The credit card industry faces the challenge of getting customers, whose fees have been restructured under central bank regulation, to start using their cards.
Many of these retail customers were gunslingers, and their reluctance to spend impacted the industry. Credit card customers can be categorized into two groups based on repayment schedules: transactors (those who pay the outstanding amount on the due date) and revolvers (customers who pay part of the dues to avoid the failure). Credit card companies earn more interest from the second category of customers.
“Only a few of them showed interest in picking up the card and starting to use it and most of them were wary when activating the card,” Rama Mohan told analysts. Rao Amara, Managing Director and Managing Director of SBI Cards and Payment Services Ltd. Friday.
On Friday, India’s second-biggest credit card company said the percentage of revolvers fell to 25% of its receivables in the March quarter, from 28% a year ago. Traders grew to 40% in the fourth quarter of FY22 from 35% a year earlier.
According to internal analysis by SBI Card, the turnover rate – the amount of spend converted into revolvers – increased slightly from October 2021 to February 2022. The credit card company ran special campaigns that resulted in ₹3,523 crore in additional retail spending compared to February and expects some to go into the revolving credit.
“Part of it could be converted into a revolver,” Amara said.
Amara said the company recalibrated credit screens in FY22 and is gradually allowing entry to segments such as the self-employed. SBI Card had 13.8 million cards in circulation, up 16% from the same period last year. However, it lost market share by number of cards to 18.9% in FY22 from 19.1% in FY21, according to RBI data through February. A large part of the cards in force belonged to 84% to salaried customers, while the rest belonged to the self-employed segment.
“In terms of customer sourcing, independent sourcing has increased by at least 2 percentage points sequentially, showing our increased appetite for this segment, but that will take time,” Amara said.
Asked about RBI’s new credit card rules regarding activating a credit card within a stipulated time frame, management said they would work with the regulator to understand the definition of activation in this context.
On April 21, RBI said card issuers will need to ask the cardholder for one-time password (OTP)-based consent to activate a credit card, if it hasn’t been activated for longer. 30 days from the date of issue. Under the new rules, which will come into effect from July, if the credit card issuer does not receive consent, they will have to close the credit card account at no cost to the customer within seven days. working days from the date of the customer’s request for confirmation.
SBI Card announced on Friday that it had tripled its net profit to ₹581 crores in the three months to March, on a yearly (yoy) basis. Its receivables increased by 25% to ₹31,281 crore in Q4 FY22 versus ₹25,114 crores in the same period last year. Its gross non-performing asset ratio stood at 2.22% in the March quarter, down 278 basis points (bps) from the same quarter of FY21.