The card-issuer’s gross non-performing assets (GNPAs) have remained in the range of 2.3-2.5% as the defaults have not been high.
SBI Cards’ initial public offering (IPO), in which parent State Bank of India is offloading a 4% stake, has been used as an alternate opportunity for raising the capital, Dinesh Khara, managing director, global banking and subsidiaries wing of SBI, told Ankur Mishra and Anwesha Ganguly in an interview. The card-issuer’s gross non-performing assets (GNPAs) have remained in the range of 2.3-2.5% as the defaults have not been high. Edited excerpts:
How will you utilise proceeds from IPO?
The very idea of taking this company public was to give them an alternate opportunity for raising the capital. The parent company — State Bank of India (SBI) — is offloading only 4% stake in SBI Cards. So, if at all we had need for capital, we could have perhaps increased our stake in offer for sale (OFS). Therefore, we will put to use these proceeds as we are a growing bank and growing group.
What are the risks you see in credit card business in current economic scenario?
The risk is a ‘reality’. The skill lies in managing those risks. I think the company has mastered managing the risk in upside and downside of the market cycle. In any sense, it is a long-term company. So, they have to face it and if at all they have to face it, they should be in a position to calibrate those risk matrix accordingly.
How has been your growth in last few quarters? Has there been rise in defaults?
We should be able to grow very well, which is very encouraging. I do not see any constraints for their growth, going forward. The gross non-performing assets (GNPA) were in the range of 2.3-2.5%. It has generally remained in that range only. We have not witnessed any kind of defaults which may cause some kind of anxiety. Generally, there is a risk of delinquencies in unsecured credit side.
How do you see it panning out in the current economic scenario?
Panning out in the economy is also a function of effective collection machinery. First is underwriting and second is efficient collection mechanism. On both the fronts this company has been able to manage impaired loans very well. We do not perceive it as a challenge.
What are the preparations in case delinquencies rise? How are you using technology?
In many respects the company has become algorithm and analytics-driven company. We are working on algorithm for desirable card base. So, they are very mindful about the macroeconomic scenario. The company is quite ahead of curve in terms of adopting the technology. We have got Near-Field Communication (NFC) card already, which is actually like sitting on the mobile phone.
In 2019, companies that cater to a niche or have a natural monopoly got an overwhelming response, for example, IRCTC, IndiaMart and Polycab India. Do you believe that niche or monopoly will work for you as well?
SBI Cards may be registered as a credit card company but many other banks are offering credit card facility within the bank. So, it is more of a product and not a monopoly.