SBI Bank opted to enter the credit card field in the year of 1998, when the Indian stock market and SBI were recovering from the Harshad Mehta scandal, recognising the potential of credit card business in the twenty-first century. After HDFC Bank, the company is India’s second largest card distributor and the first to list on the Indian stock exchanges. The company currently has over 10 million customers and holds 18 percent of the entire market share in India. This makes SBI credit Card one of the best credit cards in India for everyone.
Reason Behind Growth of SBI Cards
SBI Cards’ Growth Drivers
Less card penetration: If you compare the overall number of cardholders in India to the total population, you’ll find that India only has three credit cards for every 100 individuals. In the United States, there are 320 credit cards for every 100 persons, indicating a vacuum that credit card firms have yet to address.
Increased Co-Branding
Spice Jet, Tata, Etihad, Apollo, IRCTC, and American Express have teamed with the company to expand their reach through corporate branding. This will continue to promote their interest income and commissions. Its recent co-branding as a Paytm SBI Card with India’s largest merchant banking app Paytm demonstrates how seriously the SBI Card is taking the untapped volumes in the economy.
Rising E-commerce Platform Trends
The rise of e-commerce platforms in India has increased demand for credit cards, which offer attractive discounts and short-term advances. Payment gateways, regardless of the type of e-commerce platform, will almost always have a credit card option.
Parental support
SBI, the parent business, is well-known in the Indian banking industry. This may make it easier for SBI Cards to obtain low-cost credit for a longer period of time. Furthermore, SBI’s robust presence will continue to attract a healthy customer base.
Oligopoly structure in unlisted space
After the government promoted privatisation and disinvestment to hang the prices of commodities on the demand-supply mechanism, there may be no monopoly structure in any industry. Due to high entry barriers, credit card distribution organisations have little control over pricing of the service, putting them in the driver’s seat.
Monopoly structure in the listed space
Listed companies with no competitors command a high premium on Indian exchanges, as investors monitor these types of businesses.
Cost to Income Ratio
This ratio has a distinct identity in the examination of the balance sheet, indicating how effectively the company’s management has performed in disbursing loans to borrowers while keeping cost reduction in mind. The operating expense to operating income ratio is computed by dividing operating expenses by operating income (net interest income plus other income). According to SBI Cards’ consolidated financial filings, the Cost to Income ratio is 56.6 percent. Compared to other NBFCs, the ratio is larger, which raises some concerns.
Net Interest Margins
A financial institution’s NIM margins determine its efficiency in earning net interest income on assets utilised to generate revenue from direct operations. SBI Cards’ NIM margins are substantially better than the leading NBFCs Bajaj Finance and Shriram Transport, which have NIMs of 10.24 percent and 7.6 percent, respectively. This ratio assists bankers in determining how effectively they have managed to earn on assets that can be used to give advances. The higher the NIM margins a bank can create, the healthier its revenue generation potential will be.
Cost to Income Ratio
This ratio has a distinct identity in the examination of the balance sheet, indicating how effectively the company’s management has performed in disbursing loans to borrowers while keeping cost reduction in mind. The operating expense to operating income ratio is computed by dividing operating expenses by operating income (net interest income plus other income). According to SBI Cards consolidated financial filings, the Cost to Income ratio is 56.6 percent. Compared to other NBFCs, the ratio is larger, which raises some concerns.
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