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Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, <keyword id="46717" type="General" weightage="20" keywordseo="IndusInd-bank" source="Orion">IndusInd Bank</keyword> set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e., an <keyword id="79363" type="General" weightage="20" keywordseo="npa" source="Orion">NPA</keyword>, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals, i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv, from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending installments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honor any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its <keyword id="763994" type="General" weightage="20" keywordseo="Gross-NPA" source="Orion">gross NPA</keyword> for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. <keyword id="62152" type="General" weightage="20" keywordseo="IDFC-bank" source="Orion">IDFC Bank</keyword>’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in unsecured loans, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. Kotak Mahindra Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical Bollywood headmaster who runs his dominion with an iron fist and takes things (and ceiling rates) into their own hands. However, that's a story for another day.

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

<div type="image" title="The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books." agency="ANI" msid="114778648" hostid="261" caption="&amp;lt;p&amp;gt;The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books.&amp;lt;/p&amp;gt;"></div> Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, IndusInd Bank set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e. an NPA, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, RBI, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and <keyword id="20117932" type="General" weightage="20" keywordseo="navi-finserv" source="keywords">Navi Finserv</keyword> from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending instalments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honour any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its gross NPA for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. IDFC Bank’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in <keyword id="6051027" type="General" weightage="20" keywordseo="Unsecured-loan" source="Orion">unsecured loan</keyword>s, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. <keyword id="6376194" type="General" weightage="20" keywordseo="kotak-mahindra" source="Orion">Kotak Mahindra</keyword> Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical <keyword id="19897820" type="General" weightage="20" keywordseo="bollywood" source="keywords">Bollywood</keyword> headmaster who runs his dominion with an iron fist. However, that's a story for another day. Do you have a topic in mind you'd want a simpler explanation for, or insights or personal experience to share on personal finance and more? Contact us at businessinsider@timesinternet.in.

Simply Put: Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

<ul><li>BPS is inviting applications for the post of probationary officers/management trainees for 2022-23.</li><li>The online applications began on October 20 and the last date to register is November 10 this year.</li><li>Candidates will also have to pay an application fee of ₹850 in online mode.</li></ul>Institute of Banking Personnel Selection (<keyword id="460374" type="General" weightage="20" keywordseo="IBPS" source="Orion">IBPS</keyword>) is inviting applications for the post of probationary officers/management trainees for 2022-23. The online applications began on October 20 and the last date to register is November 10 this year. Candidates who are interested in applying for the opportunity, will have to mandatorily appear for an online preliminary exam and then online main examination and then finally for a common interview for selection. Applicants who successfully clears all three phases of the exam, will be provisionally allotted to one of the participating banks. These are the banks participating — Bank of Baroda, Canara Bank, <keyword id="3658" type="General" weightage="50" keywordseo="india" source="Orion">India</keyword>n Overseas Bank, UCO Bank, Bank of India, Central Bank of India, Punjab National Bank, Union Bank of India, Bank of Maharashtra, Indian Bank, and Punjab &amp; Sind Bank. Online preliminary examination will be conducted on December 4 and 11 (tentative dates). The results of this exam will be announced in December2021/January 2022. The date for the online main exam is yet to be announced and is expected to be held in January 2022. The common interviews are expected to be conducted in February/March 2022. The final allotment will be done in April 2022. Eligibility criteria for the opportunity — <ol><li>Candidates must be a citizen of India or a subject of Nepal or a subject of Bhutan or a Tibetan Refugee who came over to India before 1st January 1962 with the intention of permanently settling in India or a person of Indian origin who has migrated from Pakistan, Burma, Sri Lanka, East African countries of Kenya, Uganda, the United Republic of Tanzania (formerly Tanganyika and Zanzibar), Zambia, Malawi, Zaire, Ethiopia and Vietnam with the intention of permanently settling in India, provided that a candidate belonging to above categories shall be a person in whose favour a certificate of eligibility has been issued by the Government of India. </li><li>Applicants minimum age should be 20 years, while maximum should be 30 years as on 1 October, 2021. </li><li>Graduation degree in any discipline from any university recognised by the government of India or any equivalent qualification recognised by the Central Government. </li></ol>Candidates will also have to pay an application fee of ₹850 in online mode. Applicants belonging to scheduled castes (SC)/scheduled tribes (ST)/persons with disability (PwD) are liable to pay only ₹175. How to apply online for the recruitment process — <ol><li>Open the IBPS’s official <a href="http://www.ibps.in">website</a> and click on the Home Page to open the link “CRP PO/MT” and then click on the option “CLICK HERE TO APPLY ONLINE FOR CRP PROBATIONARY OFFICERS/ MANAGEMENT TRAINEES (CRP-PO/MT-XI)” to open the online application form. </li><li>Click on “CLICK HERE FOR NEW REGISTRATION” to register their application by entering their basic information in the online application form. After that a provisional registration number and password will be generated by the system and displayed on the screen. </li><li>Then upload the necessary documents and then click on ‘Save and Next’. </li><li>After uploading all the documents, pay the fee through online mode. </li><li>After payment, click on the ‘complete registration’ button. </li></ol>Note: Candidates are required to cross-verify their details and documents as IBPS will not be responsible for any consequences arising out of furnishing incorrect and incomplete details in the application or omission to provide the required details in the application form. Interested candidates can seek more information and apply <a href="https://ibpsonline.ibps.in/crppo11jul21/">here</a>. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/international/news/heres-how-janet-yellens-proposed-tax-on-unrealised-capital-gains-may-work/articleshow/87249423.cms">Here’s how Janet Yellen's proposed tax on unrealised capital gains may work</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/startups/news/loss-making-groww-is-now-the-most-valued-investment-platform-even-though-some-of-its-peers-make-profits/articleshow/87249142.cms">Loss-making Groww is now the most-valued investment platform even though some of its peers make profits</a>

IBPS invites applications for probationary officers/management trainees in Bank of Baroda, Indian Bank, PNB and many others for 2022-23

New Delhi, Jan 27 () Bank of Baroda (BoB) shares on Monday declined by over 3 per cent after the company reported a net loss of Rs 1,407 crore for December quarter.
Shares of the company fell 3.40 per cent to close at Rs 92.35 on the BSE. During the trade, it dropped 3.76 per cent to Rs 92.
At the NSE, it dipped 3.13 per cent to close at Rs 92.60.
On traded volume front, 14.50 lakh shares of the company were traded on the BSE and 4.4 crore shares on the NSE during the day.
State-owned Bank of Baroda on Friday reported a net loss of Rs 1,407 crore for the quarter ended December on account of higher provisioning for bad loans.
The bank had reported profit after tax of Rs 436 crore in the same period last year.
Provisions for bad loans rose 47 per cent to Rs 6,621 crore from Rs 4,505 crore last year.
Total provisions increased by 54 per cent to Rs 6,365 crore as against Rs 4,133 crore.
BoB amalgamated Dena Bank and Vijaya Bank with it from April 1, 2019. SUM
BAL

Bank of Baroda shares decline over 3 pc after Q3 results

<ul><li>The growth in AUM for August 2023 compared to the same period in 2022 was 18.6% across all schemes. </li><li>The growth in <keyword id="6409502" type="General" weightage="20" keywordseo="bank-deposits" source="Orion">bank deposits</keyword> was 12.3% during the same period, as per RBI data. </li><li>There's also a shift among mutual fund schemes with debt schemes losing some momentum. </li></ul><keyword id="6357979" type="General" weightage="20" keywordseo="mutual-funds" source="Orion">Mutual funds</keyword> hold an inherent advantage as investments because they provide a diverse range of products tailored to investors' preferences. These include equity schemes and traditional debt options. For those with a more risk-tolerant approach, there are hybrid schemes, whereas index funds and ETFs offer more aggressive investment options. Nonetheless, it's important to note that all these investment options carry a degree of risk since they are influenced by the market, making them somewhat less predictable. On the other hand, bank deposits offer safety and ensure conservative yet guaranteed returns. During the pandemic, when the Reserve Bank of India (RBI) significantly reduced interest rates, causing deposit rates to decline, both retail and corporate investors poured more funds into mutual fund schemes. This resulted in an increase in the <keyword id="163912" type="General" weightage="20" keywordseo="assets-under-management" source="Orion">assets under management</keyword> (AUM) of mutual funds, according to a report by Bank of Baroda. <cmsannotation type="cmsannotation" annotationid="The growth in AUM for August 2023 compared to the same period in 2022 was 18.6% across all schemes. The growth in bank deposits was 12.3% during the same period, as per RBI data. There's also a shift among mutual fund schemes with debt schemes losing some momentum. Mutual funds hold an inherent advantage as investments because they provide a diverse range of products tailored to investors' preferences. These include equity schemes and traditional debt options. For those with a more risk-tolerant approach, there are hybrid schemes, whereas index funds and ETFs offer more aggressive investment options. Nonetheless, it's important to note that all these investment options carry a degree of risk since they are influenced by the market, making them somewhat less predictable. On the other hand, bank deposits offer safety and ensure conservative yet guaranteed returns. During the pandemic, when the Reserve Bank of India (RBI) significantly reduced interest rates, causing deposit rates to decline, both retail and corporate investors poured more funds into mutual fund schemes. This resulted in an increase in the assets under management (AUM) of mutual funds, according to a report by Bank of Baroda. Mutual fund deposits grow faster than bank deposits Using 2019-20 as the base year, a significant transformation occurred in the financial landscape as interest rates reached historic lows. Subsequently, there was a notable surge in the growth of assets under management (AUM) for mutual funds over the following three years. During this period, the compound annual growth rate (CAGR) was 24.8%, increased from ₹20.26 lakh crore to ₹39.42 lakh crore according to data by Association of Mutual Funds in India(AMFI). In contrast, the growth in bank deposits during this period was more modest, at just 10%, a per RBI data. Shift in investor preference towards mutual funds The growth in mutual funds AUM for August 2023 compared to August 2022 was 18.6% across all schemes. The growth in bank deposits was 12.3%. While equity/growth schemes saw a 25.8% growth , while hybrid and debt mutual funds grew at 14.5% and 7.4% respectively. The proportion of mutual funds in the market now stands at approximately 20%, a significant increase from the pre-pandemic figure of 13%. It is evident that there has been a notable shift in investor preferences towards mutual funds, primarily driven by the attractive returns they offer. For context, the Sensex, which was nearly at 30,000 in March 2020, surged to 58,992 in March 2023, achieving a CAGR of nearly 26% per annum. As of August, the Sensex had reached 64,831. Risk appetite of investors increase, debt schemes lose momentum The highest growth rates in mutual fund schemes have been in equity and 'others' categories, indicating investors' increased risk appetite. They are favouring growth-oriented schemes, indices, and ETFs in anticipation of higher returns, especially during a period of high inflation (18.3% over the past three years). On the other hand, AUM growth in debt schemes has been the slowest. There's also a shift among mutual fund schemes, with debt schemes losing some momentum. According to the report, this can be partly attributed to banks raising deposit rates, reducing the yield gap. “The new provisions of the previous budget have taken away the tax arbitrage of debt funds. The two products of the fixed income segment bank deposit and debt funds can be compared on their merits. Debt funds offer diversification of papers, better liquidity and a tool to take duration and interest calls,” says Renu Maheswari, co-founder and principal advisor, Finscholarz Wealth Managers. Over time, there has been a noticeable shift in the allocation of funds towards bank deposits and mutual funds. The pandemic marked a turning point, as investors, compelled by circumstances, embraced more risk through mutual funds." comment="Subhead" text="Mutual fund deposits grow faster than bank deposits">Mutual fund deposits grow faster than bank deposits</cmsannotation> Using 2019-20 as the base year, a significant transformation occurred in the financial landscape as interest rates reached historic lows. Subsequently, there was a notable surge in the growth of assets under management (AUM) for mutual funds over the following three years. During this period, the compound annual growth rate (CAGR) was 24.8%, increased from ₹20.26 lakh crore to ₹39.42 lakh crore according to data by Association of Mutual Funds in India(AMFI). In contrast, the growth in bank deposits during this period was more modest, at just 10%, a per RBI data. <cmsannotation type="cmsannotation" annotationid="Shift in investor preference towards mutual funds" comment="Subhead" text="Shift in investor preference towards mutual funds">Shift in investor preference towards mutual funds</cmsannotation> The growth in mutual funds AUM for August 2023 compared to August 2022 was 18.6% across all schemes. The growth in bank deposits was 12.3%. While equity/growth schemes saw a 25.8% growth , while hybrid and debt mutual funds grew at 14.5% and 7.4% respectively. The proportion of mutual funds in the market now stands at approximately 20%, a significant increase from the pre-pandemic figure of 13%. It is evident that there has been a notable shift in investor preferences towards mutual funds, primarily driven by the attractive returns they offer. For context, the Sensex, which was nearly at 30,000 in March 2020, surged to 58,992 in March 2023, achieving a CAGR of nearly 26% per annum. As of August, the Sensex had reached 64,831. <cmsannotation type="cmsannotation" annotationid="Risk appetite of investors increase, debt schemes lose momentum" comment="Subhead" text="Risk appetite of investors increase, debt schemes lose momentum">Risk appetite of investors increase, debt schemes lose momentum</cmsannotation> The highest growth rates in mutual fund schemes have been in equity and 'others' categories, indicating investors' increased risk appetite. They are favouring growth-oriented schemes, indices, and ETFs in anticipation of higher returns, especially during a period of high inflation (18.3% over the past three years). On the other hand, AUM growth in debt schemes has been the slowest. There's also a shift among mutual fund schemes, with debt schemes losing some momentum. According to the report, this can be partly attributed to banks raising deposit rates, reducing the yield gap. “The new provisions of the previous budget have taken away the tax arbitrage of <keyword id="35474" type="General" weightage="20" keywordseo="debt-funds" source="Orion">debt funds</keyword>. The two products of the fixed income segment bank deposit and debt funds can be compared on their merits. Debt funds offer diversification of papers, better liquidity and a tool to take duration and interest calls,” says Renu Maheswari, co-founder and principal advisor, Finscholarz Wealth Managers. Over time, there has been a noticeable shift in the allocation of funds towards bank deposits and mutual funds. The pandemic marked a turning point, as investors, compelled by circumstances, embraced more risk through mutual funds.

Investors’ new love for mutual funds might take sheen off bank deposits

The downgrade of SBI, Bank of Baroda, and ICICI Bank is proof that the 'biggest nightmare' for India's financial sector is becoming real

New Delhi, Jun 23 () Bank of Baroda on Tuesday reported a standalone net profit of Rs 506.59 crore for the March 2020 quarter. The bank had posted a net profit of Rs 991.37 crore in the January-March quarter of the preceding fiscal ended March 2019. The figures for the quarter are not comparable year-on-year due to amalgamation of Vijaya Bank and Dena Bank into it with effect from April 2019. The Government of India through a gazette notification dated January 2, 2019 approved the scheme of amalgamation between Bank of Baroda, Dena Bank and Vijaya Bank and amalgamation is effective April 1, 2019. The results for the quarter/ year ending March 31, 2020 and quarter ended December 31, 2019 includes operations of erstwhile Vijaya Bank and erstwhile Dena Bank, Bank of Baroda said in a regulatory filing. "Hence the results for quarter and year ended March 31, 2020 are not comparable with corresponding period of previous year and for the year ended March 31, 2019," it said. The income for the March quarter of 2019-20 was at Rs 21,533.10 crore. Its income during the same quarter of 2018-19 was Rs 15,284.59 crore. For the full year FY20, Bank of Baroda posted a net profit of Rs 546.18 crore, up from Rs 433.52 crore in FY19. Income during the year increased to Rs 86,300.98 crore from Rs 56,065.10 crore. On asset front, Bank of Baroda witnessed slight improvement as the gross non-performing assets (NPAs) or bad loans came down to 9.40 per cent of the gross advances as on March 31, 2020 as against 9.61 per cent by March 31, 2019. Likewise, net NPAs fell to 3.13 per cent from 3.33 per cent. The bank has not declared any dividend for the FY 2019-20, BoB said. Non-performing assets provisioning coverage ratio (including floating provision) is 81.33 per cent as on March 31, 2020 (previous year's 78.68 per cent), it added. Bank of Baroda stock closed 2.13 per cent up at Rs 50.45 apiece on BSE. KPM MKJ

Bank of Baroda posts Q4 net profit of Rs 506 cr

Mumbai, Jan 24 () Bank of Baroda (BoB) on Friday reported a net loss of Rs 1,406.95 crore for December quarter 2019-20 on higher provisioning for bad loans.
The state-owned lender had posted a profit of Rs 736.68 crore in the preceding September quarter and Rs 471.25 crore in the year-ago period.
BoB, which merged Dena Bank and Vijaya Bank with itself earlier this year, said its total income increased to Rs 21,809.08 crore during the quarter under review as against Rs 14,562.85 crore in the year- ago period. 
In a stock exchange filing, the bank said its net interest income grew 9 per cent to Rs 7,128 crore. 
"Bank's provisions rose 54 per cent resulting in net loss of Rs 1,407 crore for the quarter ending December 2019," the lender said.
Its Gross Non Performing Assets (NPA) ratio declined to 10.43 per cent at December-end 2019 as against 10.91 per cent by the end of same quarter a year ago. 
Net NPA ratio also declined to 4.05 per cent from 4.79 per cent during the same quarter of previous financial year.
The bank has made a provision of Rs 6,620.61 crore during the quarter under review as against Rs 3,416.02 crore in the year-ago three-month period.
BoB also reported a fresh slippage for the quarter at Rs 10,387 crore. NKD ANU

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Investors’ new love for mutual funds might take sheen off bank deposits

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The downgrade of SBI, Bank of Baroda, and ICICI Bank is proof that the 'biggest nightmare' for India's financial sector is becoming real

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Bank of Baroda posts Q4 net profit of Rs 506 cr

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Bank of Baroda reports Rs 1,407 cr loss for Q3

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