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<ul><li>Deal volumes jumped by 21% to 191 while the values declined by 37% to USD 9.4 billion in <keyword id="20061151" type="General" weightage="20" keywordseo="April" source="keywords">April</keyword> compared to March 2024</li><li>Adani Group's three major domestic consolidations of around USD 2 billion in value marked 38% of the total deal values in April 2024.</li><li>Experts predict sustained momentum and growth in deal activities, supported by strong fundamentals and a conducive investment climate.</li></ul> In the dynamic landscape of Indian business transactions, the manufacturing sector has emerged as a beacon of value, while consumer retail reigns supreme in volume. April 2024 marked significant shifts in deal-making compared to the month before with a notable absence of billion-dollar deals. Overall deal volumes jumped by 21% to 191 while the values declined by 37% to USD 9.4 billion in April compared to March 2024, as per the latest <keyword id="20034170" type="General" weightage="20" keywordseo="Grant-Thornton-Bharat" source="keywords" meta.keywordsubtype="org" meta.entityname="Grant Thornton Bharat" meta.hostid="83" meta.entityid="Grant Thornton Bharat">Grant Thornton Bharat</keyword> Dealtracker report. The past month has witnessed a flurry of activity, with notable shifts and surges across various industries, offering a compelling glimpse into the evolving economic terrain. "Deal volumes increased in April 2024 marking the highest monthly volumes since May 2022. There were no billion-dollar deal but witnessed 12 high value (&gt; USD 100 million) deals amounting to USD 3.8 billion," said Shanthi Vijetha, Partner at Grant Thornton. <cmsannotation type="cmsannotation" annotationid="Adani Group leads M&amp;A activity" comment="subhead" text="Adani Group leads M&amp;A activity">Adani Group leads M&amp;A activity</cmsannotation> At the forefront of deal values stands the manufacturing sector, boasting an impressive tally of nine transactions amounting to a staggering USD 1,919 million. This surge is underpinned by two monumental deals, notably the Adani Group's strategic stake increase in Ambuja Cement and ACC, which was the most significant M&amp;A activity of the month. Adani Group secured a significant 7.5% stake in Ambuja Cements, injecting a substantial USD 1.8 billion into enhancing the manufacturing capacity of cement makers, signaling a bold step towards industry expansion and innovation. Overall, the group's three major domestic consolidations of around USD 2 billion in value marked 38% of the total deal values in April 2024. Despite this, the <keyword id="21645622" type="General" weightage="20" keywordseo="merger-and-acquisitions" source="keywords">merger and acquisitions</keyword> transactions saw the highest decline in value, dropping by 75 percent to USD 2.5 billion from USD 10.2 billion in March. This was mainly because of the absence of large-scale mergers like those seen in March. However, M&amp;A deal-making remained robust in April with significant domestic consolidations. "This month's activity, characterized by deal volumes spanning across breadth of sectors and by large deals by select players, illustrates a market that is both diverse and robust," observed Shanthi. <cmsannotation type="cmsannotation" annotationid="Private Equity landscape remains vibrant" comment="subhead" text="Private Equity landscape remains vibrant"><keyword id="19895041" type="General" weightage="20" keywordseo="private-equity" source="keywords">Private Equity</keyword> landscape remains vibrant</cmsannotation> The private equity transactions also experienced a slight decrease in value, reaching USD 2.666 billion, according to the report by Grant Thornton Bharat. However, with a total of 130 deals, the overall market landscape remains vibrant. The numbers indicate a clear shift towards enhanced number of investments while the size of the deals remains smaller compared to previous months. "The stable value of investments, despite the higher number of transactions, indicates a strategic adjustment towards spreading investments across various sectors, aiming to capitalize on emerging opportunities while mitigating large-scale risks," says the report. "The deal outlook for 2024 continues to remain positive as India stands at the cusp of a new era of growth and investment supported by a growing consumer market, a flourishing tech start-up ecosystem, and supportive government policies," concludes Shanthi Vijetha. Factors that could influence domestic markets in the near future include the outcome of Lok Sabha elections, global and domestic trends in interest rates driven by inflation, and supply chain dynamics. However, experts predict sustained momentum and growth in deal activities, supported by strong fundamentals and a conducive investment climate.

Volumes up, values down: April 2024 marks notable shifts in India's deal-making landscape

New Delhi, <keyword id="10062958" type="UNKNOWN" weightage="20" keywordseo="transaction-auditor-grant-thornton">Transaction auditor Grant Thornton</keyword>, in a report shared with the <keyword id="57372" type="COMPANY" weightage="20" keywordseo="Administrator">Administrator</keyword> of <keyword id="127124" type="CITY" weightage="20" keywordseo="DHFL">DHFL</keyword>, has found certain transactions which are undervalued, fraudulent and preferential in nature, putting the newly-discovered fraud at ₹6,182 crore. The Administrator of <keyword id="6423706" type="DOMAIN" weightage="20" keywordseo="dewan-housing-finance">Dewan Housing Finance</keyword> Company Ltd, appointed under the Insolvency and Bankruptcy Code, 2016 to carry out the duties under it, obtained assistance from <keyword id="10802312" type="UNKNOWN" weightage="20" keywordseo="reputed-professional-agency">reputed professional agency</keyword>, Grant Thornton to conduct investigation of the affairs of the company in respect of transactions qualified under sections 43 to 51, and sections 65 and 66 of the Code. Accordingly, the Administrator of the Company received an initial report from the professional agency appointed as the transaction auditor, indicating that there are certain transactions which are undervalued, fraudulent and preferential in nature, falling under the aforesaid sections of the Code, as per a filing. On basis of the investigation and observations of the transaction auditor, the Administrator has filed an application before the Mumbai bench of the <keyword id="6354457" type="COMPANY" weightage="20" keywordseo="National-Company-Law-Tribunal">National Company Law Tribunal</keyword> (NCLT) under Section 45, Section 60(5) and Section 66 of the Code on February 20, 2021 in respect of disbursement made to certain entities as other large project loans (OLPL), against Kapil Wadhawan, <keyword id="2992416" type="PERSON" weightage="20" keywordseo="Dheeraj-Wadhawan">Dheeraj Wadhawan</keyword>, Creatoz Builders Pvt Ltd, Ikshudip Fincap Pvt Ltd, Rite Developers Pvt Ltd and certain other entities. It is to be noted that further filings may be undertaken, in due course. The nature of fraud is in relation to irregularities in disbursement of OLPL loans by the company in the past. As per the transaction auditor report shared with the Administrator, the monetary impact of the above transactions covered under the application amounts to ₹5,381.90 crore towards outstanding principal, ₹589.36 crore towards accrued interest and ₹210.85 crore towards notional loss of interest on account of charging lower rate of interest. Thus, the total impact of such transactions, as detailed in the transaction auditor's report, has been sought from the relevant entities involved, along with the interest for the relevant period, through the said application filed with NCLT. As per the report prepared by the transaction auditor, the concerned transactions occurred over a period of time, detailed in the report. Based on the report, the application has been filed with NCLT, Mumbai against 33 respondents, including Kapil Wadhawan, Dheeraj Wadhawan, Creatoz Builders Pvt Ltd, Ikshudip Fincap Pvt Ltd, Rite Developers Pvt Ltd and certain other entities. The preliminary estimation included in the application places the monetary impact of the concerned transactions at approximately ₹6,182.11 crore (which includes ₹210.85 crore towards notional loss of interest on account of charging lower rate of interest). All relevant details regarding these proceedings have been included in the application filed before the National Company Law Tribunal, Mumbai and is presently pending consideration. SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/nurecas-100-crore-ipo-heres-how-to-check-share-allotment-status/articleshow/81135236.cms">Nureca’s ₹100 crore IPO: Here’s how to check share allotment status</a> <a href="https://www.businessinsider.in/travel/article/exploring-the-unreal-beauty-of-the-andaman-islands/articleshow/81126293.cms">Exploring the unreal beauty of the Andaman Islands</a> <a href="https://www.businessinsider.in/stock-market/news/happiest-minds-is-leveraging-its-partnerships-with-big-players-like-google-microsoft-aws-salesforce/articleshow/81105035.cms">Happiest Minds is a smaller company that does the same thing as MindTree and L&amp;T Infotech — but clearly it is doing it a lot better</a>

Fraudulent transactions of ₹6,182 crore in DHFL unearthed

Dealmaking activity witnessed a huge decline in January, with only 145 transactions worth USD 2.7 billion being undertaken by <keyword id="46431" type="General" weightage="80" keywordseo="india-inc" source="Orion">India Inc</keyword>, a report said on Monday. By value, the overall flows suffered due to the absence of any big-ticket deal and were 56 per cent down as compared to USD 6.12 billion in the year-ago period, and 62 per cent down compared to the previous month, the report by consultancy firm <keyword id="131240" type="General" weightage="100" keywordseo="grant-thornton" source="Orion">Grant Thornton</keyword> said. The volumes were down 41 per cent when compared with 244 deals in January 2022, while the same were down by 3 per cent as compared to the preceding month of December. "<keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword> managed to account for record deal values last year (2022), which made investors hopeful about the future. However, the deal momentum in January 2023 did not match the expectation and witnessed a declining trend," its partner <keyword id="12539905" type="General" weightage="50" keywordseo="shanthi-vijetha" source="Orion">Shanthi Vijetha</keyword> said. The mergers and acquisition (M&amp;A) deal volumes declined by 62 per cent at 26 deals worth USD 311 million, an 88 per cent decrease compared to January 2022, it said. The M&amp;A segment continued to be dominated by domestic deals, it said, adding that at USD 270 million, the monthly value was the lowest since May 2022. Private equity (PE) investments recorded 119 deals valued over USD 2.4 billion, it said, adding that while both volumes and values declined compared to January 2022, there was a 28 per cent increase in deal volumes and a 30 per cent increase in deal values when compared with December 2022. <keyword id="6363818" type="General" weightage="80" keywordseo="pharma" source="Orion">Pharma</keyword>, healthcare and biotech stood at the top in terms of overall deal values, recording six deals valuing USD 921 million, most of which was contributed by two big-ticket transactions in the PE space, it added. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/epfo-unveils-procedure-to-apply-for-higher-pension-under-employees-pension-scheme/articleshow/98094206.cms">EPFO unveils procedure to apply for higher pension under Employees Pension Scheme</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/finance/news/rupee-gains-10-paise-to-close-at-82-72-against-us-dollar/articleshow/98094996.cms">Rupee gains 10 paise to close at 82.72 against US dollar</a>

India Inc sees winter chill in dealmaking activity in January: Grant Thornton

The Indian art market is on course to have its best-performing year ever based on the first six months of FY23. Having a turnover of USD 75.8 million as of 30 September 2022, according to Indian Art Investor's <keyword id="15302035" type="General" weightage="50" keywordseo="indian-art-market-report" source="Orion">Indian Art Market Report</keyword> for H1FY23, FY23 may exceed FY22. The first six months of FY23 have been able to produce more than the yearly turnover of 34 of the 39 years of prior auction data held by <keyword id="6515833" type="General" weightage="50" keywordseo="iai" source="Orion">IAI</keyword>. The study states that a total of 468 artists - or 57 per cent of the works sold in FY22-have contributed to this accomplishment through the sale of 2,053 pieces. "The top tier of the market continues to break norms and make headlines. Works priced &gt;USD 1.2 million are responsible for 67 per cent of the turnover, with the top 5 most expensive works alone bringing in 20 per cent. But as the divide widens, so does the lowest tier. Works priced Commenting on the report findings, <keyword id="964124" type="General" weightage="80" keywordseo="pallavi-bakhru" source="Orion">Pallavi Bakhru</keyword>, Partner, Private Client Services at <keyword id="10410446" type="General" weightage="80" keywordseo="grant-thornton-bharat" source="Orion">Grant Thornton Bharat</keyword>, said, "With a staggering USD 75.8 million being generated in the first half of the current FY, people are now understanding that the Indian art market is a great space for alternate investment portfolios. With a sharp increase in income, there has been an increase in demand for art. And while art was mostly considered a collectable and a luxury item, it has slowly and steadily moved into the category of a capital asset, which by definition provides benefits over a long period of time. Although traditional buyers remain a force in driving the market, there is an influx of new collectors who find art safe and are warming up to the idea of art as an investment option." The top 10 most expensive works sold in H1FY23 were equally distributed between Q1 and Q2. These ten pieces were responsible for 27 per cent of the entire turnover produced over those six months. Seven of these pieces belonged to <keyword id="99619" type="General" weightage="80" keywordseo="modernists" source="Orion">modernists</keyword>, and three were pre-modernist pieces. The majority of the works sold and 81 per cent of the overall revenue made during this time period are by modernists. Since oil was the medium used most frequently by Modernists, it made up 57 per cent of the overall revenue. Because canvas is thought to be the material of choice for oil, it accounted for 75 of the revenue. Online auctions have completely revolutionised the market and now makeup 86 per cent of all transactions. Overall, H1FY23 has demonstrated the strength of the Indian art auction business, demonstrating a steady growth and unrealized potential. With pride, the market has grown in all the correct directions. Modernists have shown to be wise investments since Contemporaries have been on the rise. Along with an influx of riches and a new breed of collectors entering the market, there is a positive attitude. The auction season has gotten off to a strong start in September, and the market has continued to astound everyone. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/risk-to-indias-sovereign-rating-from-external-pressures-is-limited-fitch-ratings/articleshow/94967621.cms">Risk to India's Sovereign Rating from external pressures is limited: Fitch Ratings</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/ultratech-cements-profit-tumbles-42-yoy-to-756-crore-due-to-higher-power-raw-material-costs/articleshow/94964556.cms">UltraTech Cement’s profit tumbles 42% YoY to ₹756 crore due to higher power, raw material costs</a>

Indian art market clocks $75.8 million in turnover for H1FY23

Private equity investments in the country in August -- at USD 1,090 million -- declined for the third month in a row both in terms of volume and value, down 37 per cent from last year, a report by a news agency reads. 
 According to assurance, tax and advisory firm <keyword id="131240" type="COMPANY" weightage="20" keywordseo="Grant-Thornton">Grant Thornton</keyword>, there were 85 PE transactions worth USD 1,090 million while in August 2015, there were 103 deals worth USD 1,720 million. 
 
For January-August as well, PE investments displayed a sharp 30 per cent year-on-year decline in investment values, largely owing to cautious investor sentiment. 
 "In the eight months to the year, PE has clocked over 650 transactions, contributing around USD 8 billion in value. Though the volume of transactions seems to be at par, there is a decline in deal value by about 30 per cent on a year-on-year basis," <keyword id="966459" type="COMPANY" weightage="20" keywordseo="Grant-Thornton-India-LLP">Grant Thornton India LLP</keyword> Partner <keyword id="949921" type="PERSON" weightage="20" keywordseo="Prashant-Mehra">Prashant Mehra</keyword> said. 
 
The report further noted that there has been a decline in big-ticket deals as so far this year there were only 17 investments valued above USD 100 million while in January- August 2015, there were 38 such transactions. 
 
In line with previous trends, August was dominated by investments in start-ups, which contributed to over 70 per cent of total volumes and 35 per cent of values. 
 The month saw <keyword id="3685980" type="UNKNOWN" weightage="20" keywordseo="Hike-Ltd">Hike Ltd</keyword> raising its Series D funding of USD 175 million and garnering a billion dollar valuation, adding to India's home-grown unicorns. 
 
Other sectors such as manufacturing and transport and logistics also received large investments over USD 100 million during the month. 
Moreover, the average deal value in the PE space seems to have come down to USD 12 million in 2016, from USD 17 million in 2015, Mehra said. 
 
He added that "most PE investments are actually taking place in the start-up sector which perhaps explains the decrease in average deal spend". 
 
The other major areas that are attracting PE money are core sectors such as manufacturing, transport and logistics and BFSI. 
Mehra believes that with all factors being attractive and favourable for PEs, the deals will perhaps be visualised as an alternative means of financing consolidation for large and select corporates, thus resulting in the long-awaited big-ticket transactions in the PE space. 
"The sectoral trend should continue towards core sectors and probably see some activity in the retail or consumer sector as well in the next few months," he said.

PE investment falls for 3rd
month, Aug deal tally at USD 1 bn

<keyword id="6481662" type="COMPANY" weightage="100" keywordseo="Jasper-Infotech">Jasper Infotech</keyword>, the owner of <keyword id="1705292" type="UNKNOWN" weightage="100" keywordseo="Indian-e-commerce">Indian e-commerce</keyword> giant <keyword id="541988" type="COMPANY" weightage="100" keywordseo="SnapDeal">SnapDeal</keyword>, is closer to cutting a deal with Japan's <a href="http://www.businessinsider.in/softbank-may-pick-up-minority-stake-in-vodafone-india-heres-the-latest-development/articleshow/57306703.cms">SoftBank Corp</a>, its largest shareholder. The deal would be a lifeline to the <a href="http://www.businessinsider.in/snapdeal-has-started-down-sizing-600-employees-have-already-been-fired/articleshow/57343065.cms">struggling</a> Jasper, but could drag its valuation to under $3 billion, down by half. 
 <keyword id="163404" type="COMPANY" weightage="100" keywordseo="Softbank">SoftBank</keyword> is looking forward to an investment of $100-150 million in Jasper, which would be done in parts, three people in the know told ET, while as per another source, the overall investment could be as high as $300 million. 
 
Also read: <a href="http://www.businessinsider.in/nirmalasitharaman-to-investigate-snapdeals-payment-defaults/articleshow/57429327.cms">Nirmala Sitharaman to investigate Snapdeal’s payment defaults</a> 
 
If the transaction takes place, SnapDeal would become the latest top-tier Indian Internet company to cut down its valuation, after cab aggregator Ola and <a href="http://www.businessinsider.in/HSBC-halves-Zomatos-1-billion-valuation/articleshow/52185955.cms">Zomato</a>. 
 
In its last funding round led by Canada's Ontario Teachers' Pension Plan in February 2016, Jasper was valued at $6.5 billion. However, in late 2014 to early 2015, it was valued below $3 billion because of stake sales by shareholders to other investors. 
 
However, industry analysts are of the view that a company raising capital at lower valuations does not necessarily indicate bad times. 
 
"Regardless of valuation, the fact that money is available is a good sign," said Harish HV, partner, India Leadership team, <a href="http://www.businessinsider.in/25-companies-where-interviewing-is-a-treat-not-a-chore/2-grant-thornton/slideshow/55254138.cms">Grant Thornton India</a>. "It means investors, whether new or existing, haven't yet given up on the company and that there is meat left. It's a sign of bullishness." 
 
As per reports, this fresh funding would come with stricter rules regarding financial control. 
 
"Earlier cheques were written after SnapDeal submitted annual operating plans. Now Soft-Bank will ask for SnapDeal's monthly budgets, approve them, and then remit the funds," said one of the aforementioned sources. 
 
In the recent past, SnapDeal, India’s third largest online marketplace after Flipkart and Amazon India, has seen little growth and has been marred by losses, and tremors in upper management. 
 
Also read: <a href="http://www.businessinsider.in/snapdeal-founders-admit-to-wrong-moves-take-100-salary-cut/articleshow/57308448.cms">Snapdeal founders admit to 'wrong moves', take 100% salary cut</a> 
 
(Image source: SatyaVijayi)

SoftBank’s latest investment in Jasper Infotech might bring its valuation down to half

New Delhi: After two <keyword id="19945688" type="General" weightage="20" keywordseo="acquisitions" source="keywords">acquisitions</keyword> this year, India's second-largest IT services company <keyword id="19906778" type="General" weightage="100" keywordseo="Infosys" source="keywords" meta.keywordsubtype="org" meta.entityname="Infosys" meta.hostid="268" meta.entityid="Infosys">Infosys</keyword> is on the lookout to scoop-up more firms and says the acquisition matching scale of recent in-tech buy is certainly a possibility. In an interview to PTI, <keyword id="24144" type="General" weightage="20" keywordseo="infosys-ceo" source="Orion">Infosys CEO</keyword> <keyword id="20115570" type="General" weightage="20" keywordseo="salil-parekh" source="keywords">Salil Parekh</keyword> said the company is keen on acquisitions in areas like data analytics, SAAS, and may look at some geographies within Europe, and the US. Asked if more acquisitions could be of the scale matching in-tech, which came with a price-tag of 450 million euros, <keyword id="20039787" type="General" weightage="20" keywordseo="parekh" source="keywords">Parekh</keyword> said, "Absolutely, I think those would be the size that we will look at in terms of scale, and given our structure we could do a few of those." Back in January, Infosys announced a definitive agreement to acquire 100 per cent of the equity share capital in InSemi Technology Services, a semiconductor design services company headquartered in India, for a consideration (including earn-outs, and management incentives and retention bonuses) totalling up to Rs 280 crore. A bigger acquisition followed in three months. In April, Infosys Germany, a wholly-owned step-down subsidiary, entered into a definitive agreement to acquire 100 per cent of the equity share capital in in-tech Holding -- leading provider of engineering R&amp;D services headquartered in Germany -- for a consideration of up to 450 million euros (about Rs 4,045 crore). "We have very good business in engineering services already within Infosys and then we did those two acquisitions, both of them in engineering services, one on semiconductor side and one on the automotive side... very strong businesses, and we feel quite good about expanding that footprint," Parekh said. Infosys is eyeing more acquisitions, he said, adding that the company is evaluating several firms. "We have a good balance sheet and good cash generation and now we are quite comfortable with the integration of acquisition in different areas. We have done engineering services, we will look at other areas... for example data analytics... may look at SAAS (software as a service) areas, and maybe at some other geographies in Europe, maybe the US as well," he said. Parekh, however, said a lot depends on strategic synergies, financial cost, cultural fit and integration aspects. "We are continuing to look, and we have things that are normally in the pipeline but those take their own time... there are a lot of discussions on strategic fit, on financial cost of it and cultural fit into the company and then how will we integrate them. Many of those discussions are ongoing and we will see what comes out," the Infosys top honcho said. On whether he is hopeful of closing more acquisitions this fiscal year, Parekh indicated that it is tough to put a timeline on the outcome of ongoing discussions. "It is difficult to say... we are evaluating several (of them). But to get a fit on the strategic parameters, financial parameters, culture, integration... all of it may not work out. But these two (InSemi and in-tech) happened relatively quickly... before that for some quarters we had not done anything. It is not a predictable thing, but the evaluation is ongoing," he said. According to the Grant Thornton Bharat Dealtracker Q2 2024 report, Indian dealmaking saw overall 501 deals, valued at USD 21.4 billion. The report said the second quarter of 2024 witnessed the highest quarterly volumes since the second quarter of 2022, while values declined due to the absence of big-ticket merger and acquisition transactions. Grant Thornton Bharat Dealtracker further said the merger and acquisition (M&amp;A) activity during the second quarter saw 132 deals worth USD 6.2 billion, marking a slight increase in volumes but a substantial 50 per cent drop in values. As per the report, domestic deals drove growth with volumes rising 29 per cent and values increasing 2.5 times compared to the first quarter of the current year. In contrast, cross-border deals experienced a decline, with volumes decreasing 24 per cent and values plummeting 85 per cent from the first quarter of 2024.

Infosys is keen on more acquisitions, says CEO Salil Parekh

<div type="image" title="Are Indians depositing less money in banks, or more in mutual funds? Turns out, it&amp;#39;s neither of those." msid="113663806" hostid="261" sizebytes="1121785"></div> Over the past few months, there’s been a lot of brouhaha about the lagging pace of <keyword id="20202062" type="General" weightage="20" keywordseo="bank-deposits" source="keywords">bank deposits</keyword> in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialisation of <keyword id="20751315" type="General" weightage="20" keywordseo="household-savings" source="keywords">household savings</keyword> in the country or the rising preference of Indians towards <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword> through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords" meta.keywordsubtype="org" meta.entityname="RBI" meta.hostid="261" meta.entityid="RBI">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by Franklin Templeton, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are household deposits really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. <div type="image" title="Yes, household deposits (as % of total deposits) have dipped, but the drop is far from significant" msid="113663882" hostid="261" sizebytes="306706"></div> Also, we can’t forego the fact that the share of Indian households in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and <keyword id="114757" type="General" weightage="20" keywordseo="savings-account" source="Orion">savings account</keyword> deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (Central Board of Direct Taxes) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of Securities Transaction Tax (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell <keyword id="6361918" type="General" weightage="20" keywordseo="equity-mutual-funds" source="Orion">equity mutual funds</keyword>, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by <keyword id="45369" type="General" weightage="20" keywordseo="equities" source="Orion">equities</keyword> can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in <keyword id="19998084" type="General" weightage="100" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the Fed recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next MPC (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day. Do you have insights or personal experience to share on your personal finances or money? Contact us at <a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a>.

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