SBI Cards and Payment Services Ltd (SBICARD) Q3 FY22 Earnings Concall Transcript

SBI Cards and Payment Services Ltd (NSE: SBICARD) Q3 FY22 Earnings Concall dated Jan. 24, 2022

Corporate Participants:

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Girish Budhiraja — Chief Product and Marketing Officer

Analysts:

Dhaval Gada — DSP Investment Managers — Analyst

Anuj Singla — Bank of America — Analyst

Shubhranshu Mishra — Systematix — Analyst

Karthik Chellappa — Buena Vista Fund Management — Analyst

Param Subramanian — Macquarie — Analyst

Subramanian Iyer — Morgan Stanley — Analyst

Amit Nanavati — Nomura — Analyst

Prakhar Agarwal — Edelweiss — Analyst

Ajit Kumar — Ambit Capital — Analyst

Bhavik Dave — Nippon India Mutual Fund — Analyst

Harshvardhan Agarwal — IDFC AMC — Analyst

Shweta Daptardar — Prabhudas Lilladher — Analyst

Aakriti Kakkar — Goldman Sachs — Analyst

Roshan Chutkey — ICICI Prudential Mutual Fund — Analyst

Deepak Gupta — Reliance Nippon Life Insurance — Analyst

Gaurav Kochar — Mirae Asset — Analyst

Rohan Mandora — Equirus — Analyst 

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to SBI Card 3Q FY ’22 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 and Chief Executive Officer of SBI Card. Thank you, and over to you, sir.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yes, thank you, Faizal. Good evening, everyone. I extend a warm welcome and wish you a very Happy New Year. Thank you for attending the earnings call for Q3 FY ’22 today. We highly appreciate your presence and continued support. Firstly, I hope you and your loved ones are safe and healthy.

The third wave of the pandemic can be felt, but however, many aspects offer hope. There is higher preparedness this time around 1.6 plus billion vaccines have already been administered cumulatively with about 70% of the adult population now covered by both the doses, another positive EBIT [Phonetic] over 50% of 15 to 18 age category have got the first dose of the vaccine. The rate of hospitalization actually is lower than the previous wave. Thus despite continued battle with the pandemic, consumer confidence and business optimism continues to be stable.

Looking broadly at Q3 FY ’22, as expected, it started with the festive season, significantly driving up the overall credit card spends. As a result, we at SBI Card saw our total spends crossing trillion [Phonetic] by November 2021 it itself. Retail alone crossed this mark, 1 trillion mark in nine months, that is in December. As per RBI report, the total credit card base of the industry expanded to 67.6 million in November ’21, registering 14.4% year-on-year growth, which is the highest in last 16 months. However, still the penetration in the country remains very low, offering a long growth runway.

Digital payments in India have grown at a very fast pace and continue to grow steadily as an industry with a strong bounce back after wave two. The government and the regulator have been providing a number of enablers to support penetration of digital payment partners. Now coming to the question of MDR, the discussion paper from RBI is still awaited. In the past also discussions have taken place on MDR, but credit card has been excluded in view of typical nature of the industry, which includes cost to the issuer towards credit risk, free credit period, reward cost, etc. However, in case a revision takes place, various levers do exist with the industry players to after the impact.

I will now come to business overview and new initiatives. Q3 FY ’22 can be characterized as a return to growth and profitability. Let me share with you the reason for this optimism. To start with, Q3 FY ’22 had two big business milestones for us, like SBI card. For the first time ever, we added 1 million plus new accounts during the quarter. During Q3 FY ’22, we also saw highest ever quarterly spends, crossing INR55,000 crores, both retail and corporate spends put together. This performance is an outcome of customers belief in us and the ability of our go-to-market strategy. Steady and robust increase in new accounts has helped us to expand our customer base significantly and thereby overall spends also.

Our cards in force grew at 15% year-on-year in Q3 FY ’22, thus reaching 1.32 crore marks. As per the RBI November 2021 data, our market share of cards in force increased to 19.2% from 19.1% in FY ’21. As mentioned earlier, our card spends reached INR55,397 crores, witnessing 47% year-on-year growth during Q3. There has been a sharp increase in retail spends and corporate spends with both witnessing a 36% and 93% year-on-year growth respectively. Importantly, we witnessed 34% growth in discretionary spends, this is highest since onset of COVID-19. We continue to bolster our product portfolio. During the quarter, we rolled out SBI Card PULSE, a first of its kind credit card catering to fitness and wellness segment. This is another example of our sharp focus on changing consumer need and spending behavior and aligning our go-to-market speed with it.

Let me briefly also share with you a few actions for future capacity enhancement. We continue to invest in technology to build future capabilities and lever as a digital for business transformation. We now issue instant card for our ETB customers, that is existing customers, helping achieve cost efficiencies and yield faster activation. The digital journey for NTB prospect is also in the pipeline. We have upgraded risk models to adapt to machine learning, which has yielded process efficiencies and will further help generate balanced buildup and EMI conversions. We are upgrading marketing technology stack, which will enhance our engagement throughout the customer journey and to drive better ROIs on marketing spends.

During the quarter, SBI Card partnered with Paytm for tokenization, enhancing convenience for our customers. We have also upgraded our SBI Card mobile app with smart multi experience solutions among other enhancements. We have been witnessing favorable trends in asset quality, which has continued into Q3. I would also like to convey that there is no impact of the recent RBI circular on more stringent NPA recognition norms for NBFCs as SBI Card was already following these norms. Lastly, in our commitments to be complaint with regulations introduced time to time by the regulators, we successfully switched to the new mechanism for recurring payment as per the deadline mandated by RBI. We are also ready with Card on file tokenisation implementation, though the rollout to deadline for this has been further extended to 30th June 2022 by RBI. I’m extremely grateful to my colleagues at SBI Card who have always risen to the occasion and made contributions that have led to our success even during the difficult pandemic phase. I’m also thankful to our shareholders and other stakeholders for their constant support and their strong belief in us.

Let me now take you our financial performance for Q3 FY ’22. As can be accessed from some key metrics I have always shared, it is the power of robust business model and our calibrated measures that helped us to achieve such strong performance. During Q3 FY ’22, SBI Card saw strong revenue performance, backed by resilient interest income and strong fee growth. Our business model is inherently strong with robust fundamentals and based on strong business performance in the quarter, the company achieved PAT of INR386 crores at 84% year-on-year growth. Driven by 47% growth in spends, receivables have grown by 13% year-on-year to more than INR29,000 crores, further leading to total income growing at 24% year-on-year to INR3,140 crores.

Our operating expenditure was higher by 28% year-on-year, driven by higher business volumes, festive campaigns and our continued investment for future growth. On asset quality, our GNPA has come down to 2.4% as compared to 3.36% at Q2 FY ’22 and 4.51% at Q3 FY ’21. Net NPA for the period is at 0.83% as compared to 0.91% at Q2 FY ’22 and 1.6% at Q3 FY ’21. Overall, RBI RE book stands at 2% of the total receivables as against 4% in Q2. We have created additional overlay of INR76 crores for wave three and the overall management overlay to cover ourselves for future credit risk stands at INR162 crores as on December 2021.

Return on average asset for the quarter ended December ’21 is at 5%, which is higher by 179 basis points as compared to 3.3% for Q3FY ’21. ROAE is at 21.2%, which is higher by 742 basis points as compared to 13.8% for Q3 FY ’21. We have delivered consistently improving business performance over the quarters and when we see a consolidated nine-month view, the results are impressive. Our new accounts have grown by 36% year-on-year, spends by 53% and our receivables grown by 13% to close at INR29,000 crores, PAT of INR1,035 at a growth rate of 28% enabled by strong revenue performance and lower credit cost.

Our portfolio quality has been improving. GNPA rates have come down to 2.4% and ECL rates, excluding additional overlay at 3.4% is very close to pre-COVID levels. Our liquidity position continues to be strong during Q3 and the capital adequacy ratio for the period ended December ’21 is at 24.2% vis-a-vis the regulatory minimum of 15% and Tier 1 is at 21.3%. Our liquidity coverage ratio for the period ended December ’21 is at 73% as against statutory requirement of 60%. Our credit ratings remain excellent with the A1 plus and a AAA rating by CRISIL & ICRA for both short-term and long-term borrowings.

Overall, while the industry experts and the government are hopeful of lesser impact of current COVID-19 third wave on the business and economy, it is best to move forward with caution and closely monitor the domestic and global queue. At the same time, I would like to reinforce our belief in the inherent strength of our business model and risk structure, which has so far helped us maintain a high level of business resilience and ensure sustainable growth. Tremendous growth opportunity exist in the Indian credit card market, SBIC is well placed to exploit it to grow further. We are committed and will continue to pursue all opportunities to maintain a sustainable growth rate to deliver great value for our shareholders.

With that, let’s open the call for questions, Faizal. You may please open the call.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Dhaval Gada from DSP Investment Managers. Please go ahead.

Dhaval Gada — DSP Investment Managers — Analyst

Yeah, hi, sir. Thanks for the opportunity. I had few questions related to, the first one was on other — other income. So during the quarter, we saw about INR250 crore of other income, I presume INR140 crore was related to recoveries. What explains the balance number? It’s higher than the trend line. So that’s the first question.

The second one was on the spend base fee. So one of the observation is that it’s — pre-COVID this number is to be about spend — spend base fee as a percentage of overall spend used to be about 1.6% on average. This number in the last few quarter was about 1.4% and this quarter as well, it’s been around the same level. So what would drive this number higher? Is it spend composition or any other variable that one needs to keep in mind? So that’s the second question.

And the last one was on cost to income. Overall, this quarter the number was around 60% highest since the time we’ve IPOed, so this directionally is it a quarterly phenomena or directionally any comments that you have on cost to income would be useful. Yeah., thanks.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah. Thank you. With regard to your clarification, I mean sticking to your clarification on why there is increase in the other income. You are right, INR140 crores roughly is on account of recovery, around INR108 crores is on account of GST refund, which we a couple of years back we created as a provision. It was a kind of double payment. We claimed it from the authorities and we had to adopt a legal recourse for that. So finally judgment came in our favor and we got the money refunded by GST authority. This transect will be a mega provision reversal, so it was recognized as other income.

Dhaval Gada — DSP Investment Managers — Analyst

Understood.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, with regard to spend based fee, yes, the trajectory is more or less around the percentage. Girish, you can expand on that.

Girish Budhiraja — Chief Product and Marketing Officer

You’re right, it’s gone up because in the mix the corporate spend has gone up, is higher, and on corporate expense our fee rates are comparatively higher than retails.

Dhaval Gada — DSP Investment Managers — Analyst

Sorry, Girish, actually they have gone down, if you see for the quarter it’s about 1.41% [Phonetic]. This number pre COVID used be about 1.6% and last order was about 1.22% to 1.44%. So, ideally it should have gone up given the corporate mix was higher, but if — if I remember right, the number is about INR780 crores spend base fees.

Girish Budhiraja — Chief Product and Marketing Officer

So, Dhaval, we will come back to you, okay. But from a mix perspective or as a rate, corporate rate is higher than retail and as the corporate mix has increased this quarter you would see a rate going up slightly, okay. Let us check back on the numbers.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

With regard to query on cost to income directionally, whether it is unique to Q3. To some extent you are — you are correct, in the sense like Q3 [Indecipherable] which calls for conducting lot of marketing campaigns and extending the cash back to customers. On top of it our corporate spends also increased by almost 93%, which entailed again a pass back to the corporate customers. Of course, the business-related investments are also there in terms of new acquisition. Our new account sourcing has been quite robust at 1 million, which is like a 10% year-on-year growth. So all these culminated in terms of higher cost to income ratio for the quarter, Q3.

Dhaval Gada — DSP Investment Managers — Analyst

Understood. Thanks, sir. I’ll come back.

Operator

Thank you. The next question is from the line of Anuj Singla from Bank of America. Please go ahead.

Anuj Singla — Bank of America — Analyst

Yeah, Good evening, sir. Thank you very much for the opportunity. Sir, my first question is regards to the impact of competitive intensity. So one of the biggest private banks highlighted in the recent quarter there is a lot of pressure on fee and other — and income. Have we seen similar waivers in this quarter on the late fee or maybe in a membership fee? And the second part of that question, does it extend to MDR as well? So there is a key concern that because of the competitive intensity the MDR rates continue to trend down. So even if the mix remains same, like to like I’m, if you can give some commentary on that or retail versus retail, should we see MDR rates trending down from here, is that a necessity Phonetic] going forward?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So, Anuj, on the MDR, what happens is as a acquirer, you — when you’re dealing with much merchants you can have a contract for an MDR, okay. We are in the issuing business only. So for us we get our interchange which is dependent on the spends and the type of card, which is used in that, at that merchant outlet. So our interchange is fixed with respect to, from Visa and Mastercard and RuPay and [Indecipherable] It does not depend on the the exact contract of MDR [Technical Issues] acquiring bank and the merchant. So even if the MDR keeps going up and down, our interchange is completely protected.

Anuj Singla — Bank of America — Analyst

Okay, okay.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Okay, and as far as the other question that you asked on the competitive intensity. Yes, competitive intensity is there, but we have not seen any increase in waiver rate across the portfolio. It is broadly similar waiver rates that we have seen in the past of either whether it is late fee or annual membership fee, it is broadly the same trend. There is no major change or no change, which is worth making some differences or changes into our policies against this.

Operator

Thank you. The next question is from the line of Shubhranshu Mishra from Systematix. Please go ahead.

Shubhranshu Mishra — Systematix — Analyst

Hi, sir. Thank you for the opportunity. Couple of questions. First is on the risk management, if you could explain what can we have, how many collection agencies and how many on roll collection managers and also on [Indecipherable] that’s the first. Second is if we can understand the cost of acquisition, if it’s a SBI customers versus a non SBI customer? These are my two questions.

Unidentified Speaker —

So, in terms of collection infrastructure. So we have a fairly extensive network and the — it’s a combination of tele calling set we have, which is again a combination of, some we run with our own staff and some is in agency and we have a large number of field agencies specifically to manage some of the higher bucket. Now in terms of agency numbers, we have 500 plus agencies. So I think the infrastructure whether in terms of tele calling or even physically reachability is not an issue. There are fairly good agencies now available. Additionally, we have a very robust collection system as well, so which is a workflow management to manage all aspects of collection, which also has a component for us to be able to do digital collection. So I’m not sure if that answers specifically your question, but in terms of the infrastructure we don’t really have any concern, if that for your question.

Anuj Singla — Bank of America — Analyst

A number of employees in our system who are in collections, if that can be.

Unidentified Speaker —

So our own FTs, you would include all agency managers will be in excess of 700.

Anuj Singla — Bank of America — Analyst

Sure. And the second question.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

The question of cost of acquisition difference between Banca channel and open market channel. Yes, there is a difference. Banca channel tends to be a lower cost of acquisition than the open market. There are multiple other variables which determine the cost of acquisition in a particular period. So it is — it isn’t that there is a fixed value of difference between the two, but directionally if one was to understand, maybe it’s a rough idea, it’s a range, possibly a 0.7 to 0.8 ex of open market cost of acquisition possibly you get in Banca. But like I said, it varies. There are many other factors that will come into play, but in Banca our ability to run pre-approved programs is fairly strong because of the information that is there on the bank accounts and that can be used in building models, which gives us a better throughput.

Shubhranshu Mishra — Systematix — Analyst

Many thanks. I’ll come back in the queue.

Operator

Thank you. The next question is from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Yeah, thank you very much for the opportunity, Sir. Two questions from my side. In your opening remarks on the MDR discussion paper, you mentioned that the industry as well as SBI Cards has various levers to fully pass it on. Assuming that to be the case, what do you think will be the impact on industry growth rates?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, when I said levers it is basically, looking at the value proposition, typically a credit card has in terms of free credit period of 50 days to 52 days, which has to be funded by the issuer. And then the credit risk being borne by the issuer and of course, the strong loyalty and the reward kind of program, the cash-backs and all that stuff. These are all the benefits that accrue to the customer. So what we were articulating is, like if change is very significant, then obviously that will prompt the players to look at what confidence can be tweaked and how much can be absorbed or how much to be passed on to the customer. This is all a kind of chance, I mean opportunity that is there.

But having said that, still we need to see the discussion paper. I believe RBI is yet to come out with a discussion paper. We don’t even know the contours of the changes. In fact, we are hopeful that actually the kind of dispensation or are the kind of recognition what they were giving to the credit card industry earlier, we are hopeful that we may continue with the dispensation, but nevertheless, we need to wait and watch for the discussion paper.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Okay, got it. My second question, sir, is that this is the first time I think in a quarter where we have crossed 1 billion in new accounts. The films of these 1 million cards that we have issued compared to let’s say last year same quarter when we added about 900,000, has there been any distinction in the terms that we have issued, either in terms of the card fee or waivers or any other special scheme that we have done or are they broadly similar? And I also noticed that this quarter the share of Tier 2 and Tier 3 in new account sourcing is probably one of the highest in the last six to seven quarters, what would explain that?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

See, normally we know we always target a kind of Bank earned open-market contributing 50%, 50%. So Q1, particularly when you look at the quarter one of the current financial year, the Banca’s share was less, but then from Q2 onwards they have picked up and their sourcing has increased as was presented in the slide. Banca contributes to majorly to these Tier 3 Tier 4 kind of towns where we are comfortable sourcing, where we need not set up separate offices for collections, etc., because typically we have access to the operating accounts of these customers, the Banca provides that comfort. So based on that risk mitigant, we are actually able to reach out to these Tier 3, Tier 4 customers. So whenever Banca performs extremely well, then to that extent you can see a significant contribution from Tier 3, Tier 4 customers.

Karthik Chellappa — Buena Vista Fund Management — Analyst

And no change in terms, right? In terms of fees or fee structure also for the new accounts.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Absolutely, I mean this is similar to any other quarter.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Okay, got it. That’s all from my side, Sir. Thank you very much and wish the team all the very best.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Param Subramanian from Macquarie. Please go ahead.

Param Subramanian — Macquarie — Analyst

Hi, thank you for the opportunity. Firstly, I wanted to ask on the revolver mix. So, obviously we’re well below in a pre-COVID sort of levels, but do you think you know which has sort of bottomed out and does it improve from here? Any comments on that. And secondly, on your credit cost, so you’re still at about 9% growth rate costs, whereas pre-COVID this used to be about 6% to 7%. So does that and how long before we get back to that sort of level? Those are my two questions.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, I think with regard to your revolver, question on revolver, having seen the kind of variation that happened throughout the quarter, of course we are giving the quarter end pictures to you, but internally we looked at the trending part, it has bottomed out in October and again started improving. In fact, in absolute terms also when the NEA has grown by 9%, revolver kept pace with that. Ideally it should outpace that growth so that actually it’s contribution to the overall NEA should increase, but it’s — it is taking time. So definitely it is taking slightly longer time, but we are hopeful because as you know, like we have a clamped down on certain segments of customers one year back, maybe about 15 months back and slowly depending on the kind of comfort what we have, we are recapturing our risk appetite, permitting these segments of customers, not complete a blanket reversal, but carefully we are picking to choose a small sub-segment of these customers, and of course, we had the benefit of some alternate data we are consuming that in terms of carefully underwriting. So this is a journey. So we are hopeful that this will improve, but it will take some time.

With regard to your other question on the gross credit cost. Yes, I think to some extent, I mean the trend line is okay, particularly if you take out INR76 crores overlay, which is more like a contingency reserve what we created. It is not allocated to any segment. So it is not for any identified distress. It is more like keeping a question for, in case the wave 3 impacts the delinquency, that kind of contingency. If you take it out, it is actually 7.9%. So, which is in line with the trend expected. But could it have been maybe 6%. Yes, ideally, we should have, we would have desired. But slightly the RBI RE portfolio flow rates, I think they were higher than what we anticipated. So that we had to absorb in the current quarter in terms of recognizing the strength and even accelerating some charge-offs. In fact, we disclosed in the note also that more than INR200 crores, we went for accelerated charge-offs, with of course a corresponding provision relief, but the overall percent is in the RBI RE if you look at, it is only 2% now, and out of the 2% also 70% of the portfolio is almost current, that means like it is less than 30-day delinquency, only 30% is 30 plus bucket. So we are very, very hopeful that actually the credit cost will further come down.

Param Subramanian — Macquarie — Analyst

Great, thanks, sir. Thanks for those comments. Just if I could ask one last question. Could you explain the rationale for this INR80 crore management overlay you’ve made because asset quality seems to be improving, the NPA is coming down, and do you look to revise this any time soon as and if things are fine after the survey [Phonetic]? Yeah, that’s it from me. Thank you, sir.

Unidentified Speaker —

So like Sir had mentioned, the asset quality trend is a sequential decline quarter-on-quarter. We have made a contingency vision of INR76 odd crores which is not for any identified stressed asset, it is just an estimate that if wave three creates the same degree of disruption as wave 2, we would see some increase in delinquency, especially from our earlier bucket. This is just to cover that. So it is purely an estimate, like a contingency floating provision, That is the logic for it. So we looked at our deterioration and as you would notice, obviously in wave two the extent of deterioration was not as much as wave one. Our ability is much better. So that’s just a rough estimate that we’ve made.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

But to your point, Mr. Subramanian, that we will — we will be able to write back if the trends are good. I mean, if there is no heightened delinquencies, we will wright back this provision. So it is more of a contingency in it.

Param Subramanian — Macquarie — Analyst

Okay, thank you so much and all the best. Thank you.

Operator

Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead.

Subramanian Iyer — Morgan Stanley — Analyst

Oh, Yeah, thanks for the opportunity. This is actually a follow-up to the question jus asked. Basically, if I look at the rate of the bad loan formation, it seems to have basically, say kind of stagnated around that 10% annualized mark, so on my rough calculations it’s approximately the net slippages for this quarter are about INR600 crores and that’s been the number in the last two quarters also broadly. So — so when do you see this number actually coming off?

Unidentified Speaker —

So as we were saying, a majority of our statistics for the earlier quarter was also on account of the RBI RE book. We have written off almost seven accelerated charge-off of more than INR200 cores out of that book. The quality of our incoming book is significantly better and you, and if you look at our growth credit Technical Issues] sequentially tis coming down. I think over the next one or two quarters you would see that come back to the earlier level.

Subramanian Iyer — Morgan Stanley — Analyst

Understood. And Mr. Rao mentioned that about 70% of the actual RBI RE book is is less than 30 days past due. So is that a part of Stage 2 or Stage 3?

Unidentified Speaker —

It’s Stage 2.

Subramanian Iyer — Morgan Stanley — Analyst

Okay, thank you. Thank you.

Operator

Thank you. The next question is from the line of Amit Nanavati from Nomura. Please go ahead.

Amit Nanavati — Nomura — Analyst

Yeah, hi. Question on MDRH [Phonetic] if you can broadly give some sense on broad categories where the industry enjoys higher MDR rate versus lower MDR rates meet in terms of size of merchant, online, offline or essentially like utilities versus discretionary, just broad categories where the MDRs are much lower than the overall average MDR, that would be helpful?

Girish Budhiraja — Chief Product and Marketing Officer

So [Indecipherable] able to comment on the MDR part, but I will tell you about the interchange that we received from — from the networks. Typically, there are two ways that they’ve cut it. First is on the discretionary spend. Typically, the interchange is higher. The second way to look at it is on the premium products, the interchange is higher. So we get, for example, higher interchange on our Elite, OLA [Phonetic] Prime, those cuts. So it’s because of the kind of category of cards that it is. Some examples I can give you is that the interchange on, for example, categories like consumer durable after jewelry would be higher, categories like travel agent, hotels is higher, restaurants is higher, utilities is lower, insurance payments would be lower. There is typically no interchange on some categories like fuel. So there are these different categories in which they are broken up. Essentially, the principle remains the same. Discretionary, non-discretionary, premium versus non-premium.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So I’ll just add to what Girish said, and especially double adopted question about reducing interchange compared to the previous period. Couple of things. One is as Girish mentioned that category wise interchange is different. So what has happened is when you comparing to a pre-COVID period, the travel is yet to pick up, so the interchange in that is higher and so that is yet to pick up. So that is what has impacted the interchange, while the utility, etc., their share is higher.

The second thing is the apex markup that we get on international travel, that used to be high earlier. That segment is yet to pick up and that’s what is also impacted the overall interchange.

Amit Nanavati — Nomura — Analyst

Got it. So broadly just if in case, lets says there is in India rationalization and there is more ticket size focused on more essential category focused, say to to assume that the net impact for the industry would be relatively much lower because you don’t retain much on the interchanges in which case is lower there.

Girish Budhiraja — Chief Product and Marketing Officer

See we won’t be able to speculate on because idea is once we see the actual changes, what are ways for adding or any regulator proposals. However, at this stage, I must tell you that the interchange on utilities is quite — is looked at the lower end of the spectrum, okay. So, and there the ticket sizes are also lower. Average ticket size on a card — credit card varies between INR3,500 to INR4,500 depending on the card type and other things. And in both categories are primarily large ticket size category are consumer durable, jewelry, which are in any case, as I mentioned higher interchange category, lower the utility bills, telephone bills, those are the categories which are lower ticket size and there there interchange is already at a lower end.

Operator

Thank you, Mr. Nanavati, may we request that you return to the question queue for follow-up questions. Thank you. The next question is from the line of Prakhar Agarwal from Edelweiss. Please go ahead.

Prakhar Agarwal — Edelweiss — Analyst

Yeah, hi, sir. Three sets of questions. To start with, when I look at your 30-day spend active rate, that number has supposedly has gone up to around 52%. What would you attribute this to? And do you see this happening for the industry as such or properly for us like this tentatively on the higher.

Girish Budhiraja — Chief Product and Marketing Officer

So 30 days spend active rate at 52% is good. We have seen that it is higher than the industry, that is what we get from Visa and Mastercard. There are primarily two reasons for it. The first is that it was festival period, as we have also invested into getting the customers to spend, a lot of offers have gone to the market. So that typically encourages a lot of these customers. We have seen that once customers start using the card, even if they will not use the card every month, but they start getting used to it and you’ll see a much higher rate on a, if I take a 90-day it’s kind of stuff. So, but the customer gets — starts getting into a habit of using the card and paying for the thing. So that is one reason.

Our active rates are higher than the industry. And one other major reason for that is that we charge a fee for most of our cards at the point of sourcing, even though we will give the customer the same value back once he pays us the fee, but not selling free for life card is also another major contributor to having a active portfolio.

Prakhar Agarwal — Edelweiss — Analyst

Perfect. And any indication as to what industry would be working with to 52% corresponding to us for industry, any ballpark there?

Girish Budhiraja — Chief Product and Marketing Officer

Visa and Mastercard have always told us that the — we are higher than the industry average by close to 5% to 6%.

Prakhar Agarwal — Edelweiss — Analyst

Okay, perfect. Secondly, would this sort of trend that we probably are seeing at least on the spend activity, do you see that over a period of time that populating into higher receivable mix in terms of higher revolver mix, do you see that happening or it’s too early to draw the — draw a trend over there?

Girish Budhiraja — Chief Product and Marketing Officer

So for a higher revolver mix there are multiple things have to come together to happen that. One is, yes, you are right. Spend is the first important contributor because if the customer does not spend then revolving will not happen. Second thing is also about customers’ ability to pay customer, how he is looking at that stage, the utilization on the card. There are multiple levers, basis which customer decides to revolve or not to revolve. Just give us a minute.

Operator

Mr. Agarwal, may we request that you return to the question queue for follow-up questions.

Prakhar Agarwal — Edelweiss — Analyst

It is not answered yet.

Operator

Okay.

Girish Budhiraja — Chief Product and Marketing Officer

Okay. Gan you hear me.

Prakhar Agarwal — Edelweiss — Analyst

Yeah, we can hear you, sir.

Girish Budhiraja — Chief Product and Marketing Officer

Okay. So as I was saying, so there are multiple such things and these days what is also happening is that we are seeing that a lot of customers are getting — using that new spends and converting that into instalment lending product. So if you look at it and as has been mentioned earlier in the opening remarks, the good part is that we — our rate of revolver increase in absolute terms, revolver asset increase was similar to the overall asset increase, which is very good. So that’s, and this is the trend which we have seen after October because if you look at month-on-month, October actually went down and it is a recovery in the, in November-December and it is looking like that. While the interest on instalment lending products is increasing. So as more discretionary spends have come in, high ticket size spends have come in, you see more EMI conversion. So that’s — that way it has been much higher than the overall asset increase rate. So it’s a good competition. It will settle at some level, 27% is not the level, it obviously is going to go up as the things remain normalized. What level it settles, we will have to see.

The second quarter, we also believe that the terms increased lending products, term assets, that will also increase. So there are two levers which are playing there, not only one.

Prakhar Agarwal — Edelweiss — Analyst

So, yes, last bit on this, on this one…

Operator

Sorry to interrupt, Mr. Agarwal, may we request that you return to the question queue for follow-up questions.

Prakhar Agarwal — Edelweiss — Analyst

Sure.

Operator

Thank you. The next question is from the line of Ajit Kumar from Ambit Capital. Please go ahead.

Ajit Kumar — Ambit Capital — Analyst

Thank you for this opportunity, sir. Just one question. You’d cost of fund has declined on Q-on-Q basis this quarter and this decline in cost of funds has come after increase in last quarter. So any qualitative — qualitative comment there on this trend? Plus why has the cost of come down despite increase in fund as your borrowings have increased substantially in this quarter? And what can be the trajectory going forward as far as cost of fund is concerned? That’s it.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

See our cost of fund in the last quarter was mainly because of the year — quarter end averages of receivable, that’s why it got impacted and it showed a little higher. Our daily cost of fund has been running around the number of 5.4, 5.5, and that’s what we’ve been reporting on a quarter-to-quarter basis. We do believe that at least for the next few months similar kind of cost of funds should continue, because while the increase in borrowing is there, but fortunately we’ve been able to borrow at quite competitive rates in the past and we believe that at least in the near future we’ll be able to model like that.

Ajit Kumar — Ambit Capital — Analyst

Okay. Thank you, sir. Thank you. That’s it from my side.

Operator

Thank you. The next question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead.

Bhavik Dave — Nippon India Mutual Fund — Analyst

Yeah, hi, good evening, sir. Sir, a couple of questions. One is on your cost opex, where we see last time around we did some 900,000 cards, that we, 950,000 card that we added and this time around, like we said 1 million cards. If you look at our opex on an absolute basis on the other opex side which around INR1,200 odd crores jumped to INR1,550 crores, INR1,560 crores. Just wanted to understand if you could give us some sense on what is the increase in that number that we are seeing? Is there any one-off due to the, due to the season? If you could just highlight something on that would be helpful.

And number two was on your profitability on the spend that happened on a corporate versus retail, so corporate will have lower NP as you understand, but will the profitability we hire as your cost of acquiring that customer spend is lower and also your you’re indicting this or your spend to, I’m sorry spend base fee income to spend is relatively higher. So on the profitability front on the corporate business and the cost front. These are questions. Thanks.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So on the cost front, yes, you’re right, if the number of accounts have increased so will the absolute cost of acquisition too will increase. The rate is more important. So rate wise [Technical Issues]

Operator

Ladies and gentlemen, the line for the management has got disconnected, request you all to please stay online while we reconnect them. Thank you. Ladies and gentlemen, thank you patiently waiting, the line for the management is reconnected. Thank you, and over to you.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, sorry, we got disconnected. What I was saying was, yes, the cost of acquisition has gone up as the number of accounts that we have sourced are more. The rate of acquisition, which is the cost of acquisition per account, that has remained the same. So it’s more of an absolute terms, absolute amount what has come into the total cost. The other one is, yes, you’re also right, the cost — the spend based costs have also gone up. One is because of the festive season that is there. So you must have seen there were cash backs being offered at sector, so that has come. The other thing that we see as the spends are the rising consistently and we are also seeing that the customers are using the cards regularly. The reward point cost and the redemption of reward points is also coming back. So that we consider as a good cost that shows the engagement of customer is that they’re regularly using the cards. They are utilizing the benefit associated with the card. So that is also there.

The third thing is as to corporate spends, right? We, there are costs associated with them as well, which drives alongside. So that too has come and that also leads me to the other question that you had the profitability on the corporate card. The profitability on the corporate card is on the lower side compared to our retail card. This is more of what we call it is a pass-through kind of business, wherein the corporate uses the card to get some amount of benefit instead of making a bank transfer and similarly our margins are also lower, but what we do is this gives us an entry point into the corporate — corporate account, wherein the corporate customer initially uses it for utility payments and later on brings it as a travel and T&E kind of usage to its own employees. There the margin for us improves, but this for any on the corporate side, this takes a while for it to build up and also because of the fact that these days travel is restricted, not many people are traveling. So that bit is yet to come, but what is happening is through our corporate card program we are able to enroll more and more corporates into the utility payments at this point of time and then the T&E would follow at a later date.

Bhavik Dave — Nippon India Mutual Fund — Analyst

Correct. So, just sorry, one follow-up on the cost front, this quarter like one of participant mentioned that 60% is their cost to income stands, historically has been more at 57%, 58% odd percent. Should we, with the festive season behind, should this trend more towards that 57% to 58% for the coming quarters. Is that a fair assumption to work with?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So I will not give a specific number, but in festive season you look at our previous year’s numbers as well. Every time during the festive season the cost to income goes up because there are lots of cash back offers, etc., are made. This will come down in the coming quarters.

Bhavik Dave — Nippon India Mutual Fund — Analyst

Sure, understood. Okay, thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Harshvardhan Agarwal from IDFC AMC. Please go ahead.

Harshvardhan Agarwal — IDFC AMC — Analyst

Hi, sir. Thanks for the opportunity. Sir, Just wanted to understand the total write-offs that you’ve done during the quarter?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Can you repeat, like first quarter, write-off?

Harshvardhan Agarwal — IDFC AMC — Analyst

Yeah, write-offs.

Unidentified Speaker —

800 [Phonetic].

Harshvardhan Agarwal — IDFC AMC — Analyst

Sorry, I didn’t get that number.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

It’s 812 [Phonetic]. This includes accelerated write-off of INR226 crores against which we add a corresponding provision release.

Harshvardhan Agarwal — IDFC AMC — Analyst

Sure, sure. Thanks a lot, Sir.

Operator

Thank you. The next question is from the line of Shweta Daptardar from Prabhudas Lilladher. Please go ahead.

Shweta Daptardar — Prabhudas Lilladher — Analyst

Thank you Sir for the opportunity. Your, the amount that as a percentage of overall revenue, so this has already converts to 33% share and you have in the past one third for each and every component. So directionally how and when do you see this happening?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

See that externally the way that we look at is, that RBI RE should come close to, is almost close to nil at this point of time. So it’s, 2% is left only. It started with 9%. So in few quarters it’s come to almost close to zero. And we, as I’ve mentioned earlier, 70% of it is current. So it should continue to come down as we go into, because nothing is getting added to it. Our term balances are already at close to 34% or 33%, 34%, so that should continue. As I was mentioning, there is a consumer behavior positive in that direction. Even though there are — these balances are, the tone for these balances is lower because, and there is a pay-down which happens on these balances quite quickly. However, we, a lot of new demand is there and we have seen a very strong demand in this, for example, in this festival season also leading to a slight increase in this term portfolio that should go up.

We also believe that our revolver as has been mentioned earlier. At this point of time it is, facing at the, almost at the same rate as our overall asset increase, so it remain stable. However, in the month of October, it has come down and then in November and December because of the spends in October and November, we have added in absolute amount to the revolver, and it’s now at 27, and we expect it to go up. By when and how much, we’ll have to, we’ll have to see, but it does take two, three, four quarters for this spends to start stabilizing and getting into of the asset buildup as a customer. The transacting Technical Issues] will come down given that the above 3 I’ve already given, the expected direction.

Shweta Daptardar — Prabhudas Lilladher — Analyst

Sure, I’ll come back in the queue for the next question. Thank you.

Operator

Thank you. The next question is from the line of Aakriti Kakkar from Goldman Sachs. Please go ahead.

Aakriti Kakkar — Goldman Sachs — Analyst

Hi, good evening, sir. So I have one question on the competition front. So there has been announcements about other banks getting into various partnership, mainly with respect to issue cards. What is your strategy on that [Indecipherable]

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Can you just repeat the questions, the voice is not clear.

Aakriti Kakkar — Goldman Sachs — Analyst

Yeah, sorry, is it better now.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, yeah.

Aakriti Kakkar — Goldman Sachs — Analyst

Yes. So there have been a lot of announcements about other traditional bank, other credit card issuer getting into partnership with FinTechs to issue credit cards and we have been seeing an uptick in the traction on that front. So what is your strategy on that? Also do you see any competition from this?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I mean, we don’t know, we can’t comment on their strategy, I mean, a new NBFC or a new bank, which was not into credit card play, but suddenly having a tie-up with FinTech, etc., for issuing the credit card so that they fully understand the ramifications and that is their scalable model or not, we don’t know. But we continue to have partnerships. We have a lot of banks with whom we have partnered. We have we issued open-ended cards, etc., where the transparency a big and the scalability is proven, and of course, the entire [Indecipherable] is on our side, only the the marketing part is only done by the entity and the bank. I think this, impending the digital lending kind of discussion paper, it was there, and if we take some shape by, we have some circular, etc., then more clarity will be there. People will understand what is the additional complaints they will have to do. So that may change the game slightly.

Aakriti Kakkar — Goldman Sachs — Analyst

I have one more question, if I may. It is a little open-ended, but would be great if you can give us some direction in terms of how you’re thinking about the business. So if faced the choice between growth and profitability, what would be your choice? Which metric is, which is the more important metric to you, growth or profitability?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think as large player and as a regulated entity also, we don’t have the choice of only picking one. So I think we have to marry both. So that way the philosophy, that SBI Card has always been like a sustainable growth, not one pursuing one at the cost of other. So for that purpose, obviously it requires lot of effort in terms of identifying the customer segment very, very clearly, engaging with them, offering the right product, offering the right value proposition to them so that they will continue to engage with us. But the strategy is always like a sustainable growth.

Aakriti Kakkar — Goldman Sachs — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Roshan Chutkey from ICICI Prudential Mutual Fund. Please go ahead.

Roshan Chutkey — ICICI Prudential Mutual Fund — Analyst

Yeah, thanks for taking my question. Sir, trying to understand how — who you think about penetration in the salaried segment in the Banca channel — in the SBI bank channel. So what is the potential there and what are you offered by the bank?. If you can talk little bit about that.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Okay. See the way we look at the potential over there, there are anywhere between 430 million to 450 million or 43 crores odd customers at the top of the funnel. We exclude [Indecipherable] We would exclude a degree of dominant and active accounts. We would exclude some of the rural areas and geographies where we won’t issue cards. So it’s an estimate of the eligible population, which is around 200 million or 20 crores. Within that, we have issued about 6 million cards at this point of time, which means the balance remains an opportunity, both from the asset customers of SBI and the liability customers of SBI, and then also the partner banks where these arrangements exist. So that is a huge potential in terms of issuing cards and to preempt the question saying then a lot of card can be issued in a short period of time, the answer would have been yes. But for the fact that they need to be profitable, they need to be spending on the card and accordingly they need to be picked up prudently and they are picked up in different phases or program so that we can continue to monitor these metrics, which determine how this program needs to move forward and so we run this program called Shikhar in multiple waves and we booked a large number of cards under this particular program. So that is where the total potential is and the current penetration and there’s a lot that more can be penetrated over there and that program will continue to evolve with more digitization being brought in.

Roshan Chutkey — ICICI Prudential Mutual Fund — Analyst

That’s all from my side.

Operator

Thank you. The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance. Please go ahead.

Deepak Gupta — Reliance Nippon Life Insurance — Analyst

Hi, good evening. Thank you for taking my question. Just wanted to understand on Stage 2 asset quality. While it has improved quarter-on- quarter, it still remains on an elevated level. If you could give us some qualitative aspects on the Stage 2 loans and what are your thoughts are, how that will play out in the next few quarters? Thank you.

Unidentified Speaker —

Like we’ve mentioned earlier, the asset quality, if you were be look at versus total gross credit cost basis, it is improving, okay. Quarter-on-quarter your seeing an improvement. The other thing that we said, a large part of our [Indecipherable] pool has been either written off or has run off. The big RBI RE pool that you at talking about, I think it was close to 9%. We are now sitting at just 2% of the book being of RBI RE, otherwise also it sounds as the distribution of Stage 2, even quarter-on-quarter the total number has come down from 11% — 11.2% down to 9.4%. So you have to look at it terms of two or three metrics, okay. Overall, if you looked at our asset growth, from last quarter to this quarter, it has gone up by almost INR3,000 crore and majority of the increase is now just sitting in Stage 1, Stage 2 has topped it. So incrementally whatever business we are booking and the new, any that we are building up is sitting in Stage 1. So that’s the reason why you see that the credit cost have started to come back, and this trend will continue.

Deepak Gupta — Reliance Nippon Life Insurance — Analyst

Sure. Thank you so much.

Operator

Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead.

Gaurav Kochar — Mirae Asset — Analyst

Yeah, hi, good evening. Thanks for taking my question. Just an extension to the question asked earlier on revolvers. Currently, the revolver book is about 27%, whereas if I look at earlier it used to be 3 percentage, 4 percentage point higher. So just wanted your thoughts around and given that you’ve been seeing that incrementally the quality of the book is better, where do you see the revolvers trending over the next one year? And just as a — as a rough cut form of estimate, for every 1% increase in revolver rate, what is the net-net impact on ROE over the years? I mean you can take some historical sort of, maybe steady state pre-COVID years. What was the contribution of that additional 1% at a net level on the ROE? If anything you can qualitatively.

Girish Budhiraja — Chief Product and Marketing Officer

The first question on related to whether the revolver percentage would go up. Like we’ve stated earlier, 27% seems to be on the lower end now and in the last two quarters if you see, this would — this seems to have bottomed out because we were at 27% in September and now in December as well. And as Sir had stated, we actually saw a little bit of drop within the month in the quarter. In October it actually went down a bit more and then gradually started coming back from November and December and both November, December better and finally we ended up at 27%. That did impact the yield that we had for the, for the quarter, although there was a marginal drop, but there was a drop because of the — because of the drop in October month.

As far as the impact on the ROA is concerned, so you can calculate it. You take the total asset that we have, have 1% of that minus the cost, that’s the straight income that you have to the ROA side, barring some amount of losses that we will have to bear, because there is no extra expense. There are only two costs which comes. One is the cost and a little bit on the credit cost.

Gaurav Kochar — Mirae Asset — Analyst

Okay, just to look — to frame this a bit differently. If we reach the — the revolver rate pre-COVID, with respect to this, do you expect similar ROAs going ahead?

Girish Budhiraja — Chief Product and Marketing Officer

Similar ROA, meaning what we used to get in the past, pre-COVID?

Gaurav Kochar — Mirae Asset — Analyst

Yes, yes, the pre-COVID ROA. If the revolver rate goes to 30%, 31%, which was the case earlier pre-COVID, can we expect similar ROAs, pre-COVID.

Girish Budhiraja — Chief Product and Marketing Officer

So I’ll not give any specific numbers, but like I said, see in the ROA side the movement we, interest — interest-bearing asset goes up, the returns would definitely go much higher. You see even right now if you look at it, when we have a 27% revolver book, these two are, we still delivered a 5% ROA. Now this has an impact of credit cost to the previous period coming into it. If the credit cost itself was normalized and we still have a similar kind of return, even at 27% you’ll find that our return would go up. So by the same logic if I’ll add a little bit more of interest income, the ROA would still, would go further up. So that’s where I would like to leave it. I wouldn’t want to give any specific numbers on that.

Gaurav Kochar — Mirae Asset — Analyst

Sure, sure. That’s helpful. And just lastly if I can squeeze in, any reversal — interest reversals during the quarter? If yes, any quantum that you can disclose? Thanks.

Girish Budhiraja — Chief Product and Marketing Officer

So nothing as such, because see in the normal course the way we do our India’s accounting, anything that we provide for, to the extent the provision is made for 90 plus asset, we reverse the interest and that’s a consistent and standard accounting policy that we follow. So if something has been provided a 100%, we don’t book any interest income for it.

Gaurav Kochar — Mirae Asset — Analyst

Understood. Okay, that’s it from my side. Thank you.

Operator

Thank you. Ladies and gentlemen, we will take the last question from the line of Rohan Mandora from Equirus. Please go ahead.

Rohan Mandora — Equirus — Analyst

Sir, thanks for the opportunity. I think just wanted to get a understanding from you in case you have any representation to RBI with respect to [Indecipherable] And if yes, what was that? And secondly, if you could quantify the spends on — quantify the expenses on spends towards rewards and the corporates.

Girish Budhiraja — Chief Product and Marketing Officer

Yeah, what was the first question, I mean can you repeat.

Rohan Mandora — Equirus — Analyst

In case, like what I understand is, is the previous cycle of 2016 when RBI was contemplating a reduction on interchange MDR on cards or for the digital payments, there was some representation that was made by maybe the card — credit card issuers on the SBI Cards. So has there been a similar representation being made this time to RBI? And if yes, if you could discuss what was the thought process that you’ve shared on the digital payments [Indecipherable]

Girish Budhiraja — Chief Product and Marketing Officer

Yeah, to this question on MDR. See first of all, this is basically an announcement by RBI in the month of December as part of the monetary policy guidance. They said they will be coming out with a discussion paper in a month’s time. That is what the statement from RBI says. So the discussion paper or the consultation paper is yet to be out. I mean, it’s not released by RBI, at least as of yesterday, it’s not [Speech Overlap]

Rohan Mandora — Equirus — Analyst

So, Sir, any input from our side if it goes, we’ll will go after the decision will be out, would that be a fair way to look at it or is there something that we may provide before in terms of decision with RBI.

Girish Budhiraja — Chief Product and Marketing Officer

I think see, they have not reached out, that is a fact, but nothing to — at the moment the decision paper is there and then they touch upon anything to do with credit card, definitely the gives an opportunity for entire industry, including SBI Card to represent the matter for a favorable consideration. That opportunity will always be there.

Rohan Mandora — Equirus — Analyst

Sure, Sir, sure. And, Sir, if you can quantify the expenses towards the spends based items, opex, the combined of opex towards spends?

Girish Budhiraja — Chief Product and Marketing Officer

Are you looking at the total spend base or I thought you were asking about the reward spend cost.

Rohan Mandora — Equirus — Analyst

No, no, specifically for linked spends and corporate link spends in the past by [Technical Issues] absolute quantification.

Girish Budhiraja — Chief Product and Marketing Officer

Corporate, suffice to say the net margin is very low. Quite a lot of the interchange that we earn, we pass it on. We don’t see this as a very, very profitable business, but it is a positive return business and high return on asset business because there is no asset that is also bid [Phonetic] and that is what the current model is because the T&E is yet to come back. So it was more of a utility payment, which is more of a pass back. However, once the T&E comes back, the return improves and improves quite substantially.

Rohan Mandora — Equirus — Analyst

And on the festive spend any quantification on that?

Girish Budhiraja — Chief Product and Marketing Officer

So that’s a difficult one to specifically, because that’s more of proprietary information we wouldn’t like to commit — comment on this too exactly how much we spend because this is very, very specific to us and depending on the festive campaign and depending on the partner that we are doing, we do these necessary tweaks into our business model and to specifics. So that’s one we would like to refrain from answering right now.

Rohan Mandora — Equirus — Analyst

Okay. Sure, sir. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Roa, MD and CEO of SBI Card for closing comments.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, Thank you, Faizal. I will sum it up in three, four points, like Q3 FY ’22 witnessed a significant improvement in customer confidence and improved consumption levels. The essence reflect in powerful results that SBI Card delivered during the quarter and nine months of [Technical Issues] We remain optimistic that the overall on ground situation will begin to stabilize over the next few months. The sooner we are out of this wave, the better it is for us, as we can then continue our journey back to the growth path that we had set for the economy before COVID-19 manifesting itself.

Meanwhile, as I said earlier, we will continue to pursue sustainable growth when following healthy financial and corporate governance principle which form our core strength. So before I conclude, I will urge each one of you to take precautions to stay away from COVID-19 and stay safe. Once again, a very happy New Year and thank you all.

Operator

[Operator Closing Remarks]