The company's profit after tax rose 14.7% to 6.03 billion rupees ($72.5 million) in the second quarter, while analysts had expected a profit of 6.06 billion rupees, according to LSEG data.

Analysts had flagged elevated funding costs for the company as the Indian central bank kept lending rate steady at 6.50% in its fourth straight policy meeting. It has raised rates by 250 basis points since May 2022 in a bid to cool surging prices.

SBI Card's finance cost rose by 64% year-on-year to 6.05 billion rupees.

The company, backed by the country's top lender State Bank of India, said its gross credit cost rose 36% to 7.42 billion rupees.

Net interest margin (NIM), a key measure of profitability, was 11.3% in the quarter, down 12 basis points from end-June and in contrast to SBI Card's forecast, in July, of stable margins.

Spends, or the aggregate amount transacted by cardholders, grew 27% to 791.64 billion rupees as affluent Indians spent more heading into the festive season.

Nonetheless, the company's market share in industry card spends, where it trails only HDFC Bank, fell 91 basis points month-on-month in September, Nomura said in a note.

Card-in-force, the sum of all credit cards issued by the company, grew 21% from the year-ago period.

Total revenue from operations for the credit card services company grew 24% to 40.87 billion rupees from a year earlier.

Gross bad loans as a percentage of gross advances - a measure of asset quality - slightly worsened to 2.43% at the end of September, from 2.41% at the end of June.

SBI Card's shares ended 2.3% higher ahead of the results. ($1 = 83.2021 Indian rupees)

(Reporting by Nishit Navin in Bengaluru; Editing by Savio D'Souza)