Title- Significance/Relationship of SBI Cards and Payment Service PVT LTD with Nifty50
Author-Shradha Amol Churi
Introduction-
In 1998, the State Bank of India and GE Capital introduced the SBI Card. The corporate headquarters of SBI Card is in Gurgaon, Haryana, and are known as SBI Cards and Payment Services Private Limited (SBICPSL). With the SBI Card, Indian consumers will have access to a huge selection of premium, value-added payment goods, and services. Our goal is to make life easier for our clients, team members, and other key stakeholders. State Bank of India and The Carlyle Group bought GE Capital’s share in SBI Card in December 2017. In August 2019, the business changed its legal name to SBI Cards and Payments Services Limited. The first pure-play credit card business to debut on the Indian stock markets was SBI Card in March 2020.
Objective- To understand the regression relationship between average weekly returns of Nifty 50 and SBI cards and payment pvt ltd.
Literature Review-
1. The economy’s lifeblood is finance. The RBI, which serves as the central responder, is the primary credit distributor in India. In India, banks are widely dispersed. Credit facilities are being expanded by every bank and financial organization. India has a broad financial industry that is rapidly growing due to both the development of already-existing financial services companies and the entry of new players. The banking regulator has permitted the creation of new businesses, such as payments banks, expanding the variety of organizations functioning in the market. Micro, Small, and Medium-Sized Enterprises (MSMEs) now have simple access to financing thanks to a few actions taken by the government and the State Bank of India (SBI). These actions include the introduction of the Credit Guarantee Fund Scheme for Micro and Small Enterprises. Thanks to the government and all commercial banks working together, India’s capital market is unquestionably among the most active in the world. (Birla,2018)
2. Under the name “SBI Cards,” two joint ventures between SBI and GE-capital were set up to advertise, issue, and service bankcards. One handles the distribution of SBI Cards while the other, GE Capital Business Processes Management Services, takes care of the technological and processing requirements for SBI Cards in India. By integrating SBI’s nationwide network with GE Capital’s technology, procedures, risk management, retail marketing, and service capabilities, this branch seeks to exploit brand equity and customer relationships. The joint venture is 60 percent owned by GE Capital and the remaining 40 percent by SBI. The initial capital basis of the new business would be Rs. 1 billion. SBI targeted middle-income groups with its nationwide banking network of over 14000 branches, the majority of whom were already its clients. In comparison to the industry average of Rs. 750, the firm under-priced their credit card annual charge at Rs. 500. Any card supplied after two weeks from the application date would be exempt from yearly costs. SBI Cards reached a user base of 0.25 million in 25 cities within 16 months of its inception. In 2000, 0.9 million cards were distributed nationwide, encompassing around 41 major and minor cities. (Patibandla,2002).
Data collection-
The closing price data of Nifty50 and SBI cards and payment service pvt ltd was taken from www.nseindia.com (National Stock Exchange) for the time period 1ST APRIL 2022 to 31ST MARCH 2023.
From the available data, the closing rates of all the Fridays in the year was sorted to find out weekly returns for both Nifty as well as SBI cards and payment service then the weekly returns were calculated for both by using the formula –
Weekly return = (C3-C2)/C2 *(100)
Where C3 represents the week’s closing price and C2 is the previous week’s closing price.
Once the data is calculated, the weekly return column for NIFTY50 is considered as the “X” variable, and the weekly returns column for SBI cards and payment service pvt ltd is considered as the “Y” variable.
Data Analysis-
We can write the equation in the form of Y= a+b(X)
Where, Y= SBI cards and payment service Returns
X=Nifty-50 Returns
a=intercept and b=Slope
Hence, the equation becomes,
Y= (0.2067) + 1.5891*X
SBI cards and payment service Return = (0. 2067) +1.5891*(Nifty-50 Return)
(t-stat =8.0006)
N=51 R2=0.5664 and F=64.0097
The above equation shows the relationship between X and Y (As b is positive) means there is a direct relationship which implies that if X rises, Y also rises and vice versa. In this equation b =1.58, that is if X rises by 1 unit, Y will rise by 1.58 units, t-stat for b is greater than the critical value, so b is statistically significant at a 5% significance level.
R^2 = 0.5664 which means only 56.6% of Y i.e., SBI cards and payment service pvt ltd weekly returns is explained by X i.e., Nifty returns.
Similarly, F = 64.009, which is also greater than the table value.
And p-value is greater than 0.05, so the model is statistically significant at a 5% level of significance.
Conclusion – As, beta (b) is more than 1, which implies SBI cards and payment service pvt ltd is good for short-term investment.
References-
Birla, Surabhi. “Emerging Financial Services Offered by Bank (SBI).”
Patibandla, Murali, and Shirley Rosario. “Intangible assets, multinational firms, and joint ventures.”