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The Indian <keyword id="22196321" type="General" weightage="20" keywordseo="credit-card-industry" source="keywords">credit card industry</keyword> is struggling to grow, as new issues slow down on a year-on-year (YoY) basis. Not only has the growth i.e. issuance of new credit cards slowed down, but lenders are also becoming increasingly cautious of the asset qualities, a recent report by Nomura showed. From 19% in July 2024, the growth in the <keyword id="6368202" type="General" weightage="20" keywordseo="credit-card" source="Orion">credit card</keyword> spendings came down to 13% in August 2024. The year-to-date (YTD) growth has also significantly declined in FY25, currently standing at 17%, markedly down from 28% in FY24. For the fifth consecutive month, the number of new credit cards added to the system remained well below the 1-million, or 10 lakh mark. Around 9.2 lakh credit cards were added during the month, a slight uptick from the 7.55 lakh cards that came into the system In July 2024. However, there is growth in this space nevertheless, with about 10.55 crore active credit cards at present, marking a 15.6% YoY increase. Even the annualised spend per card, or the average amount spent via an annual card during an year grew 1% YoY to Rs 1.87 lakh. But this was far less than the 7% growth annual spends via one credit card saw in FY24. Meanwhile, what continues to burgeon consistently is the outstanding amount on these credit cards, which ballooned to Rs 2.7 lakh crore in June 2024, up from Rs 2.6 lakh crore in March 2024, and around Rs 2 lakh crore in the year ago period. To put this in perspective, pre-pandemic, the total outstanding amount stood at Rs 87,686 crore, which marks a 24% CAGR in this amount, in just a span of 5 years. <h2>Large drops, slowdown to sustain</h2>Even the monthly expenditure per card dropped 2% YoY to Rs 16,000 in August, 2024. Subsequently, the transaction volume via credit cards also dipped to 1.6% in August, along with the total amount of <keyword id="21084888" type="General" weightage="100" keywordseo="credit-card-spending" source="keywords">credit card spending</keyword>, which fell to Rs 1.69 lakh crore in August, from Rs 1.73 lakh crore in July. Also, there has been a hefty cutdown in provisions made for credit card reward points, which reflects in the quantum of credit card benefits that have been mowed out by companies of late, making credit cards far less lucrative than before. <h2>HDFC takes lead </h2>During August 2024, <keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC bank</keyword> added a total of 2.41 lakh credit cards, taking its total tally of active credit cards to 2.19 crore. <keyword id="19900482" type="General" weightage="20" keywordseo="ICICI-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="ICICI Bank" meta.hostid="261" meta.entityid="ICICI Bank">ICICI Bank</keyword> came a second distant, adding 1.45 lakh credit cards during the month, which means that the second-largest credit card issuer now holds over 1.75 crore active credit cards. Axis Bank and SBI Cards also added 1.27 lakh and 1.1 lakh cards, respectively to their repertoire during the month, while the growth numbers at Kotak Mahindra Bank remained largely flat, stagnating the bank's total card tally at 54.13 lakh. This was due to the ongoing ban on the bank due to its weak IT infrastructural issues imposed by RBI in April 2024. If anything, the bank's number of credit cards declined by 61,191 during the month. Even as the festive season approaches, experts think that it is unlikely to make a major dent in credit card spendings, which are expected to see a further slowdown in the quarters to come.

Credit card growth experiencing a slowdown, as borrowers struggle to pay back loans

<ul class="summary-list"><li>Donald Trump commented on the Fed after Wednesday's interest rate cut.</li><li>As a president and a candidate, Trump has continued undermining the Fed's independence.</li></ul>Interest-rate cuts are finally here, and former President Donald Trump isn't happy about it.On Wednesday, the Federal Open Market Committee <a target="_blank" class="" href="https://www.businessinsider.com/fed-cuts-interest-rates-how-much-september-fomc-powell-inflation-2024-9">announced an interest-rate cut of 50 basis points</a>, the first cut Americans have received in over four years. With the pace of inflation slowing and the job market cooling over the past few months, some experts and Democratic lawmakers have been urging Fed Chair Jerome Powell to cut rates sooner rather than later to give Americans relief from high prices.But Trump feels differently — he <a target="_blank" class="" href="https://www.youtube.com/watch?v=ZlvBFsWoXtw">said</a> during a New York campaign stop on Wednesday that the rate cut "shows the economy is very bad to cut it by that much, assuming they're not just playing politics.""The economy would be very bad, or they're playing politics, one or the other," Trump said. "But it was a big cut."He's argued in the past that the Fed would only cut rates close to the election to aid Democrats, which he reiterated leading up to the central bank's announcement."They'll do the rate cut and all the political stuff tomorrow," Trump said during a Tuesday town hall in Michigan, adding that if he wins the presidential election, "we're going to get interest rates down."Notably, the president has no influence over lowering interest rates — the Federal Reserve is politically independent and is supposed to make monetary policy decisions solely based on its dual mandate of keeping inflation low and employment high.That's something Trump wants to change — The Wall Street Journal reported in April that members of Trump's team were <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-decisions-restructure-federal-reserve-jerome-powell-wsj-2024-4">creating plans to restructure the Fed</a> and allow Trump to have a say in interest-rate decisions. He later walked those comments back, saying in an August <a target="_blank" class="" href="https://www.bloomberg.com/news/articles/2024-08-19/trump-defends-fed-criticism-weighs-providing-aid-to-home-buyers">interview</a> with Bloomberg that he doesn't need to be "calling the shot, but it does mean that I should have a right to be able to talk about it like anybody else."Senior advisors to Trump told the Journal that those plans were not finalized.Trump has also previously accused the Fed of being political — he <a target="_blank" href="https://www.businessinsider.com/trump-interest-rate-cuts-powell-help-democrats-win-elections-inflation-2024-2">said</a> during a Fox interview in February that Powell is "going to do something to probably help the Democrats, I think, if he lowers interest rates."While Powell has not directly responded to Trump's comments, the Fed chair has repeatedly said that the Federal Reserve is an independent entity that makes decisions solely based on data and is not influenced by politics. "Our job is to support the economy on behalf of the American people, and if we get it right, this will benefit the American people significantly," Powell said during the Wednesday press conference. "It's something we all take very, very seriously. We don't put up any other filters. I think if you start doing that, I don't know where you stop."Trump sought to use his presidential power to appoint members to the Fed board who supported his unorthodox views of the central bank. Judy Shelton, a conservative economist who Trump nominated to the Board of Governors in 2019, had previously written that the Fed was "almost a rogue agency" that couldn't be trusted. Even fellow Republicans balked at her nomination, culminating in a 47-50 failed floor vote exacerbated by GOP absences related to COVID-19."In her past statements, Ms. Shelton has called for the Federal Reserve to be less independent of the political branches and has even questioned the need for a central bank," Sen. Susan Collins, a Maine Republican, said of her at the time. "This is not the right signal to send, particularly in the midst of the pandemic."Shelton was one of a series of Trump loyalists whose nominations ran aground. Former 2012 GOP presidential candidate Herman Cain and conservative commentator Stephen Moore both withdrew their respective nominations in the face of opposition. Trump was able to get former Kanas banking commissioner Michelle Bowman and economist Christopher Waller confirmed to the Fed Board.Trump has flip-flopped his views on his most important appointment to the Fed: Powell."He's strong, he's committed, he's smart," Trump said about Powell in 2017 when he nominated him to lead the Fed.In February, the former president said he would not reappoint Powell to lead the Fed. Earlier this summer, Trump told Bloomberg News that he would let Powell serve out his term. Trump's tepid support of Powell underlines just how mercurial he can be when it comes to the central bank."There are few more important positions than this, believe me, in our Government," Trump said in 2017 with Powell looking on.On that point, Trump hasn't wavered.

The Fed's interest-rate cut put Trump even more at odds with the central bank

<keyword id="20599258" type="General" weightage="20" keywordseo="Indian-consumers" source="keywords">Indian consumers</keyword> demonstrated a significant increase in their <keyword id="21084888" type="General" weightage="100" keywordseo="credit-card-spending" source="keywords">credit card spending</keyword> in July this year, marking a 19% increase compared to the same month last year. According to a report released by <keyword id="19945737" type="General" weightage="20" keywordseo="SBI-Securities" source="keywords" meta.keywordsubtype="org" meta.entityname="SBI Securities" meta.hostid="261" meta.entityid="SBI Securities">SBI Securities</keyword>, the total expenditure by credit card users across the country reached an impressive Rs 1.7 trillion. This substantial uptick highlights the growing reliance on credit cards for transactions, reflecting broader economic trends and <keyword id="20740758" type="General" weightage="20" keywordseo="consumer-confidence" source="keywords">consumer confidence</keyword>. The report also highlighted a considerable increase in <keyword id="21118324" type="General" weightage="20" keywordseo="transaction-volumes" source="keywords">transaction volumes</keyword>, which surged by 39% year-on-year, reaching a total of 38.4 crore transactions in July 2024. This increase in the number of transactions underscores the widespread adoption and usage of credit cards as a preferred <keyword id="20632158" type="General" weightage="20" keywordseo="payment-method" source="keywords">payment method</keyword> among Indian consumers. "Credit card spending in India increased 19% YoY to Rs 1.7 trillion in Jul'24. The transaction volume during the month was 38.4 crore, up 39% YoY" said the report. The report also noted that among the banks, <keyword id="19895995" type="General" weightage="20" keywordseo="HDFC-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Bank" meta.hostid="261" meta.entityid="HDFC Bank">HDFC Bank</keyword> emerged as the leader in terms of transaction volumes, with its credit cards facilitating 9.9 crore transactions during the month. <keyword id="19900482" type="General" weightage="20" keywordseo="ICICI-Bank" source="keywords" meta.keywordsubtype="org" meta.entityname="ICICI Bank" meta.hostid="261" meta.entityid="ICICI Bank">ICICI Bank</keyword> followed closely with 7.1 crore transactions, while SBI secured the third position with 6.3 crore transactions. In terms of transaction value, HDFC Bank again led the way, with a total spend of Rs 44,369 crore through its credit cards in July. ICICI Bank and SBI followed with Rs 34,566 crore and Rs 26,878 crore, respectively. The report said "In Jul'24, transaction volumes was led by cards issued by HDFC Bank (9.9 crore) followed by ICICI Bank (7.1 crore) and SBI (6.3 crore)". Additionally, the <keyword id="22988051" type="General" weightage="20" keywordseo="average-transaction-value" source="keywords">average transaction value</keyword> (ATV) also saw a marginal increase of 1.4% month-on-month in July 2024. This marks the first increase in ATV in ten months, suggesting a shift in consumer behaviour towards higher-value transactions after a period of stagnation. Overall, these figures reflect the growth of credit card usage in India, driven by increased consumer confidence and the convenience offered by credit card transactions.

Indians credit card spending increases 19% YoY to Rs 1.7 trillion in July 2024

Domestic <keyword id="19910265" type="General" weightage="100" keywordseo="gold-prices" source="keywords">gold prices</keyword> have risen by 10% on a year-to-date basis on the back of the strength in global gold prices, which have surged by 18% year-to-date, driven by robust <keyword id="19894998" type="General" weightage="20" keywordseo="central-bank" source="keywords">central bank</keyword> purchases, heightened geopolitical risks, and growing expectations of a monetary policy pivot from the <keyword id="19901377" type="General" weightage="20" keywordseo="us-federal-reserve" source="keywords">US Federal Reserve</keyword>, according to the <keyword id="20195223" type="General" weightage="20" keywordseo="World-Gold-Council" source="keywords" meta.keywordsubtype="org" meta.entityname="World Gold Council" meta.hostid="153" meta.entityid="World Gold Council">World Gold Council</keyword>. The reduction in <keyword id="20069572" type="General" weightage="20" keywordseo="import-duty" source="keywords">import duty</keyword> has ignited a resurgence in gold demand across <keyword id="19895063" type="General" weightage="20" keywordseo="India" source="keywords">India</keyword>. Reports from the recently concluded India International Jewellery Show indicate a substantial increase in order bookings from retailers, particularly in preparation for the upcoming festive and wedding season. Manufacturers have noted that in some cases, orders have reached levels not seen in several years, underscoring the strong buying interest among <keyword id="21595593" type="General" weightage="20" keywordseo="jewellery-retailers" source="keywords">jewellery retailers</keyword> and consumers alike. The trend of bar and coin buying has also remained robust, with both consumers and jewellers capitalizing on the more attractive prices to stock up for future manufacturing needs. Historical analysis suggests that Indian consumer demand, encompassing jewellery and bar and coin demand, could see an additional 50 tonnes or more in the second half of 2024. This potential increase is fueled by a combination of an initial boost in consumer appetite due to the more attractive prices and a longer-term alignment of local prices with international rates. In a notable shift, domestic gold prices, which had been trading at a discount to international prices for five consecutive months, have now started trading at a premium following the <keyword id="19908389" type="General" weightage="20" keywordseo="Union-Budget" source="keywords">Union Budget</keyword> announcement. The discount had widened significantly in July, reaching a peak of around $80 per ounce in the third week of the month, driven by subdued demand and an increased supply of gold through various preferential trade agreements and unofficial channels. However, wholesalers who had inventory purchased under the old customs duty regime began selling gold at a premium to the landed cost to mitigate their losses, further supported by increased consumer demand. While the premiums have moderated recently, from $28 per ounce to around USD 5 per ounce, this shift highlights the changing market sentiment and the impact of rising international gold prices and potential inventory valuation adjustments. The changes introduced in the Union Budget, including a reduction in the long-term investment holding period and a lower tax rate, have made gold ETFs a more attractive investment option. Data from the Association of Mutual Funds in India (AMFI) reveals that net inflows into gold ETFs in July amounted to Rs 13.4 billion (approximately USD 160 million), marking the highest monthly inflows since February 2020 and an 84% increase compared to June 2024. Despite these inflows, the total assets under management (AUM) for Indian gold ETFs grew marginally by 0.3% from the previous month, reaching Rs 345 billion ($4.1 billion). This modest increase can be attributed to the 8 % fall in domestic gold prices following the import duty reduction. Year-to-date, net inflows into Indian gold ETFs have totalled Rs 45 billion ($543 million), with total AUMs rising by 48 % from a year ago. The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="153" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> (RBI) has continued its gold purchasing trend, although at a slower pace following a significant increase in June, when purchases reached 9.3 tonnes--the highest monthly total in nearly two years. Year-to-date, the RBI's gold acquisitions have totaled 44.3 tonnes, surpassing the total purchases of the past two years combined. The RBI's gold reserves have now reached a record 849 tonnes, representing 8.8% of total foreign reserves, compared to 7.5 % a year ago. In July, gold imports remained steady at $3.1 billion, maintaining the stable trend observed over the previous three months. Between April and July, imports averaged $3.2 billion, with volumes ranging between 43 and 47 tonnes during this period. The gold import bill for July 2024 was 11 % lower than the previous year, with an estimated 26% decrease in volume terms, around 47 tonnes. Despite a surge in international gold prices, domestic gold prices in India have experienced a notable decline, primarily due to the 9 % reduction in import duty announced in the Union Budget 2024-25. This policy change has led to a 6% decrease in the landed cost of gold, marking a shift in the domestic gold market dynamics.

Domestic gold prices surge 10% amid global price rally, central bank buying: World Gold Council

<ul class="summary-list"><li>Russian banks are urging the country's central bank to boost yuan liquidity amid shortages.</li><li>But Russia's central bank is advising lenders to limit yuan-denominated loans.</li></ul>Russia's central bank and lenders are asking each other to preserve the country's stash of Chinese yuan.Last Thursday, <a target="_blank" class="" href="https://markets.businessinsider.com/news/currencies/russia-economy-china-yuan-sanctions-bank-payments-trade-transfers-2024-9">Russian banks</a> complained that they've run out of the Chinese yuan and called on the Central Bank of Russia to increase liquidity through currency swaps.But Russia's central bank is passing the buck back to the country's banks.In a <a target="_blank" class="" href="https://cbr.snowball-income.com/Collection/Collection/File/50609/ORFR_2024-08.pdf">report</a> published on Friday, Russia's central bank advised lenders to limit the issuance of yuan-denominated loans.The central bank is a primary source of yuan liquidity that it provides via daily sales and one-day swaps of the currency."Part of the growth in yuan lending was due to the replacement of loans in 'toxic' currencies, but 41% of the increase came from new foreign currency loans," said the Russian central bank in the report, referring to the currencies of countries that have imposed sanctions against the country.It added that currency swap operations can only serve as a short-term mechanism to stabilize the market, but they aren't permanent funding tools.The banks called for increased central bank currency swaps because they needed to use the mechanism to cover their foreign currency lending.But yuan liquidity is so tight that Sberbank's CEO German Gref said last Thursday that his bank cannot lend in the yuan, because it has "nothing" to cover tight foreign currency positions with, per <a target="_blank" class="" href="https://www.reuters.com/markets/currencies/major-russian-lenders-say-yuan-coffers-empty-urge-central-bank-action-2024-09-05/">Reuters.</a> Sberbank is Russia's largest bank.Russian exporters can also provide liquidity through currency sales, but many <a target="_blank" href="https://www.businessinsider.com/russia-economy-all-china-banks-refuse-yuan-ruble-transfers-sanctions-2024-8">Chinese banks</a> are refusing to process payment transactions for Russian companies due to fears of US secondary sanctions.Chinese lenders are also avoiding currency trading in Russia for the same reason.The difficulties surrounding yuan liquidity in Russia highlight increasingly challenging trading conditions for the country as the West steps up sanctions.But <a target="_blank" class="" href="https://www.businessinsider.com/dedollarization-countries-national-tech-payments-systems-russia-china-india-swift-2024-8">Russia and its trade partners</a> are trying to find ways to get around the payments issue.Dmitry Birichevsky, head of the economic cooperation department of the Russian Foreign Ministry, told Russian TV that the country and its partners are discussing how to link up their bank messaging systems, <a target="_blank" class="" href="https://tass.com/politics/1839601">TASS</a> state news agency reported on Friday."Combining these systems or deciding on the basis on which [system] we will work is the most sensitive, painful issue, because this is part of the country's financial sovereignty," Birichevsky said.

Russia's central bank and lenders tell each other to resolve the country's yuan supply squeeze

New Delhi: <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword> has demonstrated a largely successful inflation targeting regime compared to advanced economies such as the USA, Germany, and France, according to a research report by the <keyword id="19934368" type="General" weightage="100" keywordseo="state-bank-of-india" source="keywords">State Bank of India</keyword> (SBI). The report credits government initiatives, the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>, and banks for addressing these issues over the past decade, allowing for better policy transmission and improved inflation management. "The success of Inflation Targeting in India is largely a byproduct of a vibrant financial ecosystem where <keyword id="23140158" type="General" weightage="20" keywordseo="rbi-government" source="keywords">RBI, Government</keyword> and the Banks are working closely in unison in ushering in market reforms" said the report The report highlighted that India experienced minimal deviations from its inflation targets between 2021 and 2024, setting it apart from other global economies facing greater inflationary challenges. It added that during 2021-2024, India recorded one of the lowest deviations from its inflation targets, highlighting the effectiveness of its inflation control measures. This success, the report points out, is largely a result of coordinated efforts between the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> (RBI) and the central government. "India had a largely successful inflation targeting regime. Compared to advanced economies like the USA, Germany" said the report. As per the report the synchronization of monetary and fiscal policies, particularly during the pandemic, played a key role in maintaining price stability. It also emphasized that India's pre-inflation targeting regime faced several challenges that hindered the effective transmission of monetary policy. These challenges included sustained fiscal dominance, the presence of a large informal sector, significant informal financing, and inefficiencies in how banks priced their loan products. "Effectiveness of monetary policy in India's pre-Inflation Targeting regime was constrained by several India specific factors that affected transmission of the policy impulses through the interest rate channel" the report added. However, one of the key arguments in the report is that the RBI's inflation targeting has anchored inflationary expectations, even as food inflation remains high. The notion that headline inflation should exclude food prices was dismissed as counterfactual by the report. According to the study, the RBI's success in targeting inflation, despite food price volatility, has prevented a spill-over from food inflation to core inflation. The report stressed that the RBI's consistent communication of its inflation target--set at 4 per cent--has been crucial in successfully anchoring inflation expectations. By reinforcing its commitment to this target, the RBI has helped stabilize inflationary trends across the broader economy. The SBI report reinforces India's effective monetary policy framework, particularly in light of the global inflationary pressures seen in advanced economies like the US and Germany.

India handled inflation much better than US, Germany and France: SBI Report

Amid questions on the depleting <keyword id="20776807" type="General" weightage="100" keywordseo="loan-to-deposit-ratio" source="keywords">loan-to-deposit ratio</keyword> in <keyword id="19895091" type="General" weightage="20" keywordseo="Indian-banks" source="keywords">Indian banks</keyword>, a recent report by <keyword id="19896146" type="General" weightage="20" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="269" meta.entityid="Motilal Oswal">Motilal Oswal</keyword> suggests that the loan-to-deposit (LD) ratio is likely to subside on its own in the coming months. The debate on loan-to-deposit ratio (LD), particularly concerning sluggish <keyword id="19998084" type="General" weightage="20" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> and potential risks to <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">financial stability</keyword> is raised by even the finance minister and the <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-governor" source="keywords">RBI governor</keyword>. However, the report notes that on closer examination, the situation may not be as alarming as it seems. As of 9th August, 2024 the Indian <keyword id="19964544" type="General" weightage="20" keywordseo="banking-sector" source="keywords">banking sector</keyword>'s loan-to-deposit (LD) ratio stood at 77.2 %, which is slightly below its recent peak of 78.2 % on 22nd March 2024, and its all-time high of 78.8 % in September 2013. The report stated that typically a rising LD ratio is indicative of a tightness in the banking sector, potentially indicating overheating. A lower LD indicates that the bank is aggressive in its credit disbursement practises, which could be risky. It highlighted that an analysis of the sector's transactions with the Reserve Bank of India (RBI) through the liquidity adjustment facility (LAF), along with recent trends in the weighted average call rate (WACR), suggests that the current rise in the LD ratio does not indicate tightness, which is why there is no immediate cause of concern. In fact, the report added that the concern over weak deposit growth may be overstated. Historical data show that bank deposits grew at an average rate of 9.5 % during the pre-COVID period (January 2015 to February 2020) and 10.4 % in the post-COVID period (March 2020 to August 2024). Earlier, Finance Minister Nirmala Sitharaman also urged state-run banks to enhance deposit mobilization through attractive offers and focusing on Tier-2 and Tier-3 cities. Loan-to-deposit ratio pegs the total deposits received by the bank against the loans it has offered. It helps in understanding how liquid the bank is. The loan-to-deposit ratio (LDR) is a financial metric that compares a bank's total loans to its total deposits. It's used to assess a bank's liquidity and credit risk, and to inform lending and deposit-taking decisions The report said while the exact measures are unclear, the deposit growth could potentially be increased by making other asset classes less attractive through taxation or interest rates, or by boosting fiscal spending to increase net credit to the government. In its forecast, the report noted that private banks will witness a moderation in their <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>, while public sector banks will maintain a healthy credit growth rate. "Our analysis suggests that deposit growth could be raised by either making other asset classes unattractive (through taxation and/or interest rate) or increasing the growth in net credit to the government by pushing fiscal spending higher" the report added. Alternatively, policymakers might consider curtailing loan growth to lower the LD ratio. However, this could slow deposit growth, particularly if corporate credit growth remains weak. Encouraging savers to shift investments from other assets to bank deposits could also be an option, but this carries risks of overreach and potential damage to economic confidence. Das had also flagged the excessive growth, or froth developing in the personal loan space. Notably, while credit growth in unsecured personal loans like credit cards continues to decline, it remains elevated at 23.3% as of June 2024. However, this is a significant reduction from 34.2% witnessed in November 2023. As fiscal spending increases, bank credit to the government is likely to grow, which should elevate deposits and broad money supply. The report said "However, the extent of foreign capital inflows and the RBI's policy for managing these inflows remain uncertain". Last month, RBI governor Shaktikanta Das had also addressed this issue in the 50th meeting of MPC (Monetary Policy Committee). Per him, deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. "While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies. Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries", Das said. Per him, while bank deposits continue to remain dominant as a percentage of financial assets owned by households, their share has been declining consistently, since households are now increasingly allocating their savings to mutual funds, insurance funds, pension funds and other avenues.

Loan-to-deposit ratio will subside on its own in coming months, notes Motilal Oswal report

<div type="image" title="SBI report says inflation will remain around 5 per cent this fiscal" agency="ANI" msid="112275933" hostid="261" caption="&amp;lt;p&amp;gt;SBI report says inflation will remain around 5 per cent this fiscal &amp;lt;/p&amp;gt;"></div>The Consumer Price <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">Inflation</keyword> in India is expected to remain around 5 per cent in the financial year 2024-25 except for September and October month, according to a research report by <keyword id="13222" type="General" weightage="20" keywordseo="sbi" source="Orion">SBI</keyword>. The report also noted that the inflation outlook in India remains a critical focus for the <keyword id="19899810" type="General" weightage="20" keywordseo="reserve-bank-of-india" source="keywords">Reserve Bank of India</keyword> (RBI). Recent data indicates that the <keyword id="19999655" type="General" weightage="20" keywordseo="Consumer-Price-Index" source="keywords">Consumer Price Index</keyword> (CPI) inflation rose to 5.08 per cent in June 2024, driven primarily by higher food and beverage prices. "CPI inflation is expected to remain below or close to 5.0 per cent in the remaining months, except for Sep'24 and Oct'24" said the report. The report also added that the monsoon season plays an important role in shaping food prices, and while the current monsoon has shown a satisfactory surplus, excess rainfall could lead to crop losses, adversely affecting food inflation. The RBI's ability to manage inflation expectations is crucial, especially as it navigates the delicate balance between supporting <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> and maintaining <keyword id="19960158" type="General" weightage="20" keywordseo="price-stability" source="keywords">price stability</keyword>. "With monsoon progressing satisfactorily with 2 per cent surplus till date and progress of area coverage under Kharif crops showing 2.9 per cent yoy, we expect inflation to remain within RBI target in FY25. However, with La Nina getting precedence, excess rainfalls could result in crop loss and thus a negative impact on food prices" the report added. In response to the evolving economic landscape, the report mentioned that the RBI is likely to continue its stance of withdrawing accommodation. This approach aims to address inflationary pressures while ensuring that the economy remains on a growth trajectory. However, the central bank faces challenges in policy transmission, as deposit rates have shown downward rigidity despite a declining weighted average lending rate (WALR). This situation complicates the RBI's efforts to implement effective monetary policy. "Even though the Banks are chasing deposits to fund the incremental credit growth, RBI recent report suggests, the weighted average lending rate (WALR) on fresh rupee loan decreased by 11 bps from the beginning of the year (i.e. from 9.43 in January'24 to 9.32 in June'24)" the report noted. Looking ahead, the RBI's decisions will be influenced by both domestic and global economic conditions. The potential for a recession in the US and geopolitical tensions could impact inflation dynamics in India. As such, the RBI's monetary policy will need to remain flexible and responsive to these external factors while striving to achieve its inflation targets and support sustainable economic growth. (ANI)

SBI report says inflation will remain around 5 per cent this fiscal

Global <keyword id="19978688" type="General" weightage="100" keywordseo="gold-demand" source="keywords">gold demand</keyword> in Q2 2024, excluding over-the-counter (OTC) transactions declined by 6% year-on-year to 929 tonnes, primarily due to a sharp fall in jewelry consumption, according to the latest report of the <keyword id="20195223" type="General" weightage="20" keywordseo="World-Gold-Council" source="keywords" meta.keywordsubtype="org" meta.entityname="World Gold Council" meta.hostid="261" meta.entityid="World Gold Council">World Gold Council</keyword>. However, when including <keyword id="22654356" type="General" weightage="20" keywordseo="OTC-investment" source="keywords">OTC investment</keyword>, total gold demand increased by 4% YoY to 1,258 tonnes, marking the highest Q2 figure since data collection began in 2000. The record-high <keyword id="19910265" type="General" weightage="20" keywordseo="gold-prices" source="keywords">gold prices</keyword> took a significant toll on jewelry consumption. Volumes fell 19% YoY to 391 tonnes, the lowest in four years. The report reveals a mixed picture for the Indian market in the second quarter of 2024. While overall gold demand showed a modest increase due to investment in OTC markets and central bank purchases, India witnessed trends that reflect broader market shifts. This decline reflects the impact of elevated gold prices on consumer purchasing behaviour, particularly in markets sensitive to price fluctuations, including India. <keyword id="19946830" type="General" weightage="20" keywordseo="central-banks" source="keywords">Central banks</keyword> continued to be significant players in the gold market, with net gold buying increasing by 6% YoY to 184 tonnes. This rise is attributed to the need for portfolio protection and diversification in a volatile economic environment. In June alone, central banks reported net purchases of 12 tonnes, with key contributors including the Central Bank of Uzbekistan and the Reserve Bank of India, both adding 9 tonnes to their reserves. The Monetary Authority of Singapore was noted as the largest seller, offloading 12 tonnes in the same month. The LBMA (PM) gold price averaged a record $ 2,338 per ounce in Q2 2024, up 18% YoY and 13% QoQ. Gold prices peaked at a new high of $2,427 per ounce in May. This environment drove significant investment and production trends, with total gold supply growing by 4% YoY to 1,258 tonnes. Mine production reached a record 929 tonnes for a second quarter, while recycling supply was the highest since 2012, reflecting the response to rising prices. OTC investment was a major component of the Q2 total gold demand, amounting to 329 tonnes. This, along with continued central bank buying, contributed to pushing gold prices to record highs during the quarter. Despite a minor 7-tonne decline in global gold <keyword id="19930506" type="General" weightage="20" keywordseo="etf" source="keywords">ETF</keyword> holdings in Q2, this was an improvement compared to the 21-tonne drop in Q2 2023. The decline in ETF holdings was followed by early outflows and nascent inflows later in the quarter. Retail bar and coin investment experienced a 5% decline to 261 tonnes, mainly due to weakened demand from Western markets. Conversely, gold used in technology saw an 11% YoY increase, driven by the continued growth in <keyword id="19904566" type="General" weightage="20" keywordseo="artificial-intelligence" source="keywords">artificial intelligence</keyword> (AI) applications. <keyword id="21088407" type="General" weightage="20" keywordseo="investment-trends" source="keywords">Investment trends</keyword> continued to diverge regionally. Eastern markets exhibited robust demand for bars, coins, and ETFs, while Western markets saw marked declines. However, Western ETF investment flows have shown signs of recovery in early Q3 2024. Looking ahead to the full year of 2024, it is expected that revived Western investment flows will help balance out weaker consumer demand, and potentially slower central bank buying, compared to 2023.

Global gold demand drops 6% in Q2 2024 due to slump in jewelry consumption, OTC investment pushes the total to record high

<ul class="summary-list"><li>Russia's economic expansion will drop off sharply after this year, the country's central bank said.</li><li>GDP could fall from as much as 4% to as low as 0.5% in 2025, the report said.</li></ul>Russian wartime growth will stagger next year as labor and sanction issues wear down the "overheating" economy, the country's central bank said in its annual report.Although GDP is projected to expand as much as 4% this year, state and consumer demand have by now outstripped supply, the Central Bank of Russia said.The report, cited by the <a target="_blank" href="https://www.ft.com/content/553c50cf-aa2c-41bc-8f4c-f8f24cee2b1a">Financial Times</a>, expects growth to reach the 0.5%-to-1.5% zone in 2025, and be 1% to 2% in 2026."Available production capacity is depleted," bank deputy governor Alexei Zabotkin told reporters last week. "The pace of expansion is held back by sanctions barriers and by physical limitations on the output of the means of production. The economy needs additional labor for this as well."He added that labor shortages had "significantly worsened."This dilemma first cropped up after Russia invaded Ukraine in 2022, committing part of its workforce to the front lines. Last year's forced mobilization order made the deficit more severe, as <a target="_blank" href="https://markets.businessinsider.com/news/currencies/russian-economy-record-worker-shortage-sanction-ukraine-war-labor-exodus-2023-4?_gl=1*esjdrx*_ga*MTMxNDIwNDI1Ni4xNjc1Njg3OTU4*_ga_E21CV80ZCZ*MTcyNTM2NDU1OC41NTkuMS4xNzI1MzY0ODA4LjQ1LjAuMA..">up to a million Russians</a> fled the country. By the end of 2023, the country was estimated to lack<a target="_blank" href="https://www.businessinsider.com/russia-lacks-workers-ukraine-war-labor-crisis-worker-shortage-2023-12"> close to 5 million workers.</a>That's put pressure on Russian businesses to increase wages, in a big to source new workers. According to FT, the nominal wage jumped 19.2% in the first quarter of 2024, slowing slightly in the second quarter. Labor shortfalls have hit manufacturing, trade and agriculture the hardest, according to the report.Rising wages and aggressive government spending are a recipe for higher inflation, which the central bank expects to reach 6.5% to 7% by the end of this year. The bank outlined that <a target="_blank" href="https://www.businessinsider.com/russia-economy-business-elites-criticize-central-bank-interest-rate-hike-2024-7">interest rates</a> — now standing at 18% — are unlikely to move away from the double digits.The report said inflation is projected to fall between 4% and 4.5% in 2025, then remain at the 4% level after that.The West has offered no relief to Russia, as sanctions from the US and its allies have only tightened in recent months. In late August, Washington announced another <a target="_blank" href="https://www.businessinsider.com/us-russia-sanctions-war-spending-exports-ukraine-china-banks-treasury-2024-8">sweeping sanctions package targeting foreign entities</a> that still support Russia's war production.Production capacity and labor supply is "nearly fully used," the report said.According to FT, the central bank also listed other economic scenarios in its report, such as an economic "deglobalization" that occurs alongside higher interest rates. In this situation, Russia would contract as much as 3% to 4% next year, and face a crisis as difficult as the 2008 period.The central bank's outlook appears in line with Western forecast, as the International Monetary Fund similarly <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-grows-faster-than-all-advanced-economies-imf-2024-4">anticipates momentum to fade in 2025</a>.Meanwhile, individual analysts have warned that a <a target="_blank" class="" href="https://www.businessinsider.com/russia-economy-collapse-recession-moscow-ukraine-war-us-dollar-energy-2024-7">severe recession is looming over Moscow</a>, which could hit as soon as next year.

Russia's 'overheating' economy will face a sharp slowdown next year as labor and sanctions crush momentum, central bank says

<ul class="summary-list"><li>The European Union just made its first cut to interest rates in five years.</li><li>The European Central Bank lowered its main interest rate from 4% to 3.75%.</li></ul>The European Union has become the latest global economy to cut its benchmark interest rate.The <a target="_blank" href="https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.mp240606~2148ecdb3c.en.html">European Central Bank</a> announced on Thursday that it would lower its main interest rate from 4% to 3.75%, marking its first reduction since 2019. Canada cut its key policy rate from 5% to 4.75% on Wednesday.Neil Birrell, the chief investment officer at Premier Miton Investors, said in a research note to clients:"In one of the most flagged central bank interest rate decisions for some time, the ECB followed Canada into the rate cutting cycle. However, the path for further cuts is unlikely to be as predictable or smooth.""Eurozone inflation is proving more resilient than hoped, as it is in the US and UK, which has to influence the ECB, although they will be keen to keep providing stimulus to the economy, it needs it. As has been the case all the way through the cycle, they have a tight rope to walk," he said.Economies worldwide have <a target="_blank" href="https://www.businessinsider.com/when-will-fed-cut-interest-rates-powell-fomc-inflation-relief-2024-4">raised interest rates</a> significantly over the past two years after inflation surged because of the COVID-19 pandemic.For example, US inflation surged to a 40-year high of more than 9% in the summer of 2022. The US central bank has responded by <a target="_blank" href="https://www.businessinsider.com/federal-reserve-hikes-interest-rates-inflation-higher-costs-loans-mortgages-2022-3">hiking interest rates</a> from nearly zero in early 2022 to more than 5% and has yet to make its first cut.Central banks raise interest rates to cool inflation, as higher rates make it more attractive to save instead of spend or invest, and deter companies from hiring by raising the interest payments on their debts. The result is usually less overall demand in the economy, which helps to relieve upward pressure on prices.But consumers and businesses in Europe, the US, and elsewhere have faced a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/big-short-michael-burry-jpmorgan-consumer-inflation-rates-banking-crisis-2023-4">painful combination</a> of historic inflation and sharp rate increases. They're now paying significantly higher prices for food, fuel, housing, and other essentials, and also higher monthly payments on their cars, mortgages, credit cards, and other debts.The cost-of-living crisis has heaped pressure on central banks to cut rates, but stubborn inflation has made it a tough decision for the likes of the ECB's president, Christine Lagarde.Indeed, annualized inflation in the EU ticked up from 2.4% in April to 2.6% in May — above the ECB's 2% target. At the same time, the EU is only expected to <a target="_blank" href="https://economy-finance.ec.europa.eu/economic-forecast-and-surveys/economic-forecasts/spring-2024-economic-forecast-gradual-expansion-amid-high-geopolitical-risks_en">increase its gross domestic product</a> by 1% this year, fueling calls to stimulate growth by lowering rates."Since the Governing Council meeting in September 2023, inflation has fallen by more than 2.5 percentage points and the inflation outlook has improved markedly," the ECB said in its press release."Underlying inflation has also eased, reinforcing the signs that price pressures have weakened, and inflation expectations have declined at all horizons," it continued.The central bank did, however, note that "domestic price pressures remain strong" and "inflation is likely to stay above target well into next year," signaling that markets shouldn't expect a flurry of cuts in the months ahead.

Europe's central bank cuts interest rates for first time in 5 years

<ul class="summary-list"><li>China's yuan is falling as holders eye the risk of western sanctions.</li><li>The US Treasury threatened to impose secondary sanctions on nations aiding Russian trade.</li></ul>China's yuan is in the midst of a steep decline as holders of the currency eye the risk of US sanctions.The value of the yuan slumped against Russia's ruble for the fifth day in a row on Wednesday, falling to a level of 11.51 rubles. That's the cheapest the yuan has been in about a year. Central banks, meanwhile, are looking to dump the yuan while raising their holdings of the US dollar. Nearly 20% of central bank reserve managers said they planned on <a target="_blank" href="https://www.omfif.org/2024/06/reserve-managers-battling-low-returns-face-tough-choices/">raising dollar holdings</a> over the next one to two years, while 12% said they planned on reducing yuan holdings, according to a survey from the Official Monetary and Financial Institutions Forum.Yuan holders are assessing the risk of Western trade restrictions on China after the US Treasury imposed secondary sanctions on countries and entities doing business with Russia's economy. That puts China at particular risk, given that the nation become a <a target="_blank" href="https://www.businessinsider.com/russia-ukraine-war-putin-china-trade-partnership-economy-moscow-beijing-2024-4">key trading partner</a> to Russia since Moscow first began its invasion of Ukraine in 2022. The two countries have embarked on a "no limits" economic partnership, which took their trade to a <a target="_blank" href="https://www.businessinsider.com/china-russia-trade-record-ukraine-war-xi-jinping-vladimir-putin-2024-1">record $240 billion in 2023</a>, according to data published by the Chinese government. They've also partnered on efforts with other BRICS states to <a target="_blank" href="https://markets.businessinsider.com/news/currencies/dedollarization-dollar-dominance-brics-currrency-china-russia-trade-yuan-ruble-2023-12">phase out the use of the dollar</a>, which has been nearly eliminated in China-Russia trade.Lawmakers are reportedly already <a target="_blank" href="https://www.businessinsider.com/china-dedollarization-sanctions-russia-trade-dollar-access-banks-ukraine-war-2024-4">drafting sanctions</a> to impose against Chinese banks, sources told The Wall Street Journal in April. If enforced, those sanctions could completely cut off some Chinese lenders from the global financial system, severely limiting the volume of trade and currency transactions.China, for its part, has taken some steps to distance itself from Russia's economy. China's state-run banks are looking to restrict <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-01-16/china-banks-tighten-curbs-on-russia-after-us-sanctions-order">lending to Russian clients,</a> due to fear of being targeted by US sanctions, people familiar with the matter told Bloomberg.

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