RBL Bank expects dip in new credit cards, spends in FY21

We recently got a news that RBL Bank expects dip in new credit cards, spends in FY21. The bank which derives 18 per cent of its loan portfolio from credit cards, is expecting new plastic issuances to halve and a fall in expenses also in FY21 but is confident of the revenues from the segment remaining intact, a senior official has said.

However, the economic climate will end in a rise in credit costs, or money being put aside for possible loan losses, by over 30 per cent within the cards segment, the official told PTI.

 

Usually, banks have a lower reliance on the credit cards segment for his or her advances because it’s an unsecured product, but its segmental head Harjeet Toor said the bank has been employing a slew of analytics capabilities to grow within the category without increasing its delinquencies.

 

He said that the revenue is stabilizing to a large extent due to a three-month moratorium on loan repayments announced by the RBI, as compounding for non-interest payers continues to increase, thereby increasing their overall income.

Nearly a fourth of its overall MasterCard portfolio of Rs 10,500 crore has opted for the moratorium, he said.

“Our revenue is equally divided between fee and interest income. What we will lose on fees such as reduced expenses, cross-sales and fines for delayed payments, we will recover through an increase in interest. We expect revenue to remain stable.” he said.

According to an investor presentation, in FY20, credit card fees contributed Rs 942.3 crore, which is 54 per cent of the Common Core Fee income, suggesting that the total revenue from MasterCard is around Rs 1,900 crore.

As a prudential measure, the bank locks up the power to use the cards for newer spends in cases of these customers who’ve opted for the moratorium, Toor said, adding that only 13 per cent of the purchasers by number have opted for the RBI-announced relief and sounded confident of it to return down albeit the moratorium is extended.

In FY21, it expects to sell only over 5 lakh credit cards as against the 13 lakh earlier, Toor said, adding that it’s to attend for a couple of months before the market actually settles down.

In April, there was negligible new acquisitions and therefore the overall portfolio remained at 28 lakh cards, he said, adding that it’ll be slow in expanding the bottom a minimum of till the post-monsoon festivities.

With over 60 per cent of its customers being a resident of the ‘red zones’, spends have also taken successful, Toor said, remarking that spends on aspects like groceries and utilities have persisted.

In FY 2011, the bank expects a 12 per cent drop in overall expenditure, through which it receives an interchange fee as per the presentation of the investor.

Toor said the reduction in expenses will not be very clear as the bank does not depend on discretionary spending categories such as restaurants and cinema which are likely to be more affected.

From a portfolio quality perspective, he said the credit costs are going to be up by 30-60 per cent thanks to the general climate, but added that it’s been employing a host of levers to scale back its delinquencies.

He said total gross non-performing assets from the card business declined to 1.2 per cent in March, down from 1.67 per cent, adding that its fragility was 27 per cent lower than peers.

He uses age-group strategies where it focuses on people above 30, offering it data analytics to tie-up with brands like Bajaj Finance and Tomato, and NPA Stay To avoid people from the master card segment avoids fresh investigation, he said.

RBL Bank expects dip in new credit cards, spends in FY21

 

 

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