CONTAINING CREDIT COSTS: SBI Card's measured moves

AFTER A GREAT run in recent years, SBI Cards & Payment Services seems to have hit an air pocket. Even as the card issuer has added meaningful market share, the quality of the book is causing some concern. Credit costs are elevated at 6.7% of loans in the September quarter on the back of 6.8% of loans in the June quarter, and 5.6% in Q2FY23.

- AJAY RAMANATHAN

Analysts are somewhat perturbed bywhat they call an unusual'explanation for the stress. The management commentary, they say, attributes the stress to concerns on recently originated cohorts "without calling out for any specific period"; earlier it had attributed this to the FY19 cohort. This is somewhat befuddling, they say, since the company had indicated in the June quarter, that the recently originated cohorts were relatively better.

The management has, however, clarified that in Q1FY24, it had identified FY19 cohort as a "focus area" while mentioning that recent sourcing continues to be better. Managing director and chief executive Abhijit Chakravorty confirmed to FE the management has not raised any concerns about the newly-sourced vintages. "On the contrary, our newly sourced vintages continue to perform better than some prior vintages. In fact, the more recent vintages now comprise over 50% of our current portfolio," Chakravorty asserted.

That is reassuring as is the fact that the delinquency behaviour of priorvintages is now "following expected trends more closely". Remedial action is being taken in terms of cutting limits, cancelling cards and intensifying collections. "We have taken tailored action in segments identified, tightened underwriting standards and collection strategies. We are seeing early signs of success," Chakravorty said, conceding, however, that the benefits are to some extent, being offset by pressures in the ecosystem. "With a share of 19%, SBI Card can't avoid some impact," he said.