SBI Cards targets 1 million new customers by 2014-15

SBI Cards, the second largest credit card solutions provider in India after HDFC Bank, is targeting to add one million new
customers by 2014-15, Mr Kadambi Narahari, CEO, said on Thursday.
Between 2007 and 2010, the number of credit card holders in India fell from 27 million to 17 million. Even after this consolidation in the wake of global slowdown, when many credit card companies went out of business, penetration of credit cards in India is still low — as against China and Brazil accounting for 200 million cards each, India accounts for only 18.4 million credit card holders, he told presspersons here.
SBI Cards have a customer base of 2.3 million. HDFC currently issues about 80,000 credit cards per month while SBI Cards issues about 50,000.
On an average, an Indian credit card holder spends only $755 (Rs 40,000) annually, as against the Australians ($3,352), and even the Thais ($2,084).
With its expansion in Tier II and III towns and cities becoming profitable with 12 per cent of cards reaching there, SBI Cards is now banking on the spread of the Internet to 121 million customers and grow its business by three to four times by 2014-15. India currently has 80 million banked households, he said.
Ticket booking and similar instant payment facilities have boosted the business of SBI Card, particularly after its tie up with the Indian Railways and other agencies and co-branding cards with the Oriental Bank of Commerce, Bank of Maharashtra and the Karur Vysya Bank.
Credit card spend in India is expected to increase from Rs 96,000 crore in 2011 to Rs 120 crore this year. SBI Cards and Payment Services Pvt Ltd, a joint venture with GE Capital, is the only standalone credit card providing company in India. It offers 14 different modes of payment options to customers.

SBI's sharp downturn NPAs increase, but provisioning does not

The performance of the State Bank of India (SBI), the country’s largest lender, is in a way similar to that of the Indian Railways. Both, because of their size and critical positioning, are significantly linked to the overall health of the economy. It is, therefore, not surprising that in the first quarter of the current year the bank has reported a sharp rise in non-performing assets (NPA), indicating borrowers’ inability to service their loans in the present economic environment. This has overshadowed the large year-on-year rise in the bottom line, which has, in any case, benefited from the earlier low base then caused by catching up in provisioning. The bank’s Chairman, Pratip Chaudhuri, has highlighted the deterioration in the portfolio for mid-corporates and small and medium enterprises, which underlines the adverse conditions at the grassroots level. The agricultural and large account portfolios have also deteriorated, but Mr Chaudhuri has held out the hope that with the monsoon picking up somewhat and a chance of two large loans getting back on track, the outlook may not be all that depressing.

What cannot, however, be explained by the overall deterioration in the economic situation, which has been gradual, is the sharp setback in performance compared to the picture it had projected just three months ago. In the last quarter of 2011-12, gross NPAs had actually fallen by a small amount, compared to the sequential previous quarter. This had been made possible by upgrading of assets, more cash recoveries and low additions to non-performing assets. The hope that the bank would be able to sustain this effort in order to combat the tough year that lay ahead has been belied. Gross NPAs have gone up by a massive nearly Rs 7,500 crore and taken the ratio of gross NPA to total assets up to 4.99 per cent from 4.44 per cent. There has also been a sequential deterioration in performance across the board covering interest income, net interest margin (down by 28 basis points), other income and operating profit. Poorer operating performance, combined with higher provisioning, has led to a fall in return on assets by 12 basis points to touch 1.03 per cent.

If non-performing assets have gone up sharply then so should provisioning. However, quite perplexingly, provisioning on that account has actually gone down marginally. This amounts to making the bottom line look better than it actually is. The bank may have good reason to believe that by the end of the financial year improvement will be made in asset quality, but it is always better to first provide and then write back if you get the chance to. After Mr Chaudhuri took over, he earned appreciation by cleaning up the balance sheet and then posting improved performance. That is the trend that needed to continue.