SBI Card asset quality hit

SBI Cards reported a sharp deterioration in asset quality as thousands of cardholders skipped payments, according to reports.

The company’s gross non-performing assets (GNPA) rose to 4.29% in the September quarter from just 1.35% in the preceding three months.

The asset quality could have been worse had not a top court order put a standstill on recognition of bad loans. Lenders cannot label loans as bad, even if a default has occurred.

In the absence of the ordered standstill, the GNPA number would have jumped to 7.46%, SBI Card management said.

SBI Cards reported impairment losses and bad debt expenses at Rs. 862 crore in the quarter against Rs. 329 crore for the same period last year.

“Additionally, management overlay provision created for Rs. 268 crore in Q2 FY21; total management overlay provision is at Rs. 758 crore as of September,” the company said.

The rise in provisioning and bad loans led to a 46% drop in profit to Rs. 206 crore. Revenue from operations, however, grew 5% to Rs. 2,413 crore.

While asset quality concerns emerged in the fiscal second-quarter, the credit card company said that retail spending showed resurgence.

Retail spending increased by about 50% in the second quarter from the preceding three months. Retail spending was at 90% of pre-covid (December 2019- February 2020) levels.

“Card-in-force”-total number of cards issued and outstanding-grew 16% to 11 million as of Q2 FY21 as against 9.5 million in the same period last year.