SBI Cards and Payment Services Ltd (SBICARD) Q4 FY23 Earnings Concall Transcript

SBI Cards and Payment Services Ltd (NSE:SBICARD) Q4 FY23 Earnings Concall dated Apr. 28, 2023.

Corporate Participants:

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Girish Budhiraja — Chief Sales and Marketing Officer

Rashmi Mohanty — Chief Financial Officer

Analysts:

Mahrukh Adajania — Nuvama — Analyst

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Limited — Analyst

Rohan Mandora — Equirus Securities — Analyst

Bhavik Dave — Nippon India Mutual Fund — Analyst

Alpesh Mehta — IIFL Institutional Equities — Analyst

Shubhranshu Mishra — PhillipCapital — Analyst

Anand Dama — Emkay Global — Analyst

M.B. Mahesh — Kotak Securities — Analyst

Unidentified Participant — — Analyst

Pankaj Agarwal — Ambit Capital — Analyst

Anand Laddha — HDFC Mutual Fund — Analyst

Nitin Aggarwal — Motilal Oswal — Analyst

Piran Engineer — CLSA — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to SBI Cards and Payment Services Limited Q4 FY ’23 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.I now hand the conference over to Mr. Rama Mohan Rao Amara, MD and CEO, SBI Card. Thank you and over to you sir.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Thank you,. Good evening, everyone. I’m pleased to welcome you to the Q4 and FY’ 23 earnings call. I really appreciate your presence today. As you would know that global economy remains uncertain due to many factors including geopolitical ones persisting,, it seems to be inching toward improvement with IMF predicting the growth rate bottoming out in 2023 to 2.8% before rising to 3% in 2024. Amidst this economic activity in India remains resilient. The real GDP growth is expected to be 7% and 2% in 2022-2023 as per RBI. Both PMI Manufacturing and PMI Services remain robust in March ’23 at 56.4 and 57.8 respectively. I think demand conditions remained resilient in Q4. According to RBI’s recent consumer confidence survey, consumer confidence continues to improve. Most importantly the survey showed that household spending was [Indecipherable] on the back of higher essential and non-essential spending and more than a third of the households expect a rise in non-essential outlay over the next year.

This is a good sign for consumer demand and discretionary expense. Apart from its comparative economic resilience during these times, India is also being hailed as the frontrunner when it comes to digital payments. This is true when we look at aspects like innovation and payments, the safe practice adoption among populations and the vast user base. According to a recent industry report, India’s digital payments market will increase from $3 trillion to $10 trillion in 2026. Credit cards to continue to rise through this digital payments growth rate. Credit cards base grew from 73 million in March ’22 to over 85 million in March ’23. This is despite a portion of around 12 million inactive cards by the industry. Card spends have also increased significantly by 28% from INR1.07 lakh crores in March ’22 to INR1.37 lakh crore in March ’23, the highest ever monthly for the industry. Card spends continues to remain over one lakh crore for the last 13 months with e-commerce contributed — contributing to a significant share in this.

It is interesting to note that in FY ’23 the industry saw it’s highest-ever card spend at INR14 lakh crore plus. In FY ’23 the industry saw the highest festival — festive season card spend during October at INR1.29 crores and a strong winter holiday season added to increased travel spend expense. This clearly demonstrates the robustness of the demand and the useness for credit cards. In fact, the past year has been a pivotal year for the industry with many significant changes to the business model that have set the tone for future updates in the industry. The industry has largely adjusted to and having incorporated these in a seamless manner during the past six months and is now ready for the next level of growth. I would like to reiterate my confidence for India’s market potential, a significantly under-penetrated market offers ample growth opportunities things for us.

Let’s now look at SBI Cards business overview in FY’23. I’m proud to say that SBI Cards was successfully able to navigate through the year and register a robust business performance demonstrating a resilent and sustainable business model that we have been for the year. As always, we continue to create value for our stakeholders and I’m pleased to share that we declared an interim dividend of INR2.5 per equity for FY’23 in the month of March ’23. Throughout the year, we put focus efforts on three aspects mainly strengthening the acquisition channels and acquisition bucket, enhancing sustainability of the business and ensuring an engaged and active customer base. As a result, during the course we have achieved some new benchmarks. We added 500202 or 5.2 million total new accounts in FY ’23 which has been the highest ever during a financial year. In FY’23, our new accounts grew by about 46%.

During Q4, we added 13.77 lakh new accounts at a growth rate of 37% year-on-year. We continue to focus on adding about 900,000 to one million cards per quarter on net debt basis and in line we have added 900,000 cards in Q4. Our cards in force stood at 1.68 crores in Q4 FY’23. We continue to be the second-largest credit card issuer in the country and our cards outstanding in terms of cards outstanding market share, right, improved by 100 basis points to 90.7% during FY ’23.

Our spends have also seen new highs in FY ’23. SBI Cards saw the highest ever retail spend in FY’23 by over INR2 lakh crores, which is a 41% increase over FY’22. Our card spends in Q4 stood at INR71,681 crores, a 32% year-on-year growth, and this is the best-ever quarterly expense at SBI Cards. Out of this, retail spend contributed to INR55,500 crores, a 33% year-on-year growth in Q4 FY’23. Again, the best quarter for us in retail spend. It is noteworthy that our retail spends for the card has also increased by 7% year-on-year in Q4 FY’23.

On that note, I’m pleased to share that we are number two position in market share. For Q4 FY’23 spend growth on quarter-on-quarter basis have been driven by growth in categories like departmental sports, heavy utilities, education, consumer durables, furnishing, hardware, etc. Travel, entertainment and restaurant category also saw good growth. In fact, Q4 FY ’23 has been the first quarter in last three years to perform the travel spend momentum since Q4 FY’20. Online retail spends continue to grow in FY’23 to 56.9% share of total participants.

Our continued robust business momentum also helped us register healthy financials in FY’23. Let me share some key one. Our total revenue stood at INR14,286 crores and has growth 26% year-on-year for the year FY ’23. Our revenue from operations has seen 28% year-on-year growth in FY’23. Our receivables continue to increase steadily. Receivables at INR40,722 crores have grown to 30% as compared to INR31,281 crores in March ’22. A share of the [Indecipherable] FX has improved to 61% in March ’23 as compared to 59% in March ’22. In FY’23, SBICards has achieved a PAT of INR2,258 crores registering a signiciant 40% growth over FY’22. SBI Cards undertook some significant initiatves on products side during FY’23. We further expanded our core cards portfolio and added cashback to SBI Cards for [Indecipherable]

Product. Since it’s launch, the card has seen very encouraged response from the consumers. We launched new co-branded card Aditya Birla SBI card in partnership with Aditya Birla Finance.

We have been working on several initiatives in strengthening our acquisition channel and enhancing customer experience. Technology has been playing an important role as we bring this to fruition. I’m talking SBI Cards print rollout. SBI Card print is a end-to-end digital acquisition initiative and has been a significant initiatve to launch during the year, which has significant involvement for customers easier, easiest, faster and instant. This will allow the customers to get a card in five to seven minutes. With the KYC enhancement, we have launched several initiatives to digitize the KYC process across the customer journey to enhance activity and convenience for our customers. Multiple modes, biometrics e-KYC, DigiLocker, KYC, etc are used to make customer ease. It is noteworthy many such efforts are helping in rationalizing the cost adoption thus bolstering our business fundamentals. We are excited with the opportunity of linkage of RuPay cards to UPI. Access to large merchants and enahced customer-base is good for the industry players. We plan to roll out the SBI RuPay linkage over the next few months.

Speaking of business viability. It is important to note that the higher customer spend active rate is vital and at SBI Cards our spend vital rates have always been at 50% in FY’23. We continue to have a full strengthen highly capable senior management team to lead the company towards a new wave of growth journey. I am proud to share that this year too, our all around efforts have been duly recognized. SBI Cards have earned various prestigious recognitions in different areas. For instance, ET Best Brand 2023 Award, CEBI Awards for Customer Service and Golden Peacock National Training Award for Excellence in Training and Development Initiatives.

Coming to the financial performance in Q4 FY’23, our total revenue in Q4 has been at INR3,917 crores registering a growth of 30% year-on year. In Q4, our revenues from operations have been at INR3,762 crores with 32% year-on-year growth. In Q4 FY’23 our PAT grew INR596 crores registrating a 3% year-on-year increase and 17% quarter-on-quarter sequentially. In FY’23, as expected owing to consecutive interest-rate increases our cost of funds has also witnessed a significant increase. As we communicated last quarter, our cost of funds increased by 39 basis points in Q4 over Q3. We were able to minimize the impact on NIM and our NIM for Q4 is only five basis points at 11.5%. Our cost-to-income for FY’23 was at 58.9%. We saw an improvement in the cost to income ratio at 58.1% versus 61.9% in Q3 FY ’23 with spending related expenses lower this quarter.

On asset quality, it only increased marginally in Q4, GNPA stood at 2.45% as of Q4 FY’23. Our strong credit cost increased to 6.3% in Q4. We revised the model estimate this quarter, which I’m talking about ECL model. We divide the ECL model estimates this quarter, which resulted in a one-time impact of 20 basis points on the credit costs. Adjusted for that, our gross credit cards will be in a range as we have shared always at 5.82% to 6.2%. We have, I mean to say in terms of the portfolio that has contributed to higher slippages in the last two quarters impacting the NPLs write-up numbers. We have taken portfolio actions, and expect that the actions taken would be able to address the issue.

The new acquisitions from FY’23 onwards is beginning as our expectations comes up. Our profitability ratios also continues to improve. In FY’23, our return on average assets increased to 5.6% compared to 5.4% in FY’22. In Q4 FY’23 it has been at 5.4%. During the year, our return on average equity has also seen an increase reaching to 25.3% versus 25.8% in FY’22. In Q4, ROAE has been at 25.6%.

Conclusion, India remains resilient and the domestic commercial remains encouraging. At SBI Cards, as always we have maintained an avail approach and undertaken critical measures to ensure that the company remains on sustainable and profitable growth path. Interest rates remain elevated. However, these have been factored in and are likely to stabilize in the year. With such growth momentum and key policy measures too now, largely in place the credit industry is likely to witness growth momentum. I’d also like to share that this year, SBI Cards is celebrating 25 years of it’s successful journey. We look forward to celebrating this with all our stakeholders. When we look at the last 25 years journey, we believe that the future is much more promising.

Now, we are open for questions. [Indecipherable]?

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions]. We have a first question from the line of Mahrukh Adajania from Nuvama. Please go ahead.

Mahrukh Adajania — Nuvama — Analyst

Yeah, good evening, sir. Sir, my first question is on credit costs. You already explained that there was a one-time change in ECL assumption. So if you could elaborate on the change and also in general for the industry world rates have come down a lot post-COVID. So, why our credit cost is sticky? Is there scope for them to come down because if they are declining, so much then credit costs should also be lower is the general sense.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, I think one-time adjustment impact of 20 basis points in terms of strengthening the ECL model where we test the model based on the current economic factors, macroeconomic factors. We also modified the model, which has resulted in INR20 crores kind of impact in the quarter, annualized returns it works out at around 40 basis points. In fact, if you adjust the credit costs for these 20 basis points, it is around 6.1%, which is at the higher end of the spectrum of what we have given. I talked about a broad range of 5.8 to 6.2% of credit costs, which takes into account the current composition of the asset. The current share of our [Indecipherable], transactions, loans, current economic conditions, and the kind of environment in which we’re operating under-recovery, around. So we are at the higher end of the spectrum. As I communicated earlier, we have taken, we have identified the segment very carefully. We have been taking portfolio action, we are expecting the credit card — credit costs will have a trajectory of coming down in the next two quarters. It will come down.

Mahrukh Adajania — Nuvama — Analyst

Okay, sir. Thank you so much.

Operator

Thank you. We have our next question from the line of Karthik Chellappa from Indus Capital Advisors Hong Kong Limited. Please go ahead.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Limited — Analyst

Yeah, thank you very much for the opportunity. Am I audible, sir?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah. Yeah, Karthik.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Limited — Analyst

Okay, great. Two questions from my side, sir. Over the last few quarters, we have seen a very good recovery in our card volume share, which is at about 19.7%, but if I look at the difference between our card volume share and trends share, which is almost close to 1.5% now. That’s almost at a nine to 10-quarter high. So given that we got really good momentum on the volume side, why is it not reflecting in spends yet? Is that a reflection of the quality of customers that we are getting either geography-wise or self-employment or the salary ways and at what point of time do you think these different scenarios stop?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Okay. I will respond to your query and Girish also can supplement. One thing to know is that companies, both the retail and the corporate segments, we have seen the kind of volatility in the market share in terms of the spend, from a corporate perspective, we cannot be it on that, it has a significant amount of spend share. So be mindful of that and also be mindful of the fact that it is only a topline, it doesn’t add much to the bottom line but it could potentially bring it. We have been playing a very calculated game here. That’s the reason our corporate card spend is actually our confidence, so it ranges 22% to 25% of our spending.

But with regard to the new issuance, we have also commented about the robustness in the volume. As you know, it takes some time for the customers to start using the limit fully. They may start with smaller transactions to begin with but the moment they experience the benefits of using the card, they may start using it for discretionary spends, etc., then you can see large transactions. As you said the volumes have come post-COVID after 2020, I think there is a catchup here. In terms of being equal to the portfolio, it will take time for the new weekdays. Anything you want to add, Girish?

Girish Budhiraja — Chief Sales and Marketing Officer

So Karthik in the new customer acquisition that we are doing, these days because of the RBI guidelines you have to keep the customer active and if the customer is inactive for more than 12 months, in any case, that customer gets budged out of your portfolio. So what we see, all the new customers that we are getting, their average spend actually is coming out quite better and higher than the earlier that we are getting at the same point of time, so which is a good sign.

The second thing which is also visible in the portfolio is that these customers their active rates are also higher in terms of let’s say two-month, three-month, four-month active rate. So they are also higher. So we don’t see an issue there. As sir was mentioning the issue on the market share primarily is because of the mix that we are targeting of retail versus corporate space. So there will be some higher corporate versus retail mix. So it will this year will look very very different. Let me check because there are other sources, through which we check, we see that average retail spend of ours is similar to the industry number.

Rashmi Mohanty — Chief Financial Officer

Okay. Even on slide number 8 in the deck, you will see that our quarter four FY ’22 average spend five was 124,000 and has gone up to a 136,000 per quarter, for FY’23, so there is an increase. As you can see already in the retail spend per average cost. And since a lot of funding put us has happened in the non and all, there is a bit of catch-up as which is not reflecting but already we are seeing the benefit of spends going up in metric odd beds.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Limited — Analyst

Got it. This is very useful. My second question is basically on the new RBI direction on pre-sanction credit lines through banks using UPI. Now, although the details are yet to be unreal. Is there any thought process on how it’s going to be impacting credit cards?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So as you rightly said that there are guidelines still fully yet to come but these kind of products are already available. So people were already giving because UPI is essentially in a way if you see for a debit card to make a transaction online, that’s more or less there and limit on the bank account or debit cards was always there. So we will also see as how it goes further, but this is just a different version of the earlier product, which was available.

Karthik Chellappa — Indus Capital Advisors (Hong Kong) Limited — Analyst

Got it. Okay. That’s it from my side. I’ll come back in the queue for more questions. Wish the team all the very best for the next year.

Operator

Thank you. Ladies and gentlemen, in order to ensure that management is able to answer queries from all participants kindly restrict your questions to two at a time. You may join back the queue for follow-up questions. We have our next question from the line of Rohan Pandora from Equirus Securities. Please go ahead.

Rohan Mandora — Equirus Securities — Analyst

Good evening, sir. Thanks for the opportunity. I was just wondering to understand the nature of slippages that have happened in this quarter, what is the vintage of the customers and is it coming from salaried employee some color around. Second is that if you look into originations. They have picked up in the self-employed category in the last two-three quarters. So if you can touch upon what is the customer profile of these customers and what is the origination channel for this? And lastly if you could share some guidance on NIMs and cost of funds for FY ’24? Thanks.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think with regard to the also. Indeed, we did see that, as I clarified in my speech as well. The new vintages are holding good in terms of what our expectations we had in terms of a very broad delinquency band and EPL kind of consumption, nominally. Make sure of that. Legacy vintages, we did identify a small customer base which is showing higher delinquency. Obviously, that was resulting in a higher flow rates, higher NPAs, and higher write-offs. This segment was identified. There is nothing that can be pointed out all across in terms of geographies and the nature. So we are taking portfolio actions that are required. So we are confident that actually as the details for the recent vintages increases and the actions taken under the segment show the result, credit cards will trend this year. On the cost of funds, I will ask Rashmi to.

Rashmi Mohanty — Chief Financial Officer

On the cost of funds, we saw both the actions taken in quarter three, which obviously is again cost of funds going up in quarter four in one more action by RBI, which is before any hybrid funds in February. On account of that, we do expect that the cost of funds for quarter one FY ’24 would be higher by about 10 to 15 basis points. It seems from the statement that RBI has made so far they did mention, they already mentioned it before, as such we do not expect any further rate hikes from the RBI. If that is the case, I would expect as the cost of funds to stabilize for quarter two and maybe that would inch down in the second half of the year.

And on the NIM, therefore, the corresponding impact will be that, while we’ve been able to maintain the NIMs in quarter four from quarter three. We do expect the NIM to stabilize quarter two and any benefits coming from the cost of funds and also any actions that we have been taking, which we took in quarter four and will be taking further in quarter one, on the customer will help us strengthen the NIM in the second half of the year.

Rohan Mandora — Equirus Securities — Analyst

Sure, sir. Just to follow-up on the first reply. The earlier vintage customers where we have seen seeing delinquencies, are these pre-pandemic originations, just to confirm. And also on the self-employed originations if you can just touch upon. My question is pending.

Rashmi Mohanty — Chief Financial Officer

Yes, the portfolio that Mr. Rao has mentioned is the pre-pandemic portfolio, it is a sub-segment of someone segment that you identified which was originated pre-pandemic.

Rohan Mandora — Equirus Securities — Analyst

Sure.

Rashmi Mohanty — Chief Financial Officer

I think your question was [Indecipherable]. The answer was it’s a mix of self-employed salaries but we’ve taken other funding — portfolio actions based on whatever segmentation that we can do.

Rohan Mandora — Equirus Securities — Analyst

Sure, thanks.

Operator

Thank you. We have our next question from the line of Bhavik Dave from Nippon. Please go ahead.

Bhavik Dave — Nippon India Mutual Fund — Analyst

Yeah, hi, good evening, sir. Hope I’m audible. Sir, two questions. One is on your cost of acquisition in the sense that when we see incremental cards that we are adding in the last four-five quarters we’ve been adding cards to your three-plus or four regions. Just wanted to understand is the cost of acquisition that is similar than metro two acquisitions versus tier-three, tier-four acquisitions that is point number one, and point number two when you see quarter-to-quarter, the operating expenses are all-in. That we have seen last year same time, what would be the logic or what has led to this cost of other operating expenses being flat, and within that the commissions have increased by 10% quarter-on-quarter? Just wanted to understand what exactly is happening here and just wanted to understand, going ahead operating expenses come out lower as a percentage of our income, considering we are doing these online channels that we’ve opened up incrementally. So just wanted to get a sense on that. Thank you.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So first, customer acquisitions on a year-on year basis, we have seen a downward trend, it’s a 10% plus downward trend that we have seen in the cost of acquisition. We and then because you mentioned, metro versus tier-three, tier-four, while we do not look at it from that perspective, but we can tell you that bank customer acquisition is lower than open market cost of acquisition. And on the natural reasons that in the bank scenarios there is kind of leads, which is available on the customer. Apart from this, there is a constant effort on the digital side of things to bring the cost of acquisition down as going further as we go more digital, and we — and this had mentioned that we have launched the sprint journey where you can get the card within five to six minutes in your hand. As more number of customers pass through that and we are able to generate more volumes there, the cost of acquisition will further trend.

Rashmi Mohanty — Chief Financial Officer

I think the second part of your question was the operating cost has been flattish quarter-on-quarter. Is that what you were asking?

Bhavik Dave — Nippon India Mutual Fund — Analyst

Yes. And last year same time third to fourth quarter there, so just want to understand, how you see this quarter versus last quarter, the number of cards that we added, the gross additions were lower-right like one million cards to 19,000 cards this quarter. Just wanted to understand like why are you seeing like the cost of, sorry other expenses going down quarter-on-quarter.

Rashmi Mohanty — Chief Financial Officer

So the reason for the cost was flattish quarter-on-quarter between quarter three and quarter four, certain IT expenses that is done budget that we have started in quarter four and the cost of that has come in. So while you’re right that and as explained in the cost of acquisition portal and what has been coming down. The overall operating cost is higher than the certain project taken up in quarter four. Sure. And this will — like the cost of acquisition going down, should they benefit us in FY ’24, right, the cost should not rewards and promotional expenses that we do bad do. The other part of the cost structure should be that trend flattish or lower-right. Is that a fair assumption?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Quarter-on-quarter basis, there can be some variation because in our models our acquisition there is the business we acquired through digital and the cost is very low, but otherwise if you go through manpower, there is a set of fixed-cost and then there is sort of variable-cost, there is usually some amount of variation and that happened on a quarter to quarter and month to month basis, but on an annualized basis, we will be trending down.

Bhavik Dave — Nippon India Mutual Fund — Analyst

And last question is out of the 900,000 cards we added, the online sprint journey, how much is that contributing?

Operator

Please join back the queue sir.

Bhavik Dave — Nippon India Mutual Fund — Analyst

Yeah, sure, last question. How much is the sprint journey contributing to a 900,000 cards and how is it trending? That’s the last question. Thanks. So as of now sprint does not contribute much large percentage into it, it’s a very small percentage. The reason primarily is that as of now, we have kept it only purely digital and for cashback card customers in that. We are slowly integrating it with our partner. So as of now the process of integrating it with co-brand partners is one is already done. The other partners is in progress. We also want to integrate this sprint journey with our bank — the bank along with our Internet banking. So these are the things which is in progress. So once that happens, more number of customers can express and use the sprint journey on a regular basis. We expect this to rise rapidly now that we have tested that it was that, and the customer can be given targeted by.

Operator

Thank you. We have our next question from the line of Bhavesh Kanani from ASK Investment Managers. Please go ahead. Mr. Bhavesh Kanani. Since there is no response, we will move onto the next question is from the line of Alpesh Mehta from IIFL AMC. Please go ahead.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Yeah, hi, sir. Am I audible?

Operator

Yes.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay. Hi. Sir, two questions first is on the yield on loans has seen a sequential improvement that means, what has been the increase in the personal loan segment.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Alpesh, we can’t hear you properly.

Operator

Yes, please use your handset.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Yeah, yeah, just one second. Can you hear me now? Hello?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Better. Yeah, better.

Operator

Please go ahead.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Yeah. So the —

Operator

I’m sorry [Technical Issues] Since there is no response, we’ll move onto the next question from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.

Shubhranshu Mishra — PhillipCapital — Analyst

Good evening. Thank you for the opportunity. Two questions. One is given the fact that the revolvers are still — I mean what is the new revenue line items that we are missing that or we want to develop? That’s the first. Second is what is the margin contribution difference between retail spends and corporate spends?

Rashmi Mohanty — Chief Financial Officer

You have to repeat the first question, Shubhranshu. We got the second one, what was the first one?

Shubhranshu Mishra — PhillipCapital — Analyst

So given the fact that revolver as a proportionate has lowered or a range count. So the interest income was therefore getting mitigated. So what are the new revenue line items we are looking at focusing on, which can be incremental to the topline results.

Rashmi Mohanty — Chief Financial Officer

I think revolver he’s kidding [Phonetic], what are the other line items [Speech Overlap] to enhance the revenue?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think we have stated in the past that we will be looking at the revenue optimization through the process. We have various products like Encash, FlexiPay, Balance Transfer, and other stuff. Now these products are there. We are — of course, we are also — risk based pricing to be more competitive also in the market to — and we are also looking it like what are the other risk mitigation the are available to expand our digital products availing these products.

So that’s too we have steadily increased the share of the interesting bearing NEA. If you look at overall revolver, plus CMI, it has increased by 2 percentage points over a year’s time. So this endeavor will continue. But of course, we will also be looking at the fee income what are all the other ways and means of supplementing some of the revenue lines that got evaporated particularly after the — some changes that have come into effect from 1st, October. We didn’t notify the market and the stakeholders. We have witnessed with two types of fee. So we will continue to look first, avenues to augment our current suite.

Rashmi Mohanty — Chief Financial Officer

The second question is the margin contributions in retail and in the corporate spend?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So on the corporate spend, the margin contribution is very minimal, because whatever we earn as primarily interchange gets passed back to the customer in the form of a pass back or an offer. So on the corporate side, the contribution is fairly minimal. On the retail side, while we get interchange, but we have to give customer reward points. So there is an element there. And we also give up to 52 days of credit free period. So these are the two major things. After that, there is a margin which is still left. We also make money from fee and charges also from interest income so there are multiple other sources in the retail scenario, whereas in case of corporate because it is customer base 100%, so there is no interest income.

Shubhranshu Mishra — PhillipCapital — Analyst

Thank you for that. If I can sneak in one last question. What kind of spend growth are we looking at in ’24 and ’25? Thanks.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So as per industry sources, we believe that the spend should grow anywhere between 22% to 25%. We will try and keep an alpha on top of the industry methods.

Operator

Thank you. We have our next question from the line of Alpesh Mehta from IIFL AMC. Please go ahead.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Hello? Am I audible now?

Operator

Yes.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay. Just two questions. Sir, firstly, on a sequential basis, we have seen around 30 basis points, 40 basis points improvement in the yield. So what kind of the pricing action you would have taken on to the EMI segment because the mix is largely stable on a Q-o-Q basis?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think as we have said in the past, we adopt a kind of risked-based pricing, which permits like — kind of transmission of the rate, whenever the funding cost increases or whenever the other costs increase, we also can transmit back to the customers. So that is the strategy that was we adopted last quarter when we revised the prices for some of these loan products. I talked about Encash, talked about Flexipay and other loans. So we were able to successfully transmit that rates for the new disbursements, because unlike kind of others in the industry, where the entire portfolio gets reset because they lead to the actual benchmark. In our case, mostly the loans carried fixed rate. So the opportunity to transmit a rate is only based on new divestments, which we were able to do successfully last quarter.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay. And there is no change on to the rival yields, right? Rivalry yields remains the same, because I believe you would be at the —

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yes, there is no change in the APR, revolver remains same. And the share in the overall asset also remains same. So obviously there is no change in the revolver contribution.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Perfect. And just the last one, if you can throw some light onto the instance-based fees than the others because that contribution has gone up sequentially. So any major line item that would have contributed more in this quarter?

Rashmi Mohanty — Chief Financial Officer

The instance-based fee, this is — yeah, the instance-based fee was higher, largely because we — if we can’t reduce the fee on the rentals and we also increase that fee from INR99 to INR199 in the month of March [Phonetic], and of course, the impact of that increase is the minimal given that the number of days that [indecipherable] less, but significant portion of that increase has come from the rental fee.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay, got it. And —

Rashmi Mohanty — Chief Financial Officer

[Technical Issues] major contributor.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Perfect. And lastly, the 20%, 25% increase into the spends growth that you are factoring in that does not include, that — does that include any action on the rental payment side as well?

Rashmi Mohanty — Chief Financial Officer

Sorry, the 20%, 25%?

Alpesh Mehta — IIFL Institutional Equities — Analyst

Growth onto the spend side that the industry is expecting. Since now on the rental, there are no rewards and the some fees are also introduced on that. So do you expect that to be stable or that could be — that could see some drop in the spends growth?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

No, should not, because in between Q3 to Q4, as Rashmi was mentioning, in Q3, mid of Q3, we levied INR99 as a fee. And in March, we increase it to INR199. We have not seen any drop on a month-on-month basis from Q3 to Q4 on the rental spend. So while absolute growth might not be similar to industry level growth, but it will still remain stable or marginally going [Phonetic].

Operator

Thank you. We have our next question from the line of Anand Dama from Emkay Global. Please go ahead.

Anand Dama — Emkay Global — Analyst

Yeah, sir. Thanks for the opportunity. So firstly, on the NPS front, so which have gone up quarter-on-quarter and also have gone up, but you said that still provisions hasn’t gone. But just wanted to check like whether these NPAs have come or the stress has come primarily from being monitored, but identified stress pool or this was all of a surprise that basically changed during the first quarter? And if you have the — typically do the exercise of identifying the stress, then is there any pool that you can talk about that you have identified or the let’s say [indecipherable]?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think you’ll have to repeat the question. Most part of it was inaudible.

Anand Dama — Emkay Global — Analyst

So basically, sir, one is that the NPA flow that you saw during the current quarter was is basically out of the identified stress pool or basically, this was all of a surprise that we saw in the fourth quarter.

Rashmi Mohanty — Chief Financial Officer

The question is that the NPA increase that you’ve seen, is it largely from the identified stress pool that we called out or is it a cross — [Speech Overlap]?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

No, I talked about the small segment having a higher delinquency. It means like you expect a kind of contribution for the legacy portfolio, some new vintages everything. But this segment what we identified has a higher problems for you to deliver it, so — and because we have seen the recovery efficiency or collection efficiency in this segment. We noticed there is actually a stress test, that was the reason we have taken some portfolio actions there in terms of minimizing the cross-sell or not offering the cross-sell and other portfolio actions that are available, we have — we’ve taken a few and with some more are on the angle, but again at the cost of repetition, the latest vintage is behaving exactly as per our expectation. So we expect that these actions will eventually result in a tighter lower credit cost over a period of a couple of quarters.

Anand Dama — Emkay Global — Analyst

Okay. But going forward, like running into the first quarter, do we have any kind of stress that you identified already? And if yes, if you can quantify that.

Rashmi Mohanty — Chief Financial Officer

Quantify for the next quarter.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think, as I said, it’s a work in progress, but some of these things will also take time. While we are very confident that it will have a downward trajectory. I think bottom will be a kind of stabilization period before it actually starts evidencing a kind of real drop in the rate. But of course, this onetime trend [Phonetic] what happened is not expected to repeat in the next couple of quarters, because it’s purely a modem-related adjustment. So we are confident that the overall trade cost will — maybe it will not cross upper than whatever we have given, that’s confidence we have, but actions would take time. But over a couple of quarters, definitely, it will come down.

Operator

Thank you. We have our next question from the line of M.B. Mahesh from Kotak Securities. Please go ahead

M.B. Mahesh — Kotak Securities — Analyst

Hey, hi. Two data keeping questions and one qualitative question. The first is on — to Rashmi, ma’am. If you — can you just explain what is — what explains the sharp increase in business development income? And also how do you account for recovery from previously written-off accounts? Does it go to the non-interest income line? Or is it adjusted against the write-off — provision, sorry?

Rashmi Mohanty — Chief Financial Officer

So the business development incentives are basically the milestones kind of milestone [Phonetic] incentives that we get from our partners. These are part of — these are basically contracted, how should I say slab rates in a way, in terms of the number of cards that we issue on a particular network and also on the spends that we do on those cards.

M.B. Mahesh — Kotak Securities — Analyst

Yeah. In a sense, what explains this jump for the quarter?

Rashmi Mohanty — Chief Financial Officer

So, if you — I think the jump is explained basically by the sourcing of cards that we did in quarter three and quarter four and also the higher spend we saw in quarter three and quarter four. So while most of it was seen around December also, but the impact of that has come in at quarter four only largely.

M.B. Mahesh — Kotak Securities — Analyst

Okay. And recoveries from written-off?

Rashmi Mohanty — Chief Financial Officer

Recoveries from written-off go into our other income as bad debts recovered.

M.B. Mahesh — Kotak Securities — Analyst

And this gets clubbed under instance-based fee, right?

Rashmi Mohanty — Chief Financial Officer

It gets, sorry?

M.B. Mahesh — Kotak Securities — Analyst

Where would you club this income — in the non-interest income line — which line item?

Rashmi Mohanty — Chief Financial Officer

So it goes into the other income line. So, if you look at our financial statements and if you pick up the other income line, there will be a —

M.B. Mahesh — Kotak Securities — Analyst

The INR154 crores.

Rashmi Mohanty — Chief Financial Officer

[Speech Overlap] bad debt recovery.

M.B. Mahesh — Kotak Securities — Analyst

Okay. And the quality allocations to Girish probably this question. If you look at your card book today, I mean look at the, let’s say, the below prime segment, how has been that spend category — how is that spend category set of customers kind of where are they in the journey of recovery post-COVID right now?

Girish Budhiraja — Chief Sales and Marketing Officer

So Mahesh, after the — let’s say, customers with vintage, which was pre-COVID on their spend journey, they have all recovered back. In fact, they had recovered back long, I would say, almost a year back, they have recovered that. New customers, which we acquired during COVID, they were showing some bit of depressed trends in the year 2021. And it is that catch-up, as [indecipherable] was mentioning, which is now happening, and it has — we have seen that this has happened this year. New customers acquired during this last, I would say, 15 months to 18 months are showing very good spending behavior, very good activation rates.

As you have been seeing, we have been focusing on more younger customers where the activity rates are far, far better. So from a spend perspective, on an overall basis, I think we have — it’s already caught up. There is only one category of spend, which is international spend, where I believe that there is still more opportunity. The balance is — has broadly reached higher than COVID. In fact, on the travel side, we have declared some of the numbers also. So this is the first quarter in Q4, after FY ’20 that the — we have inducted almost 140% of what we were in COVID on the travel, specifically on the —

M.B. Mahesh — Kotak Securities — Analyst

Sorry, in the sense — sorry, guys. In a sense the choice of spend that you are seem to be taking still seems to be overwhelmingly on the EMI side rather than revolver. That journey has still not happened from that segment.

Girish Budhiraja — Chief Sales and Marketing Officer

I would state that if I look at spend converted to EMI, that spend conversion to EMI, if I take out the rental spends, because rental typically is more of a transactor spending in nature. If we take out the rental spend, our spend conversion to EMI actually that percentage has become higher. So that number has gone up compared to what it was pre-COVID number. And that trend is fairly visible across segments. And when I’m looking at conversion to EMI, it is either at the point of sale or after you have spend and before payment due date you have converted to it.

Operator

Thank you. We have our next question from the line of [indecipherable] from Mishcon Field [Phonetic]. Please go ahead.

Unidentified Participant — — Analyst

Hey, thanks for the opportunity. Am I audible?

Operator

Not very clear, sir. Can you use your handset, please.

Unidentified Participant — — Analyst

Yeah. Am I audible now?

Operator

[Speech Overlap]

Unidentified Participant — — Analyst

Am I audible?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, you are.

Unidentified Participant — — Analyst

Yeah, thanks. So just follow up on the cost of fund comment. So basically, you are saying that because of repo hike last quarter and then the first quarter before we will see 10 basis points, 15 basis points increase in cost of funds. And then after that, because I have a repost, we should not see any increase in cost of funds, right? But I’m just a bit confused, because if I look at historically, when RBI was cutting rates back in 2019 and early 2020, we repo it bottomed about 4% at June 2020. But if I look at our cost of funds, it only bottoms about three quarters, four quarters later. So there’s a timing lag in calculation of the time when repo posed or bottomed to our cost of funds stabilized. So just wondering why this time the cost of funds should immediately stop increasing the moment RBI stopped hiking? I saw 25%, 30% of our funding is from NCV, which price we got the open back, right?

Rashmi Mohanty — Chief Financial Officer

Your comment is that the cost of funds, why is it increasing when the RBI still paused?

Unidentified Participant — — Analyst

No. Yeah, why, because you guys are saying that second quarter FY ’24 cost of funds just don’t increase, right, sequentially, because RBI had paused.

Rashmi Mohanty — Chief Financial Officer

Yeah.

Unidentified Participant — — Analyst

But historically, our cost of fund repricing, if I just look at recent episode where RBI cutting rates, there’s — your cost of fund is still declining three quarters, four quarters after RBI stop cutting rates. So on the way up, shouldn’t there be a repricing lag as well. So our cost of funds should continue to increase a bit even after RBI paused because some of our funding could reprice within that.

Rashmi Mohanty — Chief Financial Officer

Pulling out of the data for the 2008, 2009, that you’re telling me about, I really pull out that data. But just a few pointers in terms of how do we see — how does our portfolio get impacted. Number one, as we treated in the past as well, that the transmission of any market rate change happens in our portfolio with a lag. So what we saw is an increase in the cost of funds in quarter three and now in quarter four, and what I’m talking about in quarter one is with a lag. The RBI started increasing rates in April of last year. So, April 2022 is at least, for the first increase in the record rate. We didn’t see an increase in our cost of funds till quarter three. So it was almost after about seven months to eight months that we first felt the impact of an increased market rate on our portfolio.

The second point as to why did eat [Phonetic] after six months and why are we not immune to it for another 12 months, 24 months is, because our liability portfolio largely comprises of short-term borrowings. And that’s typically again to do with the kind of assets that we have. If you look at the asset break-up, almost about 39-odd-percent is transactor. There is a revolver percentage, which again is short-term in nature of. We don’t really have too many chronic revolvers. In order to have an ALM, and in order to have a match funding position with respect to assets and liabilities, we’ve also been borrowing short and which is why every six months, every nine months when the portfolio comes for a resizing is when we’re actually able to feel the impact of the market rates. So those are the two imperatives that I wanted to first layout. And as I said earlier, we we’ve seen another rate hike in February, the impact of that will be felt as our portfolio comes — whatever portfolio, whatever amount of our portfolio comes for repricing in the first quarter, we’ve done some modeling around that and we expect that that that increase is going to be 10 to 15 basis points. I called out earlier that if there are no further rates hike, we shouldn’t see the cost of funds stabilize over the next two-odd quarters. And if the cost of — if the market rates start to trend down from now onwards till the the third quarter of this financial year, we will then see the impact of cost of — on the cost of funds when it starts to come down towards the end of this financial year. So you’re absolutely right, it is with a lag because our portfolio get repriced almost at about a six to eight months kind of a frequency. This is how we’ve felt the impact of the market rates.

Operator

Thank you. Ladies and gentlemen, request you to restrict your question to only one at a time. You can join back the queue for follow-up questions. We have our next question from the line of Pankaj Agarwal from Ambit Capital. Please go ahead.

Pankaj Agarwal — Ambit Capital — Analyst

Yeah, hi, good evening. Ma’am, if I look at your cost of funds, it used to be 8% before COVID when the policy rates were almost similar to the current year. So it used to be in the range of 8% to 8.5%, right? And so what has fundamentally changed in your funding profile over the last three, four years, so that your funding cost will remain below pre-COVID level?

Rashmi Mohanty — Chief Financial Officer

So I don’t think you mentioned that we’re going to go — so we’ve said that the rates are going to go up.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

With the policy rates remaining more or less at the same level, however, we’re confident about the trajectory being [Speech Overlap]

Rashmi Mohanty — Chief Financial Officer

10, 15 basis points.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

[Speech Overlap] only 10, 15 basis points. I think if you’re comparing the situation three years back or four years back, I think the share of long-term in our overall funding have increase over a period of last four years from a 9%, 10% to 15% to now 35% kind of overall.

Rashmi Mohanty — Chief Financial Officer

35%

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So that provides a kind of [Indecipherable] or rate increases. So we have been steadily increasing, but of course, when the rates are peak, obviously, we are looking at what is the right timing and what are the right instruments. So our endeavor is to continue to increase it in a meaningful way, in a very calibrated way, so as to insulate. But of course, as Rashmi has also said, like we want to do with the match funding and we want to get the opportunity of pricing it actually at the lowest rates and how the market rates get. So that’s the fundamental difference between a four year back scenario and the current scenario.

Pankaj Agarwal — Ambit Capital — Analyst

So basically, your duration of your liabilities have come down over the last three, four years, right?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

The duration of liabilities have increased because the long-term share — long-term liabilities [Speech Overlap] NCDs of three years, that otherwise subordinate bonds kind of — maybe out for 10 years what we rise, that actually did increased actually over a period of time.

Pankaj Agarwal — Ambit Capital — Analyst

But then — I mean, if that is the case, don’t you think then your funding cost can go — get to 8% at some point of time despite the current policy hedging. The reason I am asking is that before COVID your [Speech Overlap]

Rashmi Mohanty — Chief Financial Officer

But you also need to take into account is what Mr. Rama just mentioned that the increase in our long-term funding has happened in our scenario where the rates were lower. So we’ve been increasing our long-term funds post-COVID. And post-COVID the rates were low and we’re benefiting from that.

Pankaj Agarwal — Ambit Capital — Analyst

Okay, okay, so basically you’ve locked in lot of funds at a very lower rate and they are longer duration?

Rashmi Mohanty — Chief Financial Officer

Yeah.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yes.

Pankaj Agarwal — Ambit Capital — Analyst

Is it — no, reason I’m asking this question is that, generally, there is a tenure premium, right? So keeping everything else constant, if your tenure premium is higher, your cost of funds should be higher. And as I said, at a similar repo rate, given 8% cost of funds, similar type of focus four years back, right? So ideally, if your tenure premium — your tenure has gone up, then at some point of time in the similar policy rate, your cost of funds can go back to 8%?

Rashmi Mohanty — Chief Financial Officer

Yeah, I mean, we’ll have to go back and look at the numbers there. I mean, I do have the numbers for 2018, ’19, they’re at about 7-percent-odd. You also will have to look at the other things besides the repo rate, the credit premium, etc., as well, as to how much the credit premiums at that point in time for the accelerated entity compared to where it is right now. So we’ll have to look at all of those factors. But as I said earlier that our modeling shows another 10 to 15 basis points stabilization, and beyond that, we’ll have to just see as to how the market react. If the credit premiums go up, obviously, even if the benchmark rates remain low, the credit premium will come and impact the cost of funds for SBI cards as well.

Pankaj Agarwal — Ambit Capital — Analyst

Okay, fair enough. Thank you.

Operator

Thank you. We have our next question from the line of Anand from HDFC Mutual Fund. Please go ahead.

Anand Laddha — HDFC Mutual Fund — Analyst

Hello, ma’am, can you hear me?

Operator

Yes, go ahead.

Rashmi Mohanty — Chief Financial Officer

Yes.

Anand Laddha — HDFC Mutual Fund — Analyst

Ma’am, I just wanted to understand on the spend-based fee income. How should we look that going forward, as most of the spending category where the NPR are generally higher, are opening up and we are seeing traction of that? Should we expect the spend-based fee income to grow higher than the overall spend next year?

Rashmi Mohanty — Chief Financial Officer

How should we think about the spend-based income in the next quarter [Technical Issues].

Operator

Mr. Anand, please mute your line because there is disturbance coming from your line.

Anand Laddha — HDFC Mutual Fund — Analyst

Hello?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

On the spend — yeah.

Anand Laddha — HDFC Mutual Fund — Analyst

Yeah, yeah, sir, carry on.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Okay. Spend-based fee income is primarily the interchange —

Anand Laddha — HDFC Mutual Fund — Analyst

Correct.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

— we earn from — of this spending. It is dependent on the three elements, as we always been stating. The mix of the categories in which the spend is happening, which kind of products, whether it is a premium product, which is at the higher end of network spectrum or at the lower end which card person is spending, and thirdly, whether it is a retail versus corporate mix because corporate typically — even though it gives you a higher interchange, but you have to do a pass back. So net margin, as we have stated, is very less. Over the last period of — during the COVID, we saw these interchange rates going down because people’s consumption in the discretionary items was going down and non-discretionary was stable where the interchange rates are typically lower. Now, as you have seen, there has been a marginal stability and some marginal increase in the — of late, as the travel has gone up, restaurants have gone up, last year those things have gone up. So what we see is, futuristically, for the next year, we believe that this rate will remain stable. There are some headwinds and there are some tailwinds. There are both positives and negatives which are happening in these categories. But broadly, we expect it to remain stable.

Anand Laddha — HDFC Mutual Fund — Analyst

Sir, on the instance-based fee income, this quarter, we have seen a sharp improvement. Do you think, as we keep on charging more and more [Indecipherable], like fee on the rental, do we see that instance-based fee income to improve further or [Technical Issues]

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

We levied rental fee of INR99 on November of last year, and then we increased it from March 17 to INR199. So INR99, half of the last quarter was positively impacted by that, but you have to also recognize that the OVL fee was completely not there, which is also an instance-based fee in Q3. In Q4, we have seen a full benefit of INR99 and almost 70 bps benefit of INR199. These are in what the industry is charging. We — typically, the industry rate they are charging is 100 bps on the transaction and we have seen that the average ticket size is around INR20,000 to INR21,000, so INR199 is almost broadly in that range. It in line with the industry average. We have not seen, as I stated earlier, a decline in the spend. Whether the spend will increase further or not, that is a matter of transaction, but those spends are — little spends are stable at this time.

Anand Laddha — HDFC Mutual Fund — Analyst

So if I have to look at, sir, in terms of spend, instance-based fee income is approximately 1.2% of the spend this quarter. Should we assume this trend to sustain or to improve from here on?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

It was not be on rentals, it will not be 1.2% because we get interchange of that also, okay? it’s not a zero interchange category. So there is a interchange also available, and after that, we are now charging INR199, so the number is higher. We believe that that should remain stable in — at least in this quarter.

Anand Laddha — HDFC Mutual Fund — Analyst

Perfect. Sir, this year, our operating profit growth was 17%, despite the fact that we have seen significantly higher interest rate, we have seen lower revolve rate. How do you see this number going forward? Because interest rates will likely stabilize in the second half. And do you see some cost synergies also coming us — for us?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think you are talking — if you see our operating profit [Speech Overlap]

Anand Laddha — HDFC Mutual Fund — Analyst

Correct.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

[Indecipherable] it is 17%, but for the quarter alone if you look at, as compared to year-on-year basis, it’s 22%. So I think that way, this quarter — I mean, last quarter itself — Q3 itself reflected a kind of — observed negative impact on account of all the regulatory provisions, which has impacted certain fee lines like OVL. So in Q4, whatever steps we have taken, more or less, it’s a reflective of what’s the contribution from the new levies. So I think that this give a kind of direction of what we are aiming where we want to optimize the cost, continue to focus on digital, increase the share of channels of sourcing. This will improve steadily. That’s the kind — and overall, if you look at, I mean, if you were to take any — slightly away from this operating profit, overall return metrics if you look at, the way to look at it is like quarter-to-quarter there will be fluctuations, even in operating profit, even in ROA, ROE, but long-term average is [Indecipherable] 25% ROE, that will be maintained. That is the minimum [Indecipherable].

Operator

Thank you. We have our next question from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead.

Nitin Aggarwal — Motilal Oswal — Analyst

Yeah, hi, good evening. I have two questions. One is like over the — if you look at the new card sourcing, over the past two, three years, the mix of self-employed has risen to now 39%, it used to be in early-20s, and likewise, the mix of government employees has also reduced sharply, but the revolve rate isn’t really picking up, in fact it has only been like down since then. So is there any threshold that you would like to adhere to while broadening the rest filters to boost revolve rate?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

[Indecipherable] self-employed, perhaps if you explain.

Rashmi Mohanty — Chief Financial Officer

So, basically for the self-employed customers, a lot of self-employed actually comes from our Banca channel, where we look at their saving accounts, current account, behaviors, and we onboard them. So it’s a relatively better profile. We have a better visibility to the cash flows. So in that ways, I mean, I would say it’s relatively a lesser risk — I mean, lesser risk in terms of self-employed, because it comes from the Banca channel. In the open market, also we look at repayment performance in the bureau before we onboard self-employed customers. So all those checks are done in place. And so we have a better idea about the customers repayment potential when we onboard self-employed customers.

Nitin Aggarwal — Motilal Oswal — Analyst

All right, ma’am. So, today the mix is like 61%, 39%. Hello? Yeah. So this number like we are not looking to have any limit on this 39% self-employed, what we have reported this quarter?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah, 39% is this quarter contributed early.

Rashmi Mohanty — Chief Financial Officer

Yeah.

Nitin Aggarwal — Motilal Oswal — Analyst

See, we are putting any limit on this –?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

I think the way we are operating is like, obviously, we look at what is the potential — what is the customer choice, obviously. And what is the kind of channel we are using, if at all, we take it into account. Of course, delinquency does matter and the risk adjusted profitability at the end of the day finally that matters. So as long as all these metrics match and the acquisition is holding in terms of meeting all these expectations, we would like to continue. But to your question, other question around revolver self-employed because as much as we’re requiring more of these customers through the Banca channel where we have the auto debit and auto [indecipherable] facility, it revolves often [Phonetic] to be the lower [indecipherable] through Banca channel.

Operator

Thank you. We’ll take our last question from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer — CLSA — Analyst

Yeah. Hi, thanks for taking my questions. Just one data question on — like if you can share how many rental transactions happened on your platform over the last three months? And just to clarify on this instance-based fees of roughly INR830 crores. Is there any one-off, any element of seasonality? Or any reason why it should dip next quarter if spends don’t dip?

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

So I’ve already told you the average ticket size is between INR20,000 to INR22,000. And the weightage of spend is almost around mid-teens. So you can make an estimate on a number of transactions.

Piran Engineer — CLSA — Analyst

Okay. Okay. Fair enough. And on the next thing on instance-based fee?

Rashmi Mohanty — Chief Financial Officer

Yeah. On the instance-based fee, as I called out earlier, that there is a provision of rental fee that come in, in this quarter, which should stay also stabilize or should stay at these levels only for the next few quarters as well. There is some milestone incentive that we’ve gotten. I think that will normalize over the next few quarters. So, while I think, if I were to just look at more BIU business perspective, this number should continue to grow. Will it see the kind of jump in between quarter three and quarter four, the answer is no, you will see a more normalized increase going forward quarter-on-quarter.

Piran Engineer — CLSA — Analyst

Got it, got it. That explains. Thank you so much and all the best.

Operator

Thank you I would now like to hand the conference over to Mr. Rao for closing comments. Over to you, sir.

Rama Mohan Rao Amara — Managing Director and Chief Executive Officer

Yeah. Let me thank our shareholders, investors and business partners for their continued trust and support to us. I would also like to thank my colleagues at SBI Cards for their continued commitment to ensure the company’s success. I would like to highlight that SBI Cards strong focus on sustainability has helping emerge stronger past any market events. While we cannot control the external factors, but we do believe that our strong business model, our ability as a business and adaptive approach equips us well to keep fueling our growth in the future. Thank you all for participating in this call. [Operator Closing Remarks]