SBI Cards and Payment Services Ltd (NSE:SBICARD) Q2 FY23 Earnings Concall dated Oct. 27, 2022
Corporate Participants:
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Analysts:
Anuj Singla — Bank of America — Analyst
Girish Budhiraja — Chief Sales and Marketing Officer
Nilanjan — Nomura — Analyst
Aparna Kuppuswamy — Chief Risk Officer
Dhaval Gada — DSP Mutual Fund — Analyst
Ajit Kumar — Goldman Sachs — Analyst
Abhishek Murarka — HSBC — Analyst
Unidentified Participant — — Analyst
Karthik Chellappa — Buena Vista Fund Management — Analyst
Pankaj Agarwal — Ambit Capital — Analyst
Param Subramanian — Macquarie — Analyst
Nitin Agarwal — Motilal Oswal — Analyst
Rohan Mundhra — Equirus Securities — Analyst
Shweta Daptardar — Elara Capital — Analyst
Mohit — BOB Capital Markets — Analyst
Jai Mundhra — B&K Securities — Analyst
Mohit Surana — CLSA — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the SBI Cards & Payment Services Limited Q2 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director & Chief Executive Officer of SBI Cards. Thank you, and over to you, sir.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Thank you, Faisel. Good evening everyone. I extend a warm welcome to all of you. Thank you for joining us for the earnings call for Q2 FY ’23 today. Hope all of you had a great Diwali. It was pleasing to see the full festive fervor in the season after two years of cautions and restrictions. By [Indecipherable] festive zeal and are driven by better sentiments on general economic situation and spending, the consumer confidence in the country has been on the recovery path. While the global economy continues to be turbulent, the Indian economy remains [Indecipherable]. Real GDP grew 13.5% year-on year in Q1 FY ’23. Aggregate supply conditions have been improving. All constituents of domestic aggregated demand expanded year-on year and exceeded their pre-pandemic level. Supported by these factors, credit card industry has also seen encouraging overall growth. Credit card spend has been consistently crossing Rs. 1 lakh crore value for straight six months. Total industry spends were 53% higher year-on-year in September ’22. As a matter of fact, December witnessed Rs. 1.2 lakh crore of spend due to an early [Indecipherable] the festival season. The total cards [Indecipherable] grew by about 19.5% year-on-year in September but recorded marginal reduction on a month-on-month basis as the RB [Indecipherable] The industry has in fact seen interesting changes going to new RB regulations being implemented in two phases from July 1 and October 22 respectively.
Industry witnessed the reduction in [Indecipherable] numbers as millions of inactive cards got closed. We at SBI Card have always maintained and pursued the strategy of fee based cards since more than 95% of our portfolio consists of spend or balanced active cards that effect on our portfolio due to this new RB regulation has been limited. Our previous model has helped us in maintaining our capital spend active rate at 50% plus consistently. Regulatory change on [Indecipherable] the limit charges have come into effect from 1st October impacting the [Indecipherable] fee from this quarter onwards. I mean, October, November, December quarter onwards.
We have initiated measures to mitigate the impact of exchange. In short-term, we will see volatility in industry card numbers which is likely to stabilize in the next couple of months. The growth story of Indian credit card industry is intact and the journey has just begun. Just to reiterate, credit card market remains largely under-penetrated. As per some reports, Digital payments are accelerating in a big way and will constitute nearly 65% of all Payments by 2026. Also, e-commerce continues to grow. It is expected to grow at the rate of 25% to 30% annually for the next five years. Most importantly, linking credit cards [Indecipherable] RuPay credit cards with UCI will expand the use cases for credit cards. According to NCCI, UPS user base is likely to grow from current Rs. 250 million approx. to up to Rs. 750 million in the next five years, giving credit card customers more options to spend. As we see today we have many exciting milestones to achieve as an industry in the coming years.
Let’s now look at SBI Card business overview in Q2 FY ’23. I am pleased to share with you that the SBI Card continues to deliver a healthy business growth and strong financial performance. Our spends growth has been robust. Overall expenses have grown by about 48% year-on-year in Q2 breaking reaching 62,306 crores. Our spends market share stands at 18% for the half year but exited the September month at 19%. Retail spends continue to grow strong at 45% year-on-year and stood at Rs. 50,895 crores. Corporate spends stood at Rs. 11,411 crores in Q2 with 34% year-on-year growth. During the past few months we had undertaken an exercise to calibrate and review our corporate accounts portfolio on basis of which we had exited a few low-margin accounts resulting in moderation of corporate card spend volumes. The increased e-commerce activity helped our online spends to grow. These now contribute 57.8% share in the retail spend as of Q2 partly aided by the increased festive spend during the last ten days of September month.
In part two, we have seen a healthy growth especially in categories such as electronics, hotels, restaurants, entertainment and furnishings. Our revolver balances are rising in absolute numbers. However, the strong festival spends during the last ten days of September month has led to a buildup of [Indecipherable] resulting in lower percentage share of revolver assets as of September end. We have seen a high combustion of these festive spends into term assets similar to past trend lines. We have over 14.8 million cards in force as of Q2 FY ’23 and we added about 1.3 million new accounts during the quarter, the highest-ever during the quarter.
The market-share in bps [Phonetic] stood at 19.1%. Our customer acquisition has also been aided by the end-to-end digital journey implemented for both our ETB and the NTB customers enabling customer acquisition at lower-cost as compared to traditional channels. Our sustained growth during the quarter has been on the back of some key initiatives. We expanded our core card portfolio and introduced a cashback SBI Card, an industry’s first and most comprehensive cashback credit card ever. The card witnessed high demand from customers and we see it as a strong addition to our portfolio.
We also introduced 1600 plus festive offers pan India. Along with national offers we had also extended a large number of regional and the hyper-local offers across 2,600 cities. Such initiatives have helped us maintain a higher share of active customer portfolio and more engaged customers. Our 30-days spend active rate is at 50% plus. Our spend per average card has grown from Rs. 1.42 lakhs in Q2 to Rs. 1.7 lakhs in FY ’23. What is heartening is the increase in the average retail spend per card growing from Rs. 1.14 lakh for Q2 FY ’22 to Rs. 1.4 lakhs in Q2 FY ’23.
At SBI Card, our customer-centric approach has always driven us to keep enhancing our customers’ experience, and our SBI Card Sprint is a latest example. This end-to-end digital application platform enables customers to get their SBI Credit Card in less than five minutes. All these efforts have led to robust growth in the Q2. Our receivables grew significantly by 41% year-on-year reaching Rs. 37,730 crores. Receivables per card has grown to rupees Rs. 25,445 in Q2 FY ’23 from rupees Rs. 21,257 in Q2 FY ’22.
SBI Card has been very active on [Indecipherable] front. And I am extremely happy and proud to share with you that we have seen a significant improvement in percentile in [Indecipherable] Sustainability Index evaluation, leading to an improved performance overall by SBI Card. I would like to reiterate that we have always kept a sharp eye on the sustainability of the business ensuring viable business practices throughout. We are committed to enhance our efforts in this direction so that we are able to positively impact more and more lives.
Please allow me to now — to take you through the financial performance in Q2 FY ’23. Our resilient business model embedded on strong fundamentals have helped us deliver a healthy profitable growth. The company has achieved a PAT of Rs. 526 crores in Q2 FY ’23, a growth of 52% year-on-year. Cost-to-income ratio at 59.4% is driven by investments to drive business growth in terms of higher-volume of new accounts and to drive higher spends during festive season. The cost-to-income is expected to remain at elevated level as festive period is continuing in Q3 FY ’23 and with our continued focus on increased new customer acquisition. In Q2 FY ’23 [Indecipherable] stood at Rs. 37,730 crores with a growth of 41% year-on year. Total revenue stood at Rs. 3,452 crores and have grown at 31% year-on year during the quarter.
On asset quality front, our gross credit card percentage for the quarter is at 6.2% up from 5.6% in Q1 FY ’23. The increase is largely driven by the increase in Phase 1 assets. Our GNPA has come down to 2.14 % as compared to 3.36% at Q2 FY ’22 and 2.24% as at Q1 FY ’23. Net NPA for the period is at 0.78% as compared to 0.91% at Q2 FY ’22 and 0.79% as at the end of Q1 FY ’23. Return on average assets for the quarter ended September 22 is at 5.4% which is higher by 41 basis-points as compared to 4.9% for Q2 FY ’22. Return on average equity [Indecipherable] at 24% which is again higher by 404 basis-points as compared to over 20% for Q2 FY ’22.
Our liquidity position continues to be strong and the capital adequacy is at 23.2% for the period ended September 22, We maintain the LCR at a healthy 82% through the quarter. Owing to rise in interest rates, the cost of funds has increased from 5.1% in Q1 to 5.4% in Q2 FY ’23. The full impact of higher [Indecipherable] will be further felt in the subsequent quarter. In conclusion, due to global disturbances, the external environment continues to be volatile though the domestic economy has been able to deal with these disturbances it is still pertinent to be watchful. We remain optimistic about the future and believe there is plenty of room to expand the company’s portfolio, generate consistent profitable outcomes and increase the value to all our stakeholders.
With the festive season and the upcoming holiday season, we hope to also see a good traction in consumer discretionary spends. Having said this, we continue to maintain a cautious approach, undertake calibrate the measures as the situation calls for in the future. So, Faisel, now we are open for questions.
Questions and Answers:
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Anuj Singla from Bank of America. Please go ahead.
Anuj Singla — Bank of America — Analyst
Yeah, good evening everyone and thanks for the opportunity. The first question is on the NIMs outlook. So when we look at the NIM for this quarter 12.3% this is multi quarter low, obviously reflection of the higher transactor and higher funding costs as well. So when we look at the drivers for the upcoming quarters, the funding cost is going to rise and probably offset by improvement in the asset mix. Can you guide us how should be looking at the trend in this number maybe over the next couple of quarters? When can we expect it to maybe increase to 13% or more in the coming quarters?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah, Anuj, you’re right. Given the kind of [Indecipherable] for funding cost to increase further the next quarter because the full impact will be felt in the next quarter. During the quarter, of course, there will be an opportunity to transmit the increase in the funding costs also to the extent possible and some correction in the base or normalization of the base will also happen because business spend maximum lasting up to end of October. Some repayments will be there so some base normalization will be there. Equally we are confident that it will be more or less maybe within 10 basis-points, 20 basis-points here and there around the same range, that is what we’re expecting.
Anuj Singla — Bank of America — Analyst
Okay, in terms of cost of funding, is it possible to give what kind of numbers we can see [Indecipherable] the next quarter?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I did not get you, Anuj. Can you repeat?
Anuj Singla — Bank of America — Analyst
Sir, cost of funding. What kind of increase can we see in the next quarter, the sequential increase in the cost of funding?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Cost of funds can increase by up to 40 basis-points to 50 basis-points minimum. But of course what is shown in the debt perhaps is also colored slightly by the base effect also. Base also has a bearing while we have actually seen a 50 basis-points, 60 basis-points as guided in the last quarter, full impact is not felt. It is only like a 5.1 increase to 5.4%, which is more of a base effect. Some of this effect will fade away so we are expecting another 40 basis-points to 50 basis-points increase minimum in the cost of funds.
Anuj Singla — Bank of America — Analyst
Okay. Got it. Sir, second question is on the SBI cashback Card, obviously a very great product. And some of the best cashback available in the market right now. So two things there, one is there a number in mind as on absolute side or as percentage of outstanding card where you would like to cap the contribution from this card as a percentage of maybe or number of cards outstanding? And secondly, again, the question to reach on the economics of this card that is one of the key concerns that this is going to be ROE dilutive so, any color you can provide there.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think we are in the early stage. Our attempt is to first iron out all the things that are there in the journey and smoothen the process. And of course we also need to figure out what is the right way of reaching about potentially to the new customers, NTB kind of customers. I think it’s too early to speculate like what is the percentage but definitely we would like volumes to increase and that’s the reason we put it on a scalable platform like a digital platform. But Girish will update on the [Indecipherable] dilution.
Girish Budhiraja — Chief Sales and Marketing Officer
First of all, the numbers are just started. It’s not — we already have a base of almost 1.48 crore cards, so 14.8 million is already there. So this number is not even in — as of now not even in the hundreds of thousands. So it is — it will take it’s time to grow the portfolio. Second thing is as we had updated last time also, means looks — when we were looking at the overall profitability of the products so we have put this product purely for customers who come through digital channels only and move straight through processing. We are seeing the benefits of that also. Almost the active rate — monthly activate even though this portfolio is very new, is upwards of 70% plus for these customers. These customers are very active, they are using the Card. We are seeing better spends per-card. So once you build a portfolio of at least 200,000, 300,000 we will be able to see the behavior and accordingly take whatever if there is required, any action, which is required we will take but as of now as per our plan whatever we are saving in the cost of acquisition we are putting it back as the customer [Indecipherable].
Operator
Thank you. Mr. Singla, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Nilanjan from Nomura. Please go ahead.
Nilanjan — Nomura — Analyst
Thank you for the opportunity, sir. I hope I am audible. Couple of questions. So first is on the ECL while you mentioned about the higher transacter leading to the stage one but there is also a footnote which talks about some impairment, if you could explain that and the quantum of that. The second is, if you can talk about let’s say the revolver balance on a quarterly average basis sort of if you were trying to exclude the last ten days of spends, and how would that then compared to let’s say the 26% that we reported in the first-quarter. Also if you can briefly touch upon how the spending in the September and in early October is converting between EMI and revolver, and finally if you can talk about also about lower employee cost sequentially. And if there has been a change in the headcount numbers.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah. I will take the question on the revolver. As we — as I said initially in my speech also, the last ten days of September witnessed a very good growth in this thing on account of our campaign with Amazon. If you normalize it with — I mean if you take-off the kind of spends over and above the normal run-rate what we see, the revolver share will almost equal to what we had at the end of the June quarter. So that way it is stable. We have seen a kind of a growth in the absolute amount also but obviously the growth is not in tune with the asset growth, overall asset growth, that is the reason for the decline in the share. But kind of some ballpark estimates do indicate like the percentage of customers who are revolving is more or less stable. That’s not a concern. But revolver swing is slightly stagnant is kind of industry phenomenon. But in terms of taking necessary steps whether we have taken necessary steps or not we have taken all necessary steps, you would have seen from the investor deck also that we are promoting more of a self-employed and [Indecipherable] kind of customers who have better propensity to revolve. We are focused, but the pace at which we were expecting obviously, that’s not the case, it’s second longer time, like in the entire industry. ECL question will be taken Aparna.
Aparna Kuppuswamy — Chief Risk Officer
If you’re referring to the footnote on the asset quality base, that’s a small number of Rs. 2 crores odd that relates to other assets. Not — not to basic credit card receivables some other operational assets that we [Indecipherable]
Nilanjan — Nomura — Analyst
Right. And there is also [Indecipherable]
Aparna Kuppuswamy — Chief Risk Officer
So these are security deposits.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
These are other assets where we have provisions that [Indecipherable] if look at our overall impairment losses after finite — above 996 for the half year, 994 for the [Indecipherable].
Aparna Kuppuswamy — Chief Risk Officer
It’s a small number for other some other operational assets that we get.
Nilanjan — Nomura — Analyst
And the final one on the employee cost. And the head count if you can.
Girish Budhiraja — Chief Sales and Marketing Officer
I think the employee cost if you’re comparing quarter-on-quarter the margin reduction is perhaps. Payout of PLP perhaps in the fourth quarter slightly would have [Indecipherable]
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Look, I just [Technical Issues] There is no change on headcount impacts marginally higher. The reason you’re seeing that a little lower is our CME cost is largely flattish so there is a change in actuarial estimates on long-term employee benefit. This is what is causing us to come on lower end of [Indecipherable] last quarter.
Nilanjan — Nomura — Analyst
Any quantification [Indecipherable]
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
[Indecipherable] same [Indecipherable] October. Okay, thank you so much.
Operator
Thank you. The next question is from the line of Dhaval Gada from DSP Mutual Fund. Please go-ahead.
Dhaval Gada — DSP Mutual Fund — Analyst
Yeah. Hi, sir. Thanks for the opportunity. Two questions. First is relating to revolver book. So it’s been you like almost one month from the quarter-end, if you could give initial perspective of conversions into EMI and revolver. And so that would be first question. The second is on the sourcing, so could you just provide some color on how the September sourcing was in terms of contribution of direct sourcing in that since we just make it between Banca and open-market, just if you could split that into direct as well, that would be useful. What kind of run-rate we ended the quarter and your commentary around how it’s likely to move forward and the sourcing mix between direct and other sources. Thanks.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yes, Gada, I will take the question on the sourcing. I think we exit the quarter particularly in September with a gross issuance of more than 470. 470,000 cards. It was contributed from channel ESCH around 40% in the month of September. As we said as we guided in the past like from the month of July onwards, again the Banca sourcing starts improving. We have been seeing improved traction. Both August and September we had around 40%, now it is actually trending at 43%, 44% in terms of share in the overall sourcing.
Coming to — regards to what is kind of numbers we are looking at going-forward. Our stated stance is like we wanted to target a net growth of 300,000 cards which we almost achieved in the month of August when we reach around 296,000 in the net growth. But later it is colored by some kind of attrition where we ended-up reporting like areas roughly minus 3000 Kind of growth in the month of September. But again, October also — October onwards we were expecting the volumes will continue. And our expectation that we will continue to have a net growth of 300,000 minimum. That aspiration is there and we are confident of reaching that.
Girish Budhiraja — Chief Sales and Marketing Officer
On the revolver.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah.
Girish Budhiraja — Chief Sales and Marketing Officer
So on the — So because this festive season started somewhere around September 23, September 24 when the [Indecipherable] started. So what we have seen is the spends number is already updated, we have seen very good spend continuing in the month of October so festive season has been very strong in Diwali. The percentage of spend converting into EMI is higher than normal because earlier as we said we — updated that we would see a 10% conversion into the EMI, this time it is because it’s festival season as well as more discretionary spending and more consumer durable spending happens so we have seen a higher conversion into the term balances. Revolve we will get to see in the month of November only, because it has to take 40, 45 days and payment cycle plus payment due date to be able to figure out how the payments have come back. So we will be able to see that in the mid of November to be able to report how much of that is going to revolve. And as MD sir mentioned, even in absolute terms from June to now, the revolver balances are actually grown. It is because of the denominator impact that percentage we are looking.
Dhaval Gada — DSP Mutual Fund — Analyst
Understood. Thank you, and all the best.
Operator
Thank you. The next question is from the line of Ajit Kumar from Goldman Sachs. Please go-ahead.
Ajit Kumar — Goldman Sachs — Analyst
Thank you for taking my questions. So a couple of questions. One on the…
Operator
Mr Kumar, sorry to interrupt you. Please use the handset mode the audio is very low.
Ajit Kumar — Goldman Sachs — Analyst
Am I audible now?
Operator
Yes, sir.
Ajit Kumar — Goldman Sachs — Analyst
Okay, so first question is on the attrition rate. Your attrition rate in both set of portfolio whether it is Open Market or SBI portfolio has gone up significantly in this quarter. And as you said earlier, impact of RBI circular or inactive cards have been limited for you. So what is driving this higher attrition in the portfolio?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think during the quarter you can make out like for the kind of volumes so what we have given this is what was the cards outstanding between both the quarters last quarter and current quarter. We have own more than 7 lakh odd kind of attrition is there. Although, which around 3.6 lakh sits on a contract for — I mean cards which are inactive for more than twelve months we have closed, 3.6 lakh. The remaining is the normal BAU attrition what we have. On account of both voluntary as well as the monetary.
Ajit Kumar — Goldman Sachs — Analyst
Okay, okay, okay, thank you. And the second one is on the interchange fee. So interchange fee as a percentage of spends has marginally gone down in this quarter to 1.38%. It used to be in the range of 1.5% to 1.6% pre pandemic. So when the large ticket size spend such as travel is back, why your interchange fee is not going up?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think interchange fee is aggregate is also a function of corporate percent, which typically has a higher interchange. And as we would have seen a quarter-on-quarter basis the share of corporate spends have come down so that majorly explained…
Girish Budhiraja — Chief Sales and Marketing Officer
Yes on retail the interchange has actually gone up because the travel component has — it’s stable in Q1 versus Q2 and e-commerce have grown. So on the retail the interchange has actually gone up, the impact in spends is primarily because of the lower corporate spends.
Ajit Kumar — Goldman Sachs — Analyst
Okay, okay and any reason why Corporate spends have come down?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think we said in the past also that competition intensity is very much there and it is impacting the margins also. So we are revisiting our strategy for the last few months so we exited a few low-margin or kind of negative kind relationships. And we are recalibrating our strategy. So in the long-term — at least in the medium-term we would like to take the share again back to 22% to 25% of the overall spend but in a very calibrated manner we will take — we’ll will improve the share of corporate spends.
Ajit Kumar — Goldman Sachs — Analyst
Okay, thank you.
Operator
Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go-ahead.
Abhishek Murarka — HSBC — Analyst
Hi, sir. Good evening. So my first question is on Slide 10. If I look at the spend categories especially the post spend, category two, three, four are all lower on a Y-o-Y basis. Also Category four, which is travel agents, hotels, airlines again that is lower 5%. The total spend in that is lower 5% Y-o-Y. So why are these lower? The basic understanding was that spends are picking-up across-the-board and also on — at the [Indecipherable] So can you explain this?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
So first I’ll come on the travel fee April-May and June is typically where travel season is there. So the seasonality typically is that you will get higher expense in the April-May June quarter and then again in the November-December January period. So that’s the standard seasonality. What we have seen however is that the decline in travel has not been what it was — used to be pre COVID numbers. So actually travel is going fairly strong in terms of both lodging, airlines and all categories. So 5% is hardly is what. I would say is most of — more or less stable in this category. Okay? On the point-of-sales trends…
Abhishek Murarka — HSBC — Analyst
Can I — sorry to interject but sir, this is Q2 FY ’23 over Q2 FY ’22. So this is not a quarterly comparison, right? So there would not be a seasonality impact here.
Girish Budhiraja — Chief Sales and Marketing Officer
There is a [Indecipherable] we will have to correct it. There is I think over Q1, last quarter.
Abhishek Murarka — HSBC — Analyst
Okay, okay, okay.
Girish Budhiraja — Chief Sales and Marketing Officer
Because overall this is the total spend on each category is that so w will [Indecipherable] for this. Thank you for pointing that out.
Abhishek Murarka — HSBC — Analyst
Okay, okay sure. And what about post spends. Again, that has come down Q-o-Q if this is Q-O-Q data.
Girish Budhiraja — Chief Sales and Marketing Officer
Yeah. So overall if you look at it post spends have gone up in this category, which is consumers durable, apparel and because travel is these are mostly online category but in consumer durables and apparel most of it has been to online. So if you look at it online growth in consumer durables is 39% and 212% because whole lot of e-commerce also get categorized as apparel. So online is increasing there.
Abhishek Murarka — HSBC — Analyst
Right. And just as a clarification the interchange between online and posts would be the same right because it’s on the MCC basis so…
Girish Budhiraja — Chief Sales and Marketing Officer
Yes, absolutely. MCC as well as kind of Card business being used.
Abhishek Murarka — HSBC — Analyst
Yeah yeah, perfect, perfect okay. So that explains it. The second one sir is on yields. Now the drop-in yields partially it would be explained by the mix of transacter, revolver and all of that. But there was also a regulation which said that you can’t charge penal fees late fees, et-cetera. From the date of making the purchase, you have to charge from the date it becomes overdue. Have those regulations also impacted your yield overall?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think the measures relating to I mean it would have some potential impact on the revenue, they came into effect only from 1st of October. So RBI has given slightly extended timeline of three months for those measures so September quarter will not affect any of those changes. But something to the capitalization on the. I think they came into effect from 1st of October. The full impact — I mean the September quarter result will not have that, and we are ready to feel like a unless we see considerable period in the quarter, October, November, December quarter, we will not be able to comment on to what degree this impact will be, but definitely there will be marginal impact will be definitely. To what extent that impact quantification will take time.
Abhishek Murarka — HSBC — Analyst
But you would have done some sort of analysis or some sort of estimation of the kind of impact because if you have to offset it you would need to know what kind of impact is going to come. So any kind of ballpark indication would be helpful.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Materiality wise we have called it out clearly because it will be you’ll see is the one where we saw kind of impact. n fact it accounts for just like a 5% to 6% of the overall fee-based income rate. Now, there is an additional step involved before you permit over the limit of taking an exclusive content from the customer. So initially there if any such kind of measure, I think unless the customer is aware or consumer is aware, they will not be able to exercise the option. So that one we have actually taken note of and called it out very clearly. It will take time to exploit that. Rest of the things, it’s too early to comment I mean at least we did not consider them to be very material. Well, definitely there will be some marginal impact will be there, negative impact will be there, but the one with [Indecipherable] We’re also — there also we are looking at kind of how do we create a kind of convenient customer journey where giving these consent or taking the consent from the customer becomes easy. So we are confident of flowing back most of it actually over a period of time.
Abhishek Murarka — HSBC — Analyst
Got it, got it. And then just, one quick question, opex, is there any kind of one-off?
Girish Budhiraja — Chief Sales and Marketing Officer
No.
Abhishek Murarka — HSBC — Analyst
Okay.
Girish Budhiraja — Chief Sales and Marketing Officer
No one-offs. think it had an impact of higher sourcing which is there versus last quarter. Our sourcing of the account has gone up. The impact is within the range because utilization of of digital channels are more on coming lower [Indecipherable].
Operator
Thank you Mr. Murarka may we request that you return to the question queue for follow-up questions. The next question is from the line of Vinod [Phonetic]from CLSA [Phonetic] Please proceed.
Unidentified Participant — — Analyst
Yeah hi thanks, for taking my question. Just a couple of ones. Firstly you mentioned the 10% of your spend converted into EMI. Can you give a similar breakup for how many convert into what percentage of spend eventually revolves. And also what percentage of your customers have ever revolved?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
So all of our — percentage of spend going into revolving that — there is no specific way to close that number because there are customer keep changing from transacter two revolver on a month-on month basis. So the payments coming these days because lot of EMI options are already available in front of the customer because from a payment due date so customers revolve as a short-term funding requirements for themselves. So the movement between customers changing from revolver to transacter it’s — and transacter to revolver also is quite substantial. We have not declared internally, but we we have not declared ever evolved customers or fully transacter customers but there are set of customers who are let’s say continuously transacters and there are a whole lot of customers who revolve occasionally, you can call it one-time two times, three times. There are some sloppy payers also who will forget to make the payment and are revolving come back on the in the next cycle. So some of that continues to happen.
Abhishek Murarka — HSBC — Analyst
Got it. And sir the next question sir, maybe a very basic stupid question. But now if someone has a [Indecipherable] SimplySAVE fund and then we want the cashback fund, so do you then lower the credit limit on SimplySAVE or do you simply have to cancel one of the cards. Just wanted to get a sense of whether alot of their existing customers itself will be upgraded to the cash [Technical Issues].
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think customers will have an option of flipping this. If he feels like a is better-off actually closing the Card and then opting for completely cashback card. Or otherwise they can flip the existing limits, or at the time of exercising this option if they are eligible for higher limit, he will get incremental limit under the new card also. So it all depends on the customer profile actually.
Abhishek Murarka — HSBC — Analyst
So [Indecipherable] if you can give [Indecipherable] for Rs. 100,000 or Rs. 400,000 you’ve given this card, how do you adjust from our existing base and how we are truly like open Market.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
No, no. So we did not — first of all that, there is no Rs. 100,000 number at this point of time. Look, let me clarify, okay, we have not given the numbers out as of now. The point initially was — being made was that this cashback card portfolio is not substantial enough at this point of time to make an impact on the overall portfolio, so that is point number one. The second point here is that as far was mentioning the customers, it is a choice of the customer. Second, also you want to note that simply save SimplySAVE and SimplyCLICK cards are at Rs. 500 annual fee. And Cashback Card is at Rs. 999. And the spend base annual reversal is also at a higher higher value. So there will be customers who will be switching over and taking it but in the — in our whatever trends that we’re seeing for the initial lot of customers, we do not see more than 10% to 15% of the existing customers coming in. Most of the customers are new customers which are coming in. And that was the whole idea, we were targeting customers who have e-commerce specific card with other banks and they are taking one card with one bank, another card with another bank and third card with third bank, it is to that population, younger segment that we have targeted this card that with one card you should be able to utilize this benefit across the e-commerce platforms.
Operator
Thank you Mr. Ajit, may we request that you return to the question queue for follow-up questions. Thank you. We’ll take the next question from the line of Karthik Chellappa from Buena Vista Fund Management. Please proceed.
Karthik Chellappa — Buena Vista Fund Management — Analyst
Yeah, thank you so much for the opportunity sir and belated Diwali wishes to the management team. Two questions from my side. The first one on the revolvers. Assuming the [Technical Issues] it is stable quarter-on-quarter, could you give us some qualitative on when you look at the core of revolve rate…
Operator
Sorry to interrupt your line, [Indecipherable] your line, sir. Please check.
Karthik Chellappa — Buena Vista Fund Management — Analyst
Sure, is this any better.
Operator
Sir, it’s still the same.
Karthik Chellappa — Buena Vista Fund Management — Analyst
Okay give me a minute. Is this any better? I’m actually increasing the volume almost to full. Okay great, sir my question is basically on the room formalized for the spend increase towards the end-of-the quarter when you look at the cohort of the revolver, those who revolve one year or three times year or five, six times a year, at which cohort, do you think the deterioration has been the steepest?
Aparna Kuppuswamy — Chief Risk Officer
It’s even across all. I don’t — there is no one particular category where [Technical Issues] it’s been in-line with the overall distribution. There is no particular one that we call out [Indecipherable] any — more than normal decrease or increase.
Karthik Chellappa — Buena Vista Fund Management — Analyst
Okay, got it. And to the point on the new sourcing mix where you’re actually seeing category B rising as well as self-employed rising. If I couple that with let’s say your 2.14% gross NPA and our provision coverage north of 60%, can we say that your credit risk appetite is actually improving at the margin.
Aparna Kuppuswamy — Chief Risk Officer
So that’s — if you recollect that is something we’ve been saying now for the last couple of quarters that whatever cushion that we have been tough on the credit cost we are using that to test a few things, and that is evident with the increased self-employed category. That’s the conscious decision. However, I think it’s important to note like you said earlier, this will always be calibrated, you can expect the segment to see how it does and only then we’d start it. We’re not going to do anything in a very [Indecipherable]. Thank you, Mr. Chellappa, may we request that you return to the question queue for follow-up questions. The next question is from the line of Pankaj Agarwal from Ambit Capital. Please go-ahead.
Pankaj Agarwal — Ambit Capital — Analyst
Hello sir, am I audible? level.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yes, you are audible.
Pankaj Agarwal — Ambit Capital — Analyst
Sir, what explains this [Indecipherable] jum -in operating expenses and roughly 19% [Indecipherable] if we look at at any other parameter whether your [Indecipherable] or whether your new card origination More or even normal that’s not increased by the same margin. So from where the fixed opex has come in this quarter.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
As I said earlier, it’s driven by two things broadly. One is our new account sourcing has gone up. It’s up about 44% versus last quarter. And second as our spend rate cost is running higher because we [Indecipherable] So those two are the factors which are driving cost to be higher versus last quarter.
Pankaj Agarwal — Ambit Capital — Analyst
And so right now we are — I think you are up 59% cost-to-income in this quarter, right?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yes.
Pankaj Agarwal — Ambit Capital — Analyst
So once let’s say your new additions comes down and all these testing are over, do you think you can manage your cost-to-income at roughly 55% to 56%, which was like pre COVID.
Girish Budhiraja — Chief Sales and Marketing Officer
So. I think [Indecipherable] said initially that even the festive period this year is continuing from Q2 and extending to Q3. So the cost-to-income will remain elevated, that’s what was initially mentioned. However, as the [Indecipherable] comes down our cost-to-income should come down because our spend is cost to come down. However focus on new account sourcing will continue and don’t parties come in. We’ll see efficiencies coming because our new accounts sourcing is coming at lower-cost compared to past-due to our focus on digital resources.
Pankaj Agarwal — Ambit Capital — Analyst
And one more question about your credit cost it has gone up by roughly fifty-fifty and so do your overall mix of revolver actually downfield loads up on a slip basis but as a person million done the standard. So what explains this cost during the quarter.
Aparna Kuppuswamy — Chief Risk Officer
So you have to look at would be numbers together okay so credit cost be one of the indicators and yes the credit cost has gone up quarter-on-quarter. The way to look at it is two things. One, the new book that come in. The Stage one b will obviously provide for it and the repayments will obviously take a few — some of it has come only over a period of time however the depreciation of the Stage one provision, okay? The other piece is that as we have recalibrated Capital we have seen some degree of increase on the Stage three also. However please read that number in conjunction if your numbers as let’s see you. If you look at our BCLC this is a better indicator of what we’re expecting in the future for the quality of the portfolio. The ECL rate has been stable at 3.3 now, pre covid that number used to be in the range of 3.5 to 3.75. So, like I said we have been picking-up in terms of expanding our risk appetite. However, nothing has yet impacted the quality to that extent. The way to look at credit cost is more or less same stations and not at a number in a particular quarter. That point we’ve been making we used to operate at 6.5 pre COVID. We will see that number move in a particular range over the next two quarters.
Operator
Thank you. Mr. Agarwal may we request standard return to the question queue for follow-up questions. The next question is from the line of Param Subramanian from Macquarie please proceed.
Param Subramanian — Macquarie — Analyst
Yeah hi, thanks for taking my question. My question is actually an extension of the last question. So on provisioning, so on percentage basis, why has the credit cost quarter-on-quarter, basically I picked-up some explanation on stage with assets but that have been inflated your denominator as well. So, I didn’t understand why the 5.6% has moved to 6.2% quarter-on-quarter. And also [Indecipherable] pre covid cost but that was on revolver [Indecipherable] mostly was 24% now so [Indecipherable] that’s my first question and I’ll come back to other.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think Param the stage one is provided at the 1.7%. Even though the stage one is kind of transitory, which may either revolve, some part of it may revolve, some part of it may come back into some [Indecipherable] Most part of it may get repaid during the quarter, during October-December. Still we provided 1.7% which in annualized terms has an effect of almost 66.8% over a base rate of 5.6%, whatever was there in the previous quarter could this has an effect of I mean momentarily increasing the passenger costs.
Param Subramanian — Macquarie — Analyst
So if I understood correctly this should reverse over the next quarter, right? Because we’ve seen a very abnormal last ten days, right? Is that the right understanding?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Absolutely. So to the extent there is [Indecipherable] so that automatically get a relief.
Param Subramanian — Macquarie — Analyst
Got it. Sir my next question is on the over limit fee, you touched upon that thing it’s 5% to 6% of the fee income. But any analysis you’ve done on how much could be the EPS impact we could see because of this coming into effect from Q3 onwards? And also on the opex trajectory, how much of the increase in the opex trajectory that we’re seeing is more structural considering we moved higher than that of net issue? Yeah, those are my two questions. Thank you.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think we have not computed anything of the EPS sepnd, you were talking about the impact on the EPS. I gave kind of quantification based on the current run-rate what we see as a monthly which we did not disclose earlier so that’s the reason we wanted to clarify that 5% to 6% kind of least there. This is not permanently locked but them mean as I’ve said earlier we are figuring out what is the right way o — creating right journey which is convenient for the customer to express his [Indecipherable] his mandate. So we are confident of [Indecipherable] it back. But of course we will also be constantly looking for opportunities to realign our pricing in line with the competition wherever opportunities are there. Already would have seen like it we have already come out and communicated to the customers around charging some fee income for the rental which is in line with other players also. So those opportunities anywhere we will explore, so overall we don’t feel it as a complete loss or anything but it will take some time for a complete [Indecipherable]. [Operator Instructions] The next question is from the line of Nitin Agarwal from Motilal Oswal. Please go-ahead.
Nitin Agarwal — Motilal Oswal — Analyst
Yeah hi [Indecipherable] So I have a question around the revolve rate on the self employed segment. Now as a strategy we have been increasing the mix of self-employed, this segment share is at 30% for the quarter, which is 17% in the portfolio level. So just curious to know what is the proportion of revolve rate in this segment so for us to better understand how this approach can help.
Aparna Kuppuswamy — Chief Risk Officer
So listen, the self employed portfolio tends to revolve higher, so — and that’s something that we’ve noticed and that’s generally the case. So whether it is the second tier salary or the self employed, the propensity to revolve is higher and that is continuing. And that’s one of the reasons why we said, we’ve gone back and re-calibrated the risk appetite. We brought some of these in just to be able to see how they perform.
Nitin Agarwal — Motilal Oswal — Analyst
I understand that but sorry if you can just indicate some range as to what is the typical revolve rate in this self-employed category that you’ve seen over the last couple of years.
Aparna Kuppuswamy — Chief Risk Officer
We haven’t given the segment levels revolve rate, like I said it is higher than the salaried, and again even with the salaried, obviously the government is lower than the second tier salaried is higher, self employed is higher than that. We haven’t really given the segment level revolve rate.
Nitin Agarwal — Motilal Oswal — Analyst
Okay. And secondly a very small question is on the — the economics of the newly-launched cashback card, how do you really see that will the sort of take longer time to scale-up on the profitability curve. Any thoughts around that.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
So as we have stated earlier when we look at the economics of coming out with a Card like this, we — in the present scenario we look at the cost which has to be incurred. So, for example, cost of participating with the co-brand partner payout to the co-brand partner, cost of acquisition, we took all that and decided to convert into a customer value proposition. So that is why is Card is only available when the customer applies on their own through digital channels so thereby we save a majority of our cost of acquisition. We are also saving moneys which could have been a potential partner payout which is quite substantial in these days. The third-part is that it also gives us strategic freedom to be able to tinker with the product at some date looking at the — where the consumer behavior is happening. Given these three parameters we came out with this product. When we look at internal parameters we see that but profitability is similar to what we see on a SimplySAVE or SimplyCLICK card. Now you have to also note that SimplySAVE and SimplyCLICK card are Rs. 500 product. This product is — now is available at this point of time first year free till March 31st but it has an annual fee of Rs. 999.
Operator
Thank you. The next question is from the line of Rohan Mundhra from Equirus Securities please go-ahead.
Rohan Mundhra — Equirus Securities — Analyst
Good evening, sir. Thanks for the opportunity. Sir, could you share what was the first delinquency in this quarter and also the provision number actually [Indecipherable] Stage one, Stage two, Stage three.
Aparna Kuppuswamy — Chief Risk Officer
So if you just go to this asset quality page, we’ve actually given the provision number also on that. So I’ll — I’m not sure I understood the question. The question is on what is the delinquency?
Rohan Mundhra — Equirus Securities — Analyst
[Indecipherable] during the quarter. [Indecipherable]
Aparna Kuppuswamy — Chief Risk Officer
So the increase in page three what is largely made-up of fresh slippages only. We have not given the split. If your question is on the slippages then we’ll get back to you with the specific number, it’s not part of this. However overall if you look at the GNPA the number is at 2.14% which is down slightly from last quarter.
Rohan Mundhra — Equirus Securities — Analyst
Sure, I’ll take this separately for the fresh delinquency number. And the provision that we have done in next quarter, how would you expect between Stage one Stage two and Stage three?
Aparna Kuppuswamy — Chief Risk Officer
So I think we’ve given the ways, if I look at the Stage one book we normally provided 1.7%, and Stage two is about 5.2% and Stage three is at 64%. So that’s the breakup and it’s already available if you look at we have given you the breakup of the stage of the receivables as well as the provision in rates. So that breakup should be very easily calculated.
Operator
Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go-ahead.
Shweta Daptardar — Elara Capital — Analyst
Good evening, sir. Thank you for the opportunity. My question is on subscription-based fee share which is standing stagnant if I compare both sequential as well as annual basis [Indecipherable] Sir any color on that [Indecipherable] could attribute this to any spends based reversal [Indecipherable] offset [Indecipherable]
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Shweta question is not clear if you can ask again.
Shweta Daptardar — Elara Capital — Analyst
Yeah. Sir my question is on subscription based fee share which is standing stagnant if I compare both sequential as well as on annual basis. Sir any color on this vis-a-vis of new account company sourcing or should we attribute this to any spends based reversals that might have happened.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
So Shweta, I think the answer to earlier [Indecipherable] last quarter so this is linked to our share of Enbridge reversals which is coming in due to which the subscription based fee is marginally low.
Shweta Daptardar — Elara Capital — Analyst
Sure. If I may squeeze in second question, you mentioned because of the new RBI norms 95% is various standards in terms of active portfolio. Do you see some [Indecipherable] on the CIF improving month-on-month basis and that the impact is almost behind.
Girish Budhiraja — Chief Sales and Marketing Officer
Yeah, so in the month of September we have taken if you notice that our — we reported a swift decline of almost around 3,000 cards. So while we did as Mitr mentioned 470,000 plus new cards. So in the month of September itself we have taken the complete impact of the RBI guideline and closed all those cards. From now onwards October onwards you should see an increase. And we are targeting at least 300,000 net growth on a monthly visits.
Operator
Thank you. The next question is from the line of Ashi Mishra [Phonetic] from PhillipCapital. Please go-ahead.
Unidentified Participant — — Analyst
Hi sir, thanks for the opportunity. If you flip out the revolvers into [Indecipherable] MOSFET. And the second question is around the category [Indecipherable] has come off even on a QoQ basis. So on these rates have actually gone up and if you look at the [Indecipherable] data the domestic arrival the National, the parties have also increased on a volume basis. All these Hotel [Indecipherable] across travel websites [Indecipherable] fee. So it seems quite out of that the category for spend should come up even on a QoQ basis because the [Indecipherable] has also gone up so travel tickets escalated even on a Q-on-Q basis. So if you can throw light on these two questions. Thanks.
Girish Budhiraja — Chief Sales and Marketing Officer
So I’ll first answer the travel category. So the category for air is travel agents, hotels, airlines, railways, entertainment and restaurant. We club this altogether as more as a travel and entertainment category, however travel itself and logging itself are the large components of these. Okay? Now while in April May June quarter the travel bookings, a whole lot of travel bookings happened, at least 30 to 45 days prior to when the people are traveling. So with seasonality what we have seen is what you see actually on the ground the bookings happened slightly earlier on that one. So in the past what we have seen is pre COVID that May June and November December are the high seasons of ticket booking. Ticket booking start on April — April or so and by the end of May and early-June most of the ticket bookings are done. Similar trend you see in the November also. Regular travel, emergency trvel, all that stuff will continue but the children holidays and the leisure travel typically follows these items.
Unidentified Participant — — Analyst
Right, and the first question?
Girish Budhiraja — Chief Sales and Marketing Officer
First question.
Aparna Kuppuswamy — Chief Risk Officer
We’ve not really shared that split of revolvers into those categories in the past also, I think we only shared it on total basis.
Unidentified Participant — — Analyst
Ok guys, thank you, best of luck.
Operator
Thank you. The next question is from the line of Mohit from BOB Capital Markets. Please go-ahead.
Mohit — BOB Capital Markets — Analyst
Yeah, thanks for the opportunity. My first question was on active rate. if you look at the active rate for the quarter was 50% which was the same as the previous quarter but because of the festival season we haven’t seen any increase in the active rate, so any expectation for that [Indecipherable]
Girish Budhiraja — Chief Sales and Marketing Officer
So active rate in September has gone up but because we have given the quarterly number and we saw higher activity in last seven, eight days in the quarter — in the last quarter but between if, I talk about July, August and September, August was better than July and September was better than August. So that has been the trend-line.
Mohit — BOB Capital Markets — Analyst
Perfect. Just [Indecipherable] retail and corporate [Indecipherable] but as you said that [Indecipherable]
Operator
Mr. Mohit, please repeat your question. The audio is not clear from your line sir.
Mohit — BOB Capital Markets — Analyst
Hello, yeah is this better?
Operator
Yes sir, please proceed.
Mohit — BOB Capital Markets — Analyst
Yeah so seeing that the share of retail and corporate if I talk in terms of spends used to be around 75%, 76% retail and the balance 23%, 24% of Corporate. But now that you have certain corporate spends have come off, the ratio looks very skewed at 82% retail and 18% corporate. So going-forward should we expect that this research will continue?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
No, as I said earlier, we are targeting again improvement and taking it back to the ADR level but in a calibrated fashion. Because as I said because of the competition intensity some relationships are not working. More likely they have become more cash burn and we don’t want to be [Indecipherable] so that’s the reason we have actually exited some relationships but at the same time we are building a pipeline so we are confident of taking the share back to the ADR levels for a period of time.
Operator
Thank you. The next question is from the line of Jai Mundhra from B&K Securities. Please go-ahead.
Jai Mundhra — B&K Securities — Analyst
Yeah hi, sir, thanks for the opportunity. I wanted to check sir on your cost of funds which you had said that you were expecting 40 basis-point to 50 basis-points. Is this your total cost of funds what you are saying about the cost of funds from banks? So — and specifically sir would it be fair to assume that all your bank loan would be on — I mean would this be on MCLR or you we would be drawing from [Indecipherable] or UBLR.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
I think our sourcing particularly we have given the profile that if it wasn’t that core question is long-term and the remaining are short-term. Short-term is the bank lines which are linked to external benchmark. I mean it can be favorable or it can be repo kind of rate output. But short-term is mostly linked to the treasury bill signed-up so depending on the movement and depending on the it which, they are they will get reset. With regard to your other question on the cost of funds which, they have given its pipeline 5.4% that is the cost of borrowing on an average for the entire portfolio.
Girish Budhiraja — Chief Sales and Marketing Officer
Yeah. I think just to add what initially was that 5.4% for also because of is that effect on the last BorgWarner in the last one week, as I said in the last quarter it should [Indecipherable]by 5.7 for this quarter and for next quarter already said that it will be higher by 60 basis.
Operator
Thank you. The next question is from the line of Mohit Surana from CLSA please go-ahead.
Mohit Surana — CLSA — Analyst
Hi sir, I just have one question is — how has in your Open Market sourcing what is the percentage of customers that are new to credit and if you can also comment in terms of how it has trended over-time,.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah it will be very low because generally we get more of [Indecipherable] from the Banca channel where we have the comfort of looking at their financial transaction profile et-cetera. In the case of open-market it is negligible. Mostly it would be aided to some extent will be anti system but predominantly it will be credit facility [Indecipherable].
Mohit Surana — CLSA — Analyst
Okay sir thank you.
Operator
Thank you. We’ll take the last question from the line of Dhaval Gada from DSP Mutual Fund. Please go-ahead.
Dhaval Gada — DSP Mutual Fund — Analyst
Yeah, Sir thanks. So just two clarifications, one relating to the full-year cost-to-income. So I remember even in the fourth-quarter call you mentioned that this 57% kind of zone is where we target and then there could be quarterly volatility in the cost-to-income. Is that even same thought process that you have at the moment or give or take some percentage points, or it could be meaningfully higher just some clarification around that. And the second one is just on cost of funds. Again, [Indecipherable] just to be clear, in terms of where we ended this quarter we should see another 50 basis-points to 60 basis-point increase in the next quarter. Is that correct?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah coming to your cost-to-income, I mean when we guided in the past I think a couple of quarters back, obviously, the kind of increases what we have seen in the interest-rate scenario the NIM compression that was not even there in the reckoning at this time. We are confident that drain but it will have an upward way. I think the 58% perhaps, 57.5% to 58.5% kind of range, perhaps we can think of, for the period of 12 months, I’m not talking about quarter-to-quarter. Because as I said [Indecipherable] again [Indecipherable] through the month of October quarter, October, November, December quarter as well. So obviously we feel like it will continue to remain elevated. But that will not be the case coming to Q4 then it will be lower [Phonetic] So over a period of Palmer [Indecipherable] you average it out, it will be hovering around maybe 50 basis points here and there, around 50% actually.
Dhaval Gada — DSP Mutual Fund — Analyst
Understood, understood. And on the question of cost of funds 50 bps [Indecipherable] Q-o-Q increase. Is that correct?
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
No. I think what I said was that 5.4 which we are seeing is the [Indecipherable]. The actual number taking on the last two weeks borrowing and the denominator could be 5.7. So on top of that 50 basis points to 60 basis points percentile.
Dhaval Gada — DSP Mutual Fund — Analyst
Okay so sequentially you could see like around anywhere between 80 basis-points to 90 basis-point increase Q-o-Q, that’s the kind of magnitude we could see.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah, Dhaval, you have to think in the perspective that in Q4 we were at 4.9. What you’re seeing right now is 5.4. It’s up to 60 basis points higher than six months, however our the rates have gone up by 90 basis-points already. So the impact is not visible as colored as we are saying because of the last weeks that’s borrowing cost impact has not come in in the quarter. That’s the reason it’s at 5.4. However it should have been in the range of 5.7 for the quarter. And this and — and the next quarter it will go further high.
Mohit Surana — CLSA — Analyst
Understood. And we are saying NIM to be stable because of the optimization on the mix to offset the cost of fund impact. Hence, NIM could be plus or minus 10 bps, 20 bps on a sequential basis.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah, what I alluded to was more let’s say we are confident of management [Indecipherable] we are confident of keeping it around 12%. But definitely it will be lower than 12.3 given the kind of pressures what we’ve seen. Thank you and all the best.
Operator
Thank you. Ladies and gentlemen that was the last question for today. I would now like to hand the conference over to Mr. Rao, MD and CEO of SBI Card for closing comments.
Rama Mohan Rao Amara — Managing Director and Chief Executive Officer
Yeah. I would like to thank colleagues at SBI Card for their continued commitment, hard work and support this have contributed greatly to our continued success. I’m also grateful to our shareholders, investors and business partners who have believed in us and supported us growth. Lastly. I would like to reiterate our confidence in our ability and that up which has helped us confidence ensure sustainable and profitable growth. Wishing you all a wonderful festive season. Thank you.
Operator
[Operator Closing Remarks]