RBL Bank expects to see further defaults in its credit card business in the months to come. At the end of September 2020, 9.4% of the banks’ credit card customers, in value terms, had not repaid their dues, a month after the Reserve Bank of India’s six-month loan moratorium policy ended, according to the banks’ investor presentation.

Since then, some customers have repaid and the value of overdue credit card customers has reduced to 8.6% as of date, said Harjeet Toor, head of retail, inclusion and rural business, RBL Bank. “Around 54% of this pool of customers have not paid since April or May, this is roughly 5% of our portfolio, most of our credit losses will come from here. The size of this pool is within our expectations. In addition, only 0.4% of our the portfolio is overdue by 90 days,” he said during an earnings call.

The RBI’s policy, announced in the wake of Covid-19, allowed bank and non-bank borrowers, including credit card customers to defer their monthly loan repayments for six-months, till the end of August. In April, around 24% of the banks’ credit customers in value had availed the moratorium in April which reduced to 16% at then of August.

The credit cards book grew by 41% YoY to ₹11,401 crore at the end of Q2FY21 and now makes up 46% of the banks’ total retail advances as of September 2020. The bank issued close to 100,000 cards in September and aim to return to its pre-Covid run rate by December this year, Toor said.

Tight wallets have impacted credit card spends

“Almost 78% customer spends are towards daily spends, therefore it is not as if these customers typically spent more on buying something that is discretionary and are not able to pay. It is a function of the availability of money. On the salaried side some customers have got delayed salaries, salaries not paid and some lost jobs. On the self-employed side there is stress on businesses opening therefore that is resulting in their not being in a position to pay,” Toor said.

Overall card spends decreased marginally to ₹7,003 crore in Q2 FY21 from ₹7,035 crore in Q2 FY20. However, between September last year and April this year, the total card spends stood at around Rs 8,200 crore only to crash to ₹4,682 as of at the end of June in the wake of the Covid-19 pandemic.

The average card spends stood at ₹9,092 during Q2 FY21 compared to ₹10,838 as of Q2 FY20. Between April and June, the average card spends fell to ₹5,025. As of September 2020, the bank had 2.8 million cards in force with a market share of 4.6%.

“On customer spends we have seen consistent pick ups from May onward reaching March levels in September and the spend per active card has crossed pre-Covid levels which indicates that more customer expenditure is moving to the card. On the other hand, the active percentage of cards is still below pre-Covid levels of 45%.”

“The majority of this fall in active rate is on account of our risk-calls on these customers but there are still a portion of customers who have stopped spending on the card,” Toor said. The bank issued close to 100,000 cards in September and aim to return to its pre-Covid run rate by December this year, he added.

 

Financial Snapshot

  • Net profit stood at Rs 144 crore (up by 165% YoY)
  • Total deposits stood at Rs 64,506 crore (up by 3% YoY)
  • Net advances stood at Rs 56,162 crore (does by 4% YoY)
  • Gross non-performing asset stood at 3.34% (up from 2.6% YoY and down from 3.45% QoQ)

Investor Presentation | Financial results | Transcript