NEWS & ADVICE : CREDIT CARDS
SBI Cards expected to report loss for the second year
By Ankit Sharma
Feb 26, 2009
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The rising default rate in the country is likely to affect the growth of the second largest card issuer in the country, SBI Cards. The company is expected to report a loss for the second time in a row.

In a recent report by credit rating agency, CRISIL, it was stated that SBI Cards & Payment Services Ltd is expected to report some more losses in the 2008-09 because of credit costs and lower fee income. Similarly, the largest card issuer, ICICI Bank has also been facing defaults that have been mounting in the recent past. As a result both the issuers have been tightening salary and other norms of their credit cards. SBI's credit checks have increased and the minimum salary criterion for issue of cards has been revised from Rs 1.44 lakh to Rs 2-2.4 lakh per year.

Defaults for ICICI have also been rising but the rate is still low. Sachin Khandelwal, Head-Credit Cards, ICICI Bank, said: "In 2007-08 the credit cards business grew by 20 to 25 percent. We had done 1.5 million cards in 2007-08 which has been reduced by 60 percent in the first 10 months of 2008-09. The credit losses have increased by more than 1 percentage point (of the spread between lending rates and cost)."

As on September 30th 2008, SBI Cards reported a loss of Rs 60 crore on total income of Rs 440 crore. During the last fiscal, SBI Cards suffered a loss of Rs 150 crore and it is expected to continue the trend. "We have consciously slowed down sourcing customers by more than 50 percent from a peak of 1 lakh cards a month last year to 20,000 to 30,000 a month now to ensure a good portfolio. It's a difficult market. We have consolidated this year and are better placed to tackle losses," said a senior official of SBI Cards.

In its latest report, rating agency ICRA said that SBI Cards would need to expand its capital in order to meet the regulatory norms.

SBI Cards is 60% owned by State Bank of India (SBI) while US-based GE Money has its control over the remaining 40%.

 


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