SBI Cards sees sharp jump in Q2 provisions
The company’s gross non-performing assets (GNPA) rose to 4.29% in the September quarter from just 1.35% in the preceding three months.Updated: Oct 23, 2020, 03:40 IST
SBI Cards and Payment Services Ltd, India’s second-largest credit card firm, on Thursday reported a sharp deterioration in asset quality as thousands of cardholders skipped payments, the latest sign of the coronavirus pandemic’s impact on people’s financial health.
The company’s gross non-performing assets (GNPA) rose to 4.29% in the September quarter from just 1.35% in the preceding three months.
The asset quality could have been even worse had not a top court order put a standstill on recognition of bad loans. Also, lenders cannot label loans as bad, even if a default has occurred.
In the absence of the ordered standstill, the GNPA number would have jumped to 7.46%, SBI Card management said.
SBI Cards reported impairment losses and bad debt expenses at ₹862 crore in the quarter against ₹329 crore for the same period last year.
“Additionally, management overlay provision created for ₹268 crore in Q2 FY21; total management overlay provision is at ₹758 crore as of September,” the company said.
The rise in provisioning and bad loans led to a 46% drop in profit to ₹206 crore. Revenue from operations, however, grew 5% to ₹2,413 crore.
While asset quality concerns emerged in the fiscal second-quarter, the credit card company said that retail spending showed resurgence.
Retail spending increased by about 50% in the second quarter from the preceding three months. Retail spending was at 90% of pre-covid (December 2019- February 2020) levels.
“Card-in-force”—total number of cards issued and outstanding—grew 16% to 11 million as of Q2 FY21 as against 9.5 million in the same period last year.