for example, using the analytics and insights that we have around figuring out which customers to exclude from certain types of campaigns, tightening our customer selection filters on the underwriting side, getting aggressive with line decreases and auth declines to managed exposures on customers. Figuring out which types of customers to be exposed to which type of strategy, whether calling or whether field visits or whether a combination of the 2. Decentralizing our collection efforts. Using digital measures to get customers to pay us more frequently and more on time. So those are the types of actions that we've been taking in the past and we will continue taking them based on the insights that we get from our portfolio analytics.
[Operator Instructions] Next question is from the line of Abhishek from HSBC.
So my question is on the repricing of your book of Flexipay and Encash, which last quarter also we discussed that it would -- it's a continuous effort. So how much of the book sort of remains to be repriced? And obviously, when you look at the yield, and it has not really moved up, it's actually gone down. So this means that there is some offset to the repricing that would have happened this quarter in the EMI book. So can you just talk about that part?
So most of the subvention book has been repriced because it is around a 9-month -- 8- to 9-month kind of thing. Flexipay is still -- because it's a 12-month tenure -- 11-, 12-month tenure, that is -- some part of it still would be pending for repricing, okay? However, it is -- you should also note that on Flexipay, we used to earlier charge higher rates. Because it was -- and then we moved to risk-based pricing on that. So the rates were higher. So there was some contra movement there also. Encash because the average ticket -- average tenure there is 36 months or so -- 33 months or so. So that is -- most of it is still to be priced as of now. So this is how the movement is.
What was the rate on Flexipay earlier versus now? And what's the rate on Encash now?
So Encash rates are broadly similar. They have not changed. Subvention rates have gone up. We have taken that up by 100 to 200 bps higher. Flexipay rates, actually, Flexipay had a, if I would say, a U-shaped curve on that one. It came down when we changed the methodology of pricing, which was before the cost of fund -- Quarter 2 or quarter 1, I think. So there was a downward trend there. And then after that, there has been -- after one downward trend, then it has been a constant upward trend to the -- to almost, I think, 200 to 250 bps higher. So that's how the trend line has been.
I thought you said the Flexipay rates have come down.
So Flexipay rates came down around 9 months back. Q2...
July, August of last year.
July, August of last year, okay? They came down. And after that, they have been going up.
Yes. So how much is that increase? That's what I am asking. So from July, August...
From July, August, till now, it is almost 200 basis points plus. And we have done that in -- you should also note that it's not a onetime increase. It's happened in 3 tranches. So as the cost of funds kept on going up, we started passing on the interest rate to those guys. So the full Flexipay book has not yet been repriced.
Next question is from the line of Dhaval from DSP Mutual Fund.
I just had one question relating to the portfolio slide. So it seems like the open market Tier 1 category A customer base is the problem based on the past delinquency and the index numbers right now. I just wanted to understand what course correction are we taking any -- in these filters? And also, when you think about the sort of elevated delinquency that you're seeing, if you were to sort of map the bureau check of these set of customers, this cohort of customers, which is giving extra problem. Is there any common patterns related to leverage or multiple carding, et cetera? I mean, any insight that you could provide on this cohort of customers?
So just to go back to the point you made about what you mentioned earlier. So self-employed sourcing, as we mentioned last time, has been increasing to the index values that we shared last time. So compared to Q3 ['20] we were doing 1.64 more in terms of self-employed. That trend continues. We're doing even more self-employed. And at the same time, delinquency of the self-employed segment is coming down. So that's a positive development. Similarly, we also mentioned last time, Tier 3, Tier 4 locations, there also the sourcing in that geography has been increasing. That's somewhat plateaued out. So relative to Q3 of '20, for example, we were doing 1.67x more in Q1 F '24. That has gone -- that's remained flat at about 1.67x only. So in that sense, the trend from the last quarter has continued in both in terms of sourcing and in terms of delinquency for both of these segments.
Dhaval, you said that open market Tier 1, you see it higher, can you point out to that because I'm sure you're reading this on Slide #14. So how are you looking at that? Dhaval, can you hear us?
Yes, sorry. Sorry, I was on mute, sorry. I was just looking at March '23 data because last 2 quarters when the elevated credit cost has been a problem. So if you look at March '23, has a similar slide and where we are today, the biggest delta is basically in the Tier 1 Category A open market, if that's where the index levels have gone up -- so that's the reason I was trying to...
So Dhaval, I think what you're looking at is 3 separate points. And while from an indexing perspective, because if the overall index goes up, then you will see that. But from a trend line perspective, what we see in various markets is yes, Tier 1, which used to be -- and in fact, the number is given here. At this point of time, I think Tier 1 is -- overall cards in force is 0.99. I don't remember the March number, but March number was -- so we'll check that. But where the changes, what we had done was initially Tier 3, Tier 4, we were seeing some problems. So we cut down certain set of cities. And in fact, we declared that last to last quarter that certain cities we exited out. And we said we will not source in some of these cities, and that led to Tier 3, Tier 4 now improving, okay?
And that is why from an indexation perspective, you will see something there. Because Tier 1 was 0.97 and it is now 0.99. So that marginal changes are happening because of that only. And if you look at, I think, Tier 3 was around 1.07 -- no, Tier 3 was 1.02, and it was 1.05. So it has come down. Because we've stopped sourcing in some of those cities, some markets, taken actions. So all that has happened. While you should also recognize we have always been saying that open market will be giving you higher revenue. It will have slightly higher losses. And Banca will give us slightly lesser revenue because the spend per account is lower, revolve rates are lower. And hence, lesser -- at the same point of time lower delinquency. So it is a good mix of these 2 is how we have been operating our strategy there.
And importantly, the indexation values are relative to the mean of that time period. They are not indexed to history.
Yes. No, I appreciate that. So maybe I'll just simplify the question by asking that if from March to now, is it correct to assume that we've not made any major changes to our risk filters. And the strategy that we've continued, we've just continued that in the last 6, 7 months and so there's no change. And the outcome that you're seeing is in line with what you're expecting. Is that the way I should read it?
No. On the contrary, we have made specific changes to the way we are sourcing. We have cut sourcing in the areas that we were finding problems in and we reported that in the last quarter itself. In fact, we were taking those actions way back in December as well. So those actions take time to show up and they are showing up now.
Okay. And could you give some strategy about the cohort of customers is extra pain that is coming through? Is there a common point from a bureau data perspective that you've been able to identify if there is any extra over leverage or I think other behavior small ticket personal loan being in excess, any pattern that you could provide here?
No. As we said, we have not noticed any cohort. We have earlier also stated, we have not noticed any cohort. But yes, how we look at and as we stated, that we have improved our collection strategies based on the early warning signal. So how we look at it, we do compare our -- the card performance in our books as well as with the information available in the bureau. So we do compare and we do find that how the movement is taking place. And that's how we redirect our collection strategies in that account. But then, as I said, that we are not noticing any specific cohorts.
[Operator Instructions] Next question is from the line of M.B. Mahesh from Kotak Securities.
Just a couple of questions. One, there has been a significant slowdown in the receivables growth this quarter, just 30% and it's come down 20%. What explains this?
So Mahesh, simple. Last year -- last year, September, last 5 days, you had a jump up on the spend. So it's more of a denominator thing, okay? Receivables growth is intact. So if you take that out the last 4, 5 days of spend, which -- if you remember last -- in that quarter had also impacted our revolve rates because the festive season started on 20, I think, 25th of September last year.
Yes. Just one clarification on this entire credit cost and the new fresh cards trading a problem, how often do you scrub the data back of your customer base? See what kind of indebtedness do they carry?
We do it quarterly.
After 6 months on books.
After 6 months, after 6 months on books, we do it quarterly.
But there are segments where we do the scrub monthly as well. So we have a defined portfolio strategy -- portfolio review strategy and there are segments where we do our monthly scrub. There are segments we will do a quarterly scrub. Every customer, 6 months on board.
Next question is from the line of Hardik Shah from Goldman Sachs.
This is Rahul here. I had 2 or 3 questions. Number one, again, on the portfolio quality. Just slightly confused, I just wanted to seek some clarity. You said that you've not really noticed any specific consumer cohorts. And yet our write-off has been going up over the last few quarters. While, of course, there is concern in the market, but that's more about small ticket personal loans. In credit card portfolio, I think we are the only one who has -- who has kind of seen the increase in write-offs. So what explains this? I think there's been a lot of questions around the consumer cohort of where the problem is coming from. But if you can help us really understand and how do we plan to correct this, would it have any bearing on the business in the coming quarters?
I think I will have to repeat what I have stated earlier. And I'll just -- I'll not repeat. In fact, it will be repetition again and again on the credit cost thing. Let me share some more thought process. We are looking at our credit cost at 6.7%. It was 6.8% in the last quarter. We explained what all measures we have taken. And we have stated that how all of us, you and I together are looking at unsecured loan portfolio. All this taken together, what could have been an aspirational credit cost. We ourselves stated that we aspire to be, say, around 6 or 6 plus a bit. We are at 6.7%.
We don't think it's a runaway scenario. We have taken adequate views. We have -- that -- those have given us results. Somewhere we may see a bit of this scenario prevailing, but we don't see that it is a runaway scenario where we can end up in a huge credit cost escalation. So we are on it. We have been working on it. The results are there for all of us to see. It's on the declining trend. Yes, not the trajectory, which that we had aspired for. And we are not out of the market, somewhere we are impacted in whatever is happening in the ecosystem.
Got it. That's helpful. The reason I was asking this question is because none of these large credit card players have been complaining about their portfolio. So -- and even their unsecured portfolio. And hence, this question came about, but I appreciate the answer. The second question...
Sorry to interrupt you, I will request you to come back in the question queue. [Operator Instructions] Next question is from the line of Pankaj Agarwal from AMBIT Capital.
Sir, can you provide more information on your new ESOP scheme in terms of number of employees it covers...
[Technical Difficulty]
Sir, sorry, your voice is not coming clearly at all. Can you please speak through the handset?
My question was that can you give more information on the use of ESOP scheme in terms of number of employees covered?
So that is -- we have opened the scheme for a certain designation and above in the company. And it's a certain -- as of now, how we look at it is a miniscule part of our overall book. And what details can I share here? I mean if you want something we can always share over later. We have disclosed this already to the -- we have already disclosed it and the disclosures are there. We can share the data with you, I don't have that readily available with me.
Pankaj, what exactly are you looking for? I mean, the ESOP was approved by the shareholders and only -- the information was put up on the stock exchange. It's typical to any other organization above a certain level. There are identified employees who have been rewarded through the ESOP program. Is there anything specific you are looking for?
Yes. So earlier scheme, I think, only few employees were covered on the...
This is a little broad-based ESOP scheme, as I said, and as MD sir said earlier, covering a large set of employees above the -- above a certain level. It includes middle managers as well this time. I may just add to the response that MD sir gave on the credit cost and the subsequent remark that came in about the other players in the industry not reporting. We are the only credit card -- standalone credit card company. The others report their credit card as part of their overall portfolio, which is why you don't see that as standing out. I think the point that sir also made earlier is that there is stress building up in the retail consumption consumer loan portfolio. And we are also part of the industry and seeing the same headwinds.
Next question is from the line of Rohan Mandora from Equirus Securities.
Sir, just to touch base upon the delinquency part again, in the initial remarks, you had indicated that in FY '21, '22 portfolios and the delinquencies are relatively benign. So if we were to index the overall delinquency to 100, if you can indicate how is the trends here in the newer cohorts of portfolio? And secondly, the just judging by from the cohort part, internally, while there have not been any specific cohorts, but if we do an external scrub, are there any changes on the number of products per customer or credit lines per customer, which are elevated where we are seeing some higher delinquencies? And also on that portfolio scrub in case we find some customers, what are the actions that we take even if they are currently behaving on the portfolio? What kind of exit strategy do we follow?
I'll take the first part of the question. You're right. FY '21, '22, '23 sourcing vintages are indeed showing benign early delinquency. We don't disclose the number by vintage, but we are quite satisfied with the progress that we're making. And that is giving us comfort that our sourcing is indeed behaving in line with expectations. And it is increasing in value as a percentage of our NEA. I think I mentioned that earlier. And relative to overall, it is certainly showing lower delinquency levels than the overall average.
But sir, is it meaningfully different or just marginally different?
So in fact, if you look at our last quarter declaration, where we had shown the vintage chart, you could see the -- at the same point of time, the newer vintages are at around 60% to 65% of what the early [2019] vintages were, okay? So that trend continues. So that is why we showed those vintage charts last quarter.
And just to complete the picture, the problem cohorts of 2019, which we were saying showed elevated levels of delinquency, though -- that cohort is behaving better now and normally now and is trading downwards as per expectations. Likewise, for '18.
And if I may just respond to the second part of your question, which -- where you asked us as to what are you seeing in the bureau. Obviously, when we cut the bureau data typical to any portfolio review that we do. We do look at what is the behavior offer with the other lenders? How many trade lines have they added incrementally? What are the -- what is the trend happening on the repayments in the scrub, so it's in the bureau. So all of that data is picked up by us. And based on whatever we pick up that differentiated actions that are decided. Some of that data is also passed on to the collection team for them to focus more and keep a watch on those collections. So there are differentiated steps that we picked up from the bureau.
And not just the trade lines, but also inquiries. So...
Yes, inquiries by the clients, so to say...
They are indicator of credit [hunger].
Ladies and gentlemen, we will take that as the last question. I will now hand the conference over to Mr. Abhijit Chakravorty for closing comments.
Thank you. I must thank you for joining with us and looking at some insights with our numbers. So we will continue to be watchful of our portfolio. While being watchful, we are bullish on our numbers. We are doing the metrics, the other parameters and metrics are looking good. The profit was higher than around -- profit is on increasing trajectory. So all taken together, we will be continuing to do good business. Thank you.
Thank you very much. On behalf of SBI Cards and Payments Services Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.