Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Banks - Modifications to PPI and its impact on cards - Negligible impact, if any, for stocks under coverage

Posted On: 2022-06-24 13:18:14 (Time Zone: IST)


Modifications to PPI and its impact on cards. As per unauthenticated media reports, RBI has communicated to non-bank pre-paid instrument (PPI) issuers to stop issuing cards where the funds are loaded through a credit line. There is no negative impact in our coverage universe but we disagree that it is a positive development for existing players as well. Credit cards are still in its infancy and so is payment behavior adoption. The market is large and we believe that SBI Cards is well-positioned to defend its model currently.

Clarification on loading of credit in pre-paid instruments

As per unauthenticated media reports, RBI has communicated to all "authorised non-bank prepaid instrument issuers" to not permit loading from a credit line. However, existing channels to load the pre-paid instrument through cash, debit to a bank, credit/debit cards and formats approved by regulated entities would continue. The regulation is probably coming from recent developments wherein newer business models of credit-based payment products were built by companies using PPI as a vehicle. However, RBI has raised concerns on funding of these PPI instruments through a credit line from an NBFC. Note that the regulation currently is applicable for non-bank-based PPI instruments and not PPIs that are issued by banks.

Need better formats to reach credit-linked products that help expand market

The recent move by RBI could result in innovators looking to reassess their product strategy where the regulatory environment is constantly evolving. We need more players that have different risk appetite to expand the market. Not all players may have the ability to scale up or many may have severe challenges when there is a cyclical slowdown as these business models are not well tested. However, they do build models that allow traditional lenders, usually banks, can scale up from where they have built. These companies offer innovative solutions which makes it quite valuable to improving customer experience as well. Banks bring in low cost of funds that make it easier to scale while these players have demonstrated their ability to take risk as they have a focused approach towards solving a specific problem. Traditional NBFCs built product segments which banks have scaled up once they have demonstrated the business proposition. Examples include housing finance, especially in self-employed, auto finance (CV and car finance), gold loans or even micro finance in recent years.

We are at a point where we are looking at new solutions on retail credit as penetration is quite low. There is a large share of new-to-credit or customers who are young or yet to demonstrate a credit history. We are seeing newer models by various companies where we are experimenting through BNPL or even short-term personal products. We are looking at companies that are building credit on UPI or credit cards. Given the past history, banks could probably scale many of these products at an appropriate time if they identify the opportunity.

Many reasons to be positive on credit cards; this is not the top priority

SBI Cards saw an impressive recovery on Tuesday, which partly could be attributed to the narrative from this guideline. However, we believe that the core business opportunity is quite solid even with higher competition from new players. We believe that India is witnessing a healthy transition from cash to digital, which implies that different payment products would have a role to play. In our view, we are still in the early stages of establishing a payment behavior and we believe that the credit card journey is still an attractive proposition. SBI Cards is a leading player with a healthy ~20% market share in spends and card issuance. We maintain our positive view on the stock with an unchanged Fair Value.


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Gladiator Stocks - Minda Industries - ICICI Direct

Reliance Industries - Company Update - In fine fettle amidst global uncertainty - BUY

Sector Update - Sugar - ICICI Direct

Initiating Coverage - Hindustan Aeronautics Ltd - ICICI Direct

Rallis India - Company Update - Margin pressure likely to persist in near term..!! - Upgrade to 'BUY'

Indoco Remedies - Q4FY22 Result Update - In-line quarter; strong revenue guidance for US & EU mkt - Upgrade to 'BUY'

Indraprastha Gas - Q4FY22 Result Update - Impressive performance - BUY

KEC International - Annual Report Analysis - Healthy outlook across business segment - Accumulate

Westlife Development - Q4FY22 Result Update - Approaching the tipping point; Buy for LT Gains

Reliance Research downgrades Bajaj Auto to Sell

NOCIL - Q4FY22 Result Update - Strong operating performance amidst challenges - BUY

Gujarat Gas - Company Update - Deftly negotiating through tough times - BUY

Orient Electric - Gaining market share via innovation: initiate with ADD - ICICI Securities

Manappuram Finance - Q4FY22 Result Update - Intense Competition Put Pressure on Yields - BUY

Derivatives Weekly View - June 24, 2022 - ICICI Direct

Stock Tales - Newgen Software - ICICI Direct

Weekly Report - June 25, 2022 - Mr. Mitul Shah - Head of Research at Reliance securities

Gladiator Stocks - Bosch - ICICI Direct

Management Meet Update - Sheela Foam - ICICI Direct

Gladiator Stocks - Mahindra & Mahindra - ICICI Direct

LIC Housing Finance - Q4FY22 Result Update - Fixed rate liabilities could cushion NIM - BUY

Navneet Education - Q4FY22 Result Update - Growth levers in place - BUY

MPC Minutes: Jun-22: All eyes on inflation - Acuité Ratings

Nazara Technologies - Management Meet Update - Breaking through the ESports landscape - BUY

Sector update - Quick Service Restaurants - YES Securities

JK Lakshmi Cement - Q4FY22 Result Update - Strong performance; Valuations drive upgrade - Accumulate

Would it be wise to invest in a home early in your career?

Dr. Reddy's Laboratories - Analyst Meet Update - Multiple growth initiatives - BUY

Dhanuka Agritech - Management Meet Update - 1Q likely to be subdued; all hopes pinned on the monsoons - BUY

BUY Ipca Laboratories - Q4FY22 Result Update - Weak exports; gradual recovery

Acuité expects India's current account deficit to widen to more than USD 90 bn in FY23 - Acuité Macro Pulse

Inflationary concerns will continue to weigh on the pace of economic revival in FY23 - Acuité Macroeconomic Performance index

City Union Bank - Q4FY22 Result Update - Asset quality on the mend - BUY

Banks - BNPL - Early results are not that exciting as yet - Kotak

Acuité expects FY23 GDP growth estimate at 7.5% - Acuité Macro Pulse - Growth - May-22 Edition

Base factor pushes up IIP in Apr-22 to an 8-month high - Acuité Ratings

India Strategy & Q4FY22 Review - Long term growth prospects to overshadow near term uncertainties

India Equity Strategy - Quarterly flipbook: Q4FY22-Cost inflation driving downgrades

FMCG - D2C is here to stay; omni-channel the way forward - HDFC Securities

Automobile Sector - Monthly Quick View - May'22 - Steady Performance Improvement, backed by Gradual Rural Recovery

BFSI - New normal rate cycle; brace for transmission effects - HDFC Securities

SBI Cards and Payment Services - BUY - TP Rs. 1260 - YES SECURITIES

RBI frontloads rate hike amid increased inflationary headwinds - Acuité Ratings

Monetary Policy June 2022 - Axis MF Views

RBI Monetary Policy View - Mr. Dhiraj Relli, MD & CEO, HDFC Securities

Monetary Policy - entering the red zone - Anuj Puri, ANAROCK

Mr. Murali Ramakrishnan, MD &CEO, South Indian Bank on RBI Monetary Policy

Comments on RBI's MPC Policy Jun'22 - Acuité Ratings

Views on RBI Monetary Policy - June 2022

Bayer Cropscience - Q4FY22 Result Update - Healthy all round performance - BUY


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020