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<ul><li><keyword id="19900288" type="General" weightage="20" keywordseo="Instagram" source="keywords" meta.keywordsubtype="org" meta.entityname="Instagram" meta.hostid="261" meta.entityid="Instagram">Instagram</keyword> has announced <keyword id="23207859" type="General" weightage="20" keywordseo="Teen-Accounts" source="keywords">Teen Accounts</keyword>, a new feature aimed at offering more control to parents.</li><li>The new feature will restrict how children can use Instagram, allowing parents more supervision.</li><li>The Teen Account feature will apply to users below 18 years of age.</li></ul>In a bid to offer parents more control over how their teenage children use social media, Meta-owned image sharing platform Instagram has announced Teen Accounts.<br /><br />The social media platform, which has a significant user base among teenagers, is implementing these changes to foster a safer and more positive online environment, offering “peace of mind” for both parents and children.<br /><br />Instagram will automatically place teenagers into the new Teen Accounts and teenagers under 16 years will need a parent’s permission to change any of these settings.<br /><br />Teen accounts are set to private by default, limiting interactions with unknown adults and filtering out potentially harmful content. Instagram also provides educational resources to help teenagers navigate the digital world responsibly.<br /><br />Teenagers will also get access to a new feature that will allow them to select topics they want to see more of in Explore and their recommendations, preventing unwanted content from popping up in their feeds.<br /><br /><h2><keyword id="23216323" type="General" weightage="100" keywordseo="Instagram-teen-account" source="Orion">Instagram Teen Account</keyword> features</h2><h3>Private accounts</h3>Teenagers will placed into private accounts by default and they will have to accept new followers and people who don’t follow them will not be able to see their content or interact with them.<br /><h3><br /><keyword id="23216322" type="General" weightage="20" keywordseo="messaging-restrictions" source="keywords">Messaging restrictions</keyword></h3>Teens will be placed in the strictest messaging settings, so they can only be messaged by people they follow or are already connected to, preventing unwanted or unknown people from contacting them.<br /><br /><h3>Sensitive content restrictions</h3>Teens will automatically be placed into the most restrictive setting of Instagram’s sensitive content control, which limits the type of sensitive content teens see in places like Explore and Reels.<br /><br /><h3>Time limit reminders</h3>Teens will get notifications telling them to stop using the app after 60 minutes each day.<br /><br /><h3><keyword id="23216321" type="General" weightage="20" keywordseo="sleep-mode" source="keywords">Sleep mode</keyword></h3>Sleep mode will be turned on between 10 PM and 7 AM, which will mute notifications overnight and send auto replies to messages.<br /><br /><h3>Limited interactions</h3>Teens can only be tagged or mentioned by people they follow. Instagram will also turn on the most restrictive version of the app’s anti-bullying feature, Hidden Words so that offensive words and phrases will be filtered out of teens’ comments and message requests.<br /><br /><h3>How to change settings in the Instagram Teen Account?</h3>Teenagers under 16 years will need their parent’s permission to use less protective settings. To get permission, teens will need to set up parental supervision on Instagram. If parents want more oversight over their older teen’s (16+) experiences, they simply have to turn on parental supervision. Then, they can approve any changes to these settings, irrespective of their teen’s age.<br /><br />Once supervision is established, parents can approve and deny their teens’ requests to change settings or allow teens to manage their settings themselves. Soon, parents will also be able to change these settings directly to be more protective.<br /><br /><strong>SEE ALSO:<br /><br /><a href="https://www.businessinsider.in/business/ecommerce/news/amazon-great-indian-festival-sale-to-begin-on-september-27/articleshow/113445238.cms">Amazon Great Indian Festival sale to begin on September 27</a><br /><br /><a href="https://www.businessinsider.in/business/auto/news/triumph-speed-t4-launched-in-india-with-a-price-tag-of-2-17-lakh/slidelist/113429766.cms">Triumph Speed T4 launched in India with a price tag of ₹2.17 lakh</a><br /><br /></strong><a href="https://www.businessinsider.in/tech/mobile/webstories/motorola-edge-50-neo-vs-nothing-phone-2a-which-phone-should-you-buy-under-25000/slidelist/113417314.cms"><strong>Motorola Edge 50 Neo vs Nothing Phone (2a) – Which phone should you buy under ₹25,000?</strong></a><br />

Instagram will force teenagers to have a private account, enable sleep mode after 10 PM

<strong><em><strong><em>“Ye le beta, humare </em></strong>khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.”<br /><strong><em></em></strong></em></strong><br />How many times have we seen similar dialogues repeat itself in Bollywood films of the 70s and 80s—abject poverty and a frail-looking old mother pleading to her son to pawn the family’s heirloom gold ornaments to a jeweller, all to get a few bucks?<br /><br />Well, if you’d ask that son in 2024, he’d rather hit the loan button on his <keyword id="105386" type="General" weightage="20" keywordseo="Demat-account" source="Orion">Demat account</keyword> than pawn his mother’s gold jewellery. Given how Indians are rapidly resorting to taking loans against their investments in shares and mutual funds, these might as well be a cherished family heirloom in today’s time.<br /><br />Fair warning though; it's not as if gold and loans against it are going down in India’s lending scene. It's very much the opposite, shining brighter than ever! The secured loan category is having its time in the spotlight, and people are certainly looking beyond land and property to get their hands on some extra monies!<br /><br />But what is funding the steep rise behind these loans? And are they as failsafe and secure as they’re made out to be? We decode for you in this week’s Simply Put.<br /><br /><h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">The great Indian pawning party</h2>Pawning one’s gold has been, by far, the OG Indian financial move to get a loan. That continues well into 2024, and apparently, more so when India decides to wed and celebrate!<br /><br />Data from <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword> suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024. It looks like Gold took the motto of rise and shine too seriously!<br /><br /><strong>Table 1: Growth in gold loans</strong><br /><table class="redcator-table-advance" style="border-width: initial; border-style: none; background-color: rgb(255, 255, 255); font-size: 16px; line-height: 1.6em; box-shadow: none; width: 468pt; font-family: Merriweather; table-layout: fixed; padding-bottom: 10px !important; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important;"></colgroup><tbody><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;"><strong>Year<br /><br /></strong></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;"><strong>Amount (In Rs crore)</strong><br /><br /></td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2022<br /><br /></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">85,009<br /><br /></td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">March 2023<br /><br /></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">89,370<br /><br /></td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2023<br /><br /></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">97,426<br /><br /></td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">March 2024<br /><br /></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">1,02,562<br /><br /></td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2024<br /><br /></td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">1,47,081<br /><br /></td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table><br /><em><strong>Source: RBI data<br /></strong></em><br />While the world continues to be riled up in multiple geopolitical crises in 2024, gold has been making merry of these tough times. Thus far this year, <keyword id="3886593" type="General" weightage="20" keywordseo="domestic-gold" source="Orion">domestic gold</keyword> prices have grown by 23%, outperforming benchmark indices like Nifty and Sensex by a mile, which have gone up by 9.85% and 8.86%, respectively.<br /><br />The growth in gold loan disbursal rates month on month this year could also put Nifty and Sensex’s growth to shame. In just September 2024, gold loans grew an astounding 51%, up from 40.9% in August, 30.5% in June, and just 14.8% in March.<br /><br /><h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">Hey, wait up for me, says LAS</h2>In lockstep with the elder, gold loan sibling, advances against shares and bonds have also been inching up since 2022. Data from RBI (Reserve Bank of India) notes that as of September 2022, the outstanding quantum of loans that were taken against shares (LAS) and bonds stood at Rs 7,397.94 crores.<br /><br />This inched up to Rs 7,764 crore in September 2023. Come 2024, and it looked like this was LAS’ time to shine. Loans swiftly skyrocketed, with outstanding loans in this category going up from Rs 8,492 crore in March 2022 to a staggering Rs 9,546 crore at the end of September 2024.<br /><br />Naturally, the smoke of LAS has its fire in the record inflows that Indians are pouring into the stock market and mutual funds month on month. Per AMFI (<keyword id="134904" type="General" weightage="20" keywordseo="Association-of-Mutual-Funds-in-India" source="Orion">Association of Mutual Funds in India</keyword>), the net AUM (assets under management) of India’s mutual fund industry grew to Rs 67,25,614.61 crores in October 2024, up from Rs 67,09,259.24 crores in September 2024.<br /><br />Even the number of retail mutual fund folios, which include equity, hybrid, and solution-oriented mutual funds, burgeoned to 17,23,52,296 in October, as compared to 16,81,61,366 in September.<br /><br />The same goes for stock investments in India, where the number of new demat accounts that are added every month just simply refuses to climb down. As of last month, total demat accounts in the country stood at 17.9 crore, which is more than the entire population of full-fledged nations like Japan (12.45 crore), Russia (14.38 crore), and Bangladesh (17.3 crore).<br /><br />In fact, since February this year, the monthly growth of LAS has been hitting double digits. From 11.3% in March to 21.6% in May to 26.8% in August, growth in LAS has been exceptional, hitting 22.9% in September this year. For context, monthly growth in the LAS segment was at a mere 5% in September 2023.<br /><br /><h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">What's driving the growth?</h2>It's a win-win for both the bank and the customer. Customers love them because LAS is available at a lower interest rate compared to unsecured personal loans. You can get a loan at an interest rate of anywhere between 9 and 12% by pledging your gold, MF units, or shares. Compare this to over 10-28% rates, which is the range where unsecured personal loans charge interest.<br /><br />Banks love <keyword id="827883" type="General" weightage="100" keywordseo="Secured-Loans" source="Orion">secured loans</keyword> since they are well-secured. In case you default on paying back, the bank can sell off your gold, shares, or mutual fund units to recover the amount.<br /><br />This takes a lot of stress off the banks, which are already dealing with secured loans’ riskier sibling-<keyword id="947940" type="General" weightage="20" keywordseo="unsecured-lending" source="Orion">unsecured lending</keyword>. High NPAs (non-performing assets) and non-payments in the unsecured borrowing space have already put RBI on red alert, which is why the apex bank is tightening the screws on unsecured lending, which was well on its way to becoming a ticking time bomb. As a result, credit growth has moderated to 12.8% YoY in October, as against the 19.3% rise recorded in the year-ago period.<br /><br />Yet it's not like the banks won't feel the heat. Analysts at Nomura note that <keyword id="23954457" type="General" weightage="20" keywordseo="personal-loan-delinquencies" source="Orion">personal loan delinquencies</keyword> in India that have been overdue by over 90 days rose to 5.1% in the last financial year, as opposed to just 3.9% in the year prior.<br /><br /><h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">How does it work?</h2>Both these loans work on a similar principle: Your <keyword id="857141" type="General" weightage="20" keywordseo="loan-amount" source="Orion">loan amount</keyword> is equal to a certain percentage of the actual market value of your asset. This is known as the LTV (loan-to-value ratio). In the case of gold and debt mutual funds, RBI mandates that this LTV be about 75-80%. So, for every Rs 100 of gold or debt mutual fund unit you pledge, your maximum loan amount cannot exceed Rs 80.<br /><br />If you pledge gold, which has a market value of Rs 10 lakh, you can take a loan of up to Rs 8,00,000.<br /><br />In the case of shares and mutual fund units, this limit is set at 50%. So, your shares worth Rs 5,00,000 can only get you a loan worth Rs 2,50,000. But the bright side? You can continue earning returns on your investments and pay interest only on the amount you use, since this loan works as an overdraft facility.<br /><br /><h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">Super safe, you say?</h2>Interest rates on both of these loans are very much dependent on the market value of the asset, which wildly fluctuates on a day-to-day basis. So, in case the value of your asset falls, you’ll have to keep a margin or more of the same asset in order to continue with the loan and maintain the LTV balance. Failure to do so could mean the bank can even sell off your asset.<br /><br />Says financial planner Nema Chaya Buch. “Yes, LAS offers easy availability of funds since these loans come with a lower interest rate as compared to personal loans. Also, you continue to earn average returns of 10–13% on your equity investments. But the downside is, in case of emergency, those pledged securities cannot be sold. Also, if the equity market goes down, then the bank may ask for additional collateral.<br /><br />Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly.<br /><br />“This allows you to maximize the loan amount based on your collateral while also addressing financial needs without having to liquidate your investment portfolio. However, there are notable disadvantages to consider. The market risk is significant; a substantial decline in market value could lead to margin calls, which may incur fees and charges if there are delays or prepayments, ultimately increasing the effective cost of borrowing. Furthermore, failure to make timely payments could result in the loss of your assets.”.<br /><br />Umesh Mohanan, ED &amp; CEO, of Indel Money, cautions that one should have a sufficient quantity of gold to get the loan amount one wants. "According to the current RBI rules, the loan applicant/borrower can draw up to 75% of the total market value of the collateral/gold jewellery. So, always carry a sufficient quantity of gold based on one’s loan requirement.<br /><br />“The most important thing is that the valuation of the gold depends on the purity of the gold. If the borrower pledges gold with higher purity, such as 24 carats or 22 carats, he will get the maximum loan amount," he adds.

Secured Loans 2.0 — why more and more Indians are turning to gold, shares and mutual funds to get loans

<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><br />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. <br /><br />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? <br /><br /><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.<br /><br />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. <br /><br />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. <br />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.<br /><br />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. <br /><br />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:<br /><br /><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.<br /><br /><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><br />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. <br /><br />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. <br /><br /><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.<br /><br />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.<br /><br />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.<br /><br />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. <br /><br />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. <br /><br />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.<br /><br />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. <br /><br /><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”.<br /><br />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. <br /><br />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. <br /><br />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?<br /><br />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. <br /><br />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. <br /><br />If not, then that would be a curious case to unravel! But that worry is for another day.<br /><br /><em><i>Do you have insights or personal experience to share on your personal finances or money? Contact us at </i><i><a target="_blank" class="c-link" href="mailto:businessinsider@timesinternet.in">businessinsider@timesinternet.in</a></i></em><i><em>.</em></i><br />

Simply Put: A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

A team of environmental scientists and physical limnologists has published a fascinating study that may provide a scientific explanation for one of the most famous stories in the Bible: Jesus’ miraculous “multiplication” of fish. This research investigates natural events that may have created an abundance of fish in <keyword id="23812630" type="General" weightage="20" keywordseo="lake-kinneret" source="keywords">Lake Kinneret</keyword>, also known as the Sea of Galilee, without any need for divine intervention.<br /><h2>The story behind the miracle</h2>The New Testament recounts two instances where Jesus multiplied a small amount of food to feed the hungry. In the Gospel of Luke, Jesus tells Simon Peter to cast his nets in the Sea of Galilee, leading to an overwhelming catch of fish. In the Gospel of John, Jesus supposedly turned a few loaves of bread and a handful of fish into a meal for thousands of followers. For nearly two millennia, Christians have interpreted these events as miracles, showcasing Jesus’ divine power. But could there have been a natural phenomenon behind these "miraculous" catches?<br /><br />The new study doesn’t aim to discredit these ancient accounts but rather to explore what might have been happening in the lake at the time. Using a range of modern scientific techniques, the research team examined Lake Kinneret’s unique conditions to see if there might be another reason for these “miraculous” catches of fish.<br /><h2>What happens in Lake Kinneret</h2>The researchers found that Lake Kinneret is naturally stratified, with two distinct layers of water: a warmer, oxygen-rich upper layer, where most fish reside, and a colder, oxygen-poor lower layer. Normally, these two layers remain separate, but every once in a while, a unique combination of environmental conditions causes them to mix. This phenomenon, known as “thermal stratification,” results in a sudden and dangerous depletion of oxygen throughout the lake, leaving fish unable to breathe at any level of the water.<br /><div type="Article" hostid="261" msid="114938626" title="&amp;quot;Sugar early in life is the new tobacco&amp;quot;: Scientists urge food companies to reformulate baby foods and tax sugary options" mstype="2" mssubtype="0"></div>When this mixing happens, the fish die off en masse and float to the surface. To someone on the shore, this could look like an abundance of fish suddenly appearing, ready for easy collection. Imagine standing by the lake as hundreds or even thousands of fish rise to the surface — the scene could easily inspire stories of miraculous bounty.<br /><h2>A coincidence or a miracle?</h2>To investigate the phenomenon, the research team deployed temperature sensors, oxygen metres, and even tested wind speed and direction in the lake. These instruments confirmed that Lake Kinneret experiences regular die-offs of fish due to stratification, followed by these mass appearances of fish near the surface. According to their findings, similar environmental conditions existed around the time of Jesus, making it possible that such a die-off event occurred then, too.<br /><div type="Article" hostid="261" msid="114885489" title="A 14-year-old took home $10,000 for his award-winning investigation into train derailments. Here&amp;#39;s what he found." mstype="2" mssubtype="0"></div>The team’s research also indicated that strong winds across the lake could drive oxygen-poor waters to the surface, killing off fish in greater numbers. They observed that specific types of fish in Lake Kinneret are especially prone to this kind of die-off and tend to end up along the shore, where they could be easily collected by a hungry populace.<br /><br />While the study’s findings don’t rule out the possibility of miracles, they suggest that at least some of the stories of miraculous catches might be explained by natural processes. If Jesus and his disciples happened to be fishing in Lake Kinneret during one of these die-offs, the sudden appearance of fish may have seemed miraculous.<br /><br />From a modern perspective, it’s a reminder that ancient people often attributed unusual natural events to divine intervention simply because they lacked the scientific knowledge we have today. Rather than taking away from the significance of these stories, the scientific findings highlight the powerful ways in which natural events can intersect with human experience, shaping beliefs and narratives that endure through millennia.<br /><br />The findings of this research have been published in <em>Water Resources Research</em> and can be accessed <a href="https://dx.doi.org/10.1029/2024WR037894">here</a>.<br />

How did Jesus 'multiply' his fish? A new study provides an answer that is more science than miracle

The Olympic gold medalist, <keyword id="20206037" type="General" weightage="20" keywordseo="abhinav-bindra" source="keywords">Abhinav Bindra</keyword>, heaped praise on <keyword id="20390717" type="General" weightage="20" keywordseo="Indian-shooter" source="keywords">Indian shooter</keyword> <keyword id="20166561" type="General" weightage="100" keywordseo="Swapnil-Kusale" source="keywords">Swapnil Kusale</keyword> as the latter went on to win bronze in the men's <keyword id="22629070" type="General" weightage="20" keywordseo="50m-rifle-3P-event" source="keywords">50m rifle 3P event</keyword> at the ongoing <keyword id="20006192" type="General" weightage="20" keywordseo="Paris-Olympics" source="keywords">Paris Olympics</keyword> on Thursday. <br /><br />Kusale also became the first Indian shooter to win a medal in the men's 50m rifle 3P event. The shooter clinched the bronze medal for India in the 50m Rifle 3 Positions Men's Final after finishing in third place with an aggregate of 451.4. He secured India's third overall medal in shooting.<br /><br />The former India shooter appreciated the 28-year-old player and said that his hard work, grit, and passion have paid off. <br /><br />"Absolutely thrilled for Swapnil's epic bronze medal win in shooting at the Paris <keyword id="19933819" type="General" weightage="20" keywordseo="olympics" source="keywords">Olympics</keyword>! Your hard work, grit, and passion have truly paid off. Competing at the highest level and coming away with a medal in shooting is a testament to your dedication and talent. You've made India so proud and shown everyone what chasing dreams is all about. The Paris 2024 Olympics has been an incredible event, and your achievement adds to its unforgettable moments. Here's to many more victories and an amazing future ahead. Keep shining!" Bindra wrote on X. <br /><br />  Earlier in the qualification round, Indian shooter Swapnil Kusale finished seventh in the qualification round of men's 50m 3P to qualify for the final at the ongoing Paris Olympics on Wednesday.<br /><br />Indian shooters Aishwary Pratap Singh Tomar and Swapnil Kusale both appeared in the men's 50m 3P qualification round at the Paris 2024 Olympics. On his <keyword id="20662906" type="General" weightage="20" keywordseo="Olympic-debut" source="keywords">Olympic debut</keyword>, Kusale finished seventh with a score of 590-38x. While Tomar ranked 11th with a total of 589-33x. Only the top eight shooters qualified for the final round, and Tomar failed to make his place in the final round.<br /><br />People's Republic of <keyword id="22629071" type="General" weightage="20" keywordseo="Chinas-Liu-Yukun" source="keywords">China's Liu Yukun</keyword> registered the qualification Olympic record with a total of 594-38x.<br /><br />Kusale was also the first Indian shooter to make a place in the men's 50m rifle 3P medal event at the Olympics. Earlier at the multi-sport event, India shooter <keyword id="20241095" type="General" weightage="20" keywordseo="Manu-Bhaker" source="keywords">Manu Bhaker</keyword> opened the nation's account with a bronze medal in the women's 10m air pistol event.<br /><br />The Paris Olympics has been a redemption arc for Manu after her pistol malfunctioned at the Tokyo Olympics. She made history by becoming the first Indian woman in 20 years to reach a shooting final in an individual event of the Olympics since Suma Shirur in 2004.<br /><br />The Indian shooting duo of Manu and Sarabjot Singh got the better of South Korea's Lee Wonho and Oh Ye Jin 16-10 in the bronze medal play-off match in the 10m air pistol mixed team event.<br />

"Hard work, grit, passion have truly paid off": Abhinav Bindra after Swapnil Kusale wins bronze at Paris Olympics

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.<br /><br />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.<br /><br /><h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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?<br /><br />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!<br /><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.<br /><h2><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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?”<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br /><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%.<br /><br />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.<br /><br />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!<br /><br /><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.<br /><br />Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br />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.<br /><br /><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.<br /><br />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.<br /><br />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.”<br /><br />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.<br /><br /><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.<br /><br />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

It is no secret that women often outlive men. The global average life expectancy in 2021 was about 68.4 years for men. In contrast, this stood at 73.8 years for women. As such, it is far more important for women to begin planning for their golden years as early as possible. Perhaps realizing this, more women are getting into investing than ever before! Even better, women save about 5% more each month than men.<br /><br /> A recent Max Life's India Retirement Index Study (IRIS 4.0) also highlighted a similar sentiment: women are increasingly taking charge of their retirement and finances. Per the study, urban Indian working women are now keeping pace with men, with 66% being confident that their current investments will guarantee a financially secure retirement life.<br /><br /> In terms of health, 48% of urban Indian working women feel confident that they will continue to stay fit and healthy in their retirement years. Encouragingly, a whopping 68% of urban Indian women have already started investing for their retirement. <br /><br /> Amongst their preferred investment avenues are life insurance (65%), bank FDs/RDs (45%), medical insurance (36%), and mutual funds and SIPs (14%). <br /><br /> The awareness is not limited to women; young urban Indians are awakening to the realization that retirement planning should be kicked off as soon as possible. Per IRIS 4,0, 44% of Indians consider the right age to start planning for retirement to be before 35 years, a jump from 38% in IRIS 3.0. An overwhelming 93% of respondents aged above 50 regret delaying their retirement planning.<br /><br /> Says Priyanka Bhatia, Co-Founder of Women on Wealth, "Women, by and large, live longer than men and may confront professional interferences, which influence retirement reserve funds essentially. Beginning in your 20s permits women to create strategies that account for longevity risks and potential income gaps. Investments like annuities and dividend-paying assets guarantee a consistent income stream post-retirement, permitting ladies to explore monetary freedom even in later years.". <br /><br /> Not to mention, beginning early also permits individuals to take advantage of tax-efficient investments over a more drawn-out period. In India, instruments like the National Pension Scheme (NPS) offer tax benefits that develop over the long haul. By expanding these exceptions from a young age, women can grow their retirement reserve funds while reducing taxable income in each financial year.<br /><br /> Bhatia notes that even if one is planning to retire early, it does not only mean putting something aside for your 60s. It is also about adaptability to pick semi-retirement choices, work in sectors driven by passion, or even pursue entrepreneurial ventures without financial pressure. "Beginning in your 20s allows you to amass funds that can allow for early retirement, empowering a change to lifestyle-oriented work or community contributions later in life," Bhatia signs off. <br /><br />

Planning for your retirement in your 20s? Here's why it is a smart move!

<br />      <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><br />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.<br /><br />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.<br /><br /><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.<br /><br />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. <br /><br />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.<br /><br />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. <br /><br />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? <br /><br />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!<br /><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.<br /><h2><br />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. <br /><br />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. <br /><br />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. <br /><br />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. <br /><br />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?”<br /><br />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. <br /><br />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. <br /><br />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.<br /><br />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.<br /><br /><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%. <br /><br />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. <br /><br />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! <br /><br /><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. <br /><br />Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days.<br /><br />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. <br /><br />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. <br /><br />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. <br /><br />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. <br /><br />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.<br /><br />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.<br /><br />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.”<br /><br />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. <br /><br /><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.<br /><br />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. <br /><br /><em>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.</em>

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

Singapore Airlines will make an additional investment of Rs 3,194.5 crore in Tata Group-owned Air India post-merger of Vistara in November. The merger, announced on November 29, 2022, and set to be completed on November 11, 2024, will result in Singapore Airlines having a 25.1% stake in the enlarged Air India. <br /><br />Full-service carrier Vistara, which started flying on January 9, 2015, is a joint venture between Tatas and Singapore Airlines, where the latter holds a 49% shareholding. Vistara's last flight will take off tomorrow i.e. November 11, 2024.<br /><br />Singapore Airlines (SIA) Group on Friday said its consideration for the merger comprises the 49% interest in Vistara and Rs 20,585 million (Rs 2,058.5 crore) in cash in exchange for a 25.1% equity interest in the enlarged Air India. <br /><br />Post-merger, SIA expects to recognize a non-cash accounting gain of around 1.1 billion Singapore dollars and also start equity accounting for its share of Air India's financial results. <br /><br />According to a release on Friday, the merger includes an agreement for SIA to contribute its share of any funding previously provided by Tata prior to the completion of the merger, together with relevant funding costs up to Rs 5,020 crore that would allow it to maintain a 25.1% stake in Air India. <br /><br />"SIA's additional capital injection is expected to be Rs 31,945 million (equivalent to SGD 498 million), based on Tata's funding to Air India to date. This will occur after the completion of the merger and within November 2024 through subscription to new Air India shares. <br /><br />"Future capital injections will be considered based on Air India's requirements and available funding options," according to the release issued while announcing the airline's financial performance for the six months ended September 2024. <br /><br />The merger of Vistara with Air India will mark a major consolidation in the fast-growing Indian aviation space. SIA said the merged entity will have a significant presence across all key Indian air travel segments, including domestic, international, full-service, and low-cost operations. <br /><br />"This will strengthen SIA's multi-hub strategy, allowing it to continue participating directly in India's large and fast-growing aviation market," it added. <br /><br />Recently, Air India and SIA agreed to significantly expand their codeshare agreement, adding 11 Indian cities and another 40 international destinations to their network.

Singapore Airlines to invest additional Rs 3,195 cr in Air India post-Vistara merger

<strong><em>  <div type="image" title="Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024." msid="115250619" hostid="261" sizebytes="118350" caption="&amp;lt;p&amp;gt;Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024.&amp;lt;/p&amp;gt;"></div><br /> <strong><em>“Ye le beta, humare </em></strong>khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.”</em></strong><br />How many times have we seen similar dialogues repeat itself in Bollywood films of the 70s and 80s—abject poverty and a frail-looking old mother pleading to her son to pawn the family’s heirloom <keyword id="18712" type="General" weightage="20" keywordseo="gold" source="Orion">gold</keyword> ornaments to a jeweller, all to get a few bucks?<br /><br />Well, if you’d ask that son in 2024, he’d rather hit the loan button on his <keyword id="19977340" type="General" weightage="20" keywordseo="demat" source="keywords">Demat</keyword> account than pawn his mother’s gold jewellery. Given how Indians are rapidly resorting to taking loans against their investments in shares and mutual funds, these might as well be a cherished family heirloom in today’s time. <br /><br />Fair warning though; it's not as if gold and loans against it are going down in India’s lending scene. It's very much the opposite, shining brighter than ever! The secured loan category is having its time in the spotlight, and people are certainly looking beyond land and property to get their hands on some extra monies! <br /><br />But what is funding the steep rise behind these loans? And are they as failsafe and secure as they’re made out to be? We decode for you in this week’s Simply Put. <br /><br /><h2>The great Indian pawning party</h2>Pawning one’s gold has been, by far, the OG Indian financial move to get a loan. That continues well into 2024, and apparently, more so when India decides to wed and celebrate! <br /><br />Data from <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024. It looks like Gold took the motto of rise and shine too seriously! <br /><br /><strong>Table 1: Growth in gold loans</strong><br /><table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;"><strong>Year<br /><br /></strong></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;"><strong>Amount (In Rs crore)</strong><br /><br /></td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2022<br /><br /></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">85,009<br /><br /></td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2023<br /><br /></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">89,370<br /><br /></td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2023<br /><br /></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">97,426<br /><br /></td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2024<br /><br /></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,02,562<br /><br /></td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2024<br /><br /></td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,47,081<br /><br /></td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table><br /><em><strong>Source: RBI data<br /></strong></em><br />While the world continues to be riled up in multiple geopolitical crises in 2024, gold has been making merry of these tough times. Thus far this year, domestic gold prices have grown by 23%, outperforming benchmark indices like Nifty and Sensex by a mile, which have gone up by 9.85% and 8.86%, respectively. <br /><br />The growth in gold loan disbursal rates month on month this year could also put Nifty and Sensex’s growth to shame. In just September 2024, gold loans grew an astounding 51%, up from 40.9% in August, 30.5% in June, and just 14.8% in March. <br /><br /><h2>Hey, wait up for me, says <keyword id="23953567" type="General" weightage="20" keywordseo="las" source="keywords">LAS</keyword></h2>In lockstep with the elder, gold loan sibling, advances against shares and bonds have also been inching up since 2022. Data from RBI (Reserve Bank of India) notes that as of September 2022, the outstanding quantum of loans that were taken against shares (LAS) and bonds stood at Rs 7,397.94 crores.<br /><br />This inched up to Rs 7,764 crore in September 2023. Come 2024, and it looked like this was LAS’ time to shine. Loans swiftly skyrocketed, with outstanding loans in this category going up from Rs 8,492 crore in March 2022 to a staggering Rs 9,546 crore at the end of September 2024. <br /><br />Naturally, the smoke of LAS has its fire in the record inflows that Indians are pouring into the stock market and mutual funds month on month. Per AMFI (<keyword id="20090034" type="General" weightage="20" keywordseo="association-of-mutual-funds" source="keywords">Association of Mutual Funds</keyword> in India), the net AUM (assets under management) of India’s mutual fund industry grew to Rs 67,25,614.61 crores in October 2024, up from Rs 67,09,259.24 crores in September 2024. <br /><br />Even the number of retail mutual fund folios, which include equity, hybrid, and solution-oriented mutual funds, burgeoned to 17,23,52,296 in October, as compared to 16,81,61,366 in September. <br /><br />The same goes for stock investments in India, where the number of new demat accounts that are added every month just simply refuses to climb down. As of last month, total demat accounts in the country stood at 17.9 crore, which is more than the entire population of full-fledged nations like Japan (12.45 crore), Russia (14.38 crore), and Bangladesh (17.3 crore).<br /><br />In fact, since February this year, the monthly growth of LAS has been hitting double digits. From 11.3% in March to 21.6% in May to 26.8% in August, growth in LAS has been exceptional, hitting 22.9% in September this year. For context, monthly growth in the LAS segment was at a mere 5% in September 2023. <br /><br /><h2>What's driving the growth?</h2>It's a win-win for both the bank and the customer. Customers love them because LAS is available at a lower interest rate compared to unsecured personal loans. You can get a loan at an interest rate of anywhere between 9 and 12% by pledging your gold, MF units, or shares. Compare this to over 10-28% rates, which is the range where unsecured personal loans charge interest. <br /><br />Banks love <keyword id="827883" type="General" weightage="100" keywordseo="secured-loans" source="Orion">secured loans</keyword> since they are well-secured. In case you default on paying back, the bank can sell off your gold, shares, or mutual fund units to recover the amount. <br /><br />This takes a lot of stress off the banks, which are already dealing with secured loans’ riskier sibling-unsecured lending. High NPAs (non-performing assets) and non-payments in the unsecured borrowing space have already put RBI on red alert, which is why the apex bank is tightening the screws on unsecured lending, which was well on its way to becoming a ticking time bomb. As a result, credit growth has moderated to 12.8% YoY in October, as against the 19.3% rise recorded in the year-ago period. <br /><br />Yet it's not like the banks won't feel the heat. Analysts at Nomura note that personal loan delinquencies in India that have been overdue by over 90 days rose to 5.1% in the last financial year, as opposed to just 3.9% in the year prior. <br /><br /><h2>How does it work?</h2>Both these loans work on a similar principle: Your loan amount is equal to a certain percentage of the actual market value of your asset. This is known as the <keyword id="20051485" type="General" weightage="20" keywordseo="ltv" source="keywords">LTV</keyword> (loan-to-value ratio). In the case of gold and debt mutual funds, RBI mandates that this LTV be about 75-80%. So, for every Rs 100 of gold or debt mutual fund unit you pledge, your maximum loan amount cannot exceed Rs 80.<br /><br />If you pledge gold, which has a market value of Rs 10 lakh, you can take a loan of up to Rs 8,00,000. <br /><br />In the case of shares and mutual fund units, this limit is set at 50%. So, your shares worth Rs 5,00,000 can only get you a loan worth Rs 2,50,000. But the bright side? You can continue earning returns on your investments and pay interest only on the amount you use, since this loan works as an overdraft facility.<br /><br /><h2>Super safe, you say?</h2>Interest rates on both of these loans are very much dependent on the market value of the asset, which wildly fluctuates on a day-to-day basis. So, in case the value of your asset falls, you’ll have to keep a margin or more of the same asset in order to continue with the loan and maintain the LTV balance. Failure to do so could mean the bank can even sell off your asset.<br /><br />Says financial planner Nema Chaya Buch. “Yes, LAS offers easy availability of funds since these loans come with a lower interest rate as compared to personal loans. Also, you continue to earn average returns of 10–13% on your equity investments. But the downside is, in case of emergency, those pledged securities cannot be sold. Also, if the equity market goes down, then the bank may ask for additional collateral. <br /><br />Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly.<br /><br />“This allows you to maximize the loan amount based on your collateral while also addressing financial needs without having to liquidate your investment portfolio. However, there are notable disadvantages to consider. The market risk is significant; a substantial decline in market value could lead to margin calls, which may incur fees and charges if there are delays or prepayments, ultimately increasing the effective cost of borrowing. Furthermore, failure to make timely payments could result in the loss of your assets.”. <br /><br />Umesh Mohanan, ED &amp; CEO, of Indel Money, cautions that one should have a sufficient quantity of gold to get the loan amount one wants. "According to the current RBI rules, the loan applicant/borrower can draw up to 75% of the total market value of the collateral/gold jewellery. So, always carry a sufficient quantity of gold based on one’s loan requirement. <br /><br />“The most important thing is that the valuation of the gold depends on the purity of the gold. If the borrower pledges gold with higher purity, such as 24 carats or 22 carats, he will get the maximum loan amount," he adds.<br />

Simply Put: Secured Loans 2.0 — why more and more Indians are turning to gold, shares and mutual funds to get loans

Over the past few months, there’s been a lot of brouhaha about the lagging pace of bank deposits 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 financialization of household savings in the country, or the rising preference of Indians towards mutual funds and shares.<br /><br />So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian equity markets 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?<br /><br /><h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">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.<br /><br />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. <br /><br />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. <br /><br />And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by <keyword id="20250971" type="General" weightage="20" keywordseo="franklin-templeton" source="keywords">Franklin Templeton</keyword>, 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. <br /><br />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. <br /><br />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:<br /><br /><h2>First, are <keyword id="4000333" type="General" weightage="100" keywordseo="household-deposits" source="Orion">household deposits</keyword> 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.<br /><br />Also, we can’t forego the fact that the share of Indian <keyword id="20319599" type="General" weightage="20" keywordseo="households" source="keywords">households</keyword> 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.<br /><br />Moreover, as of March 2024, the collective CASA ratio (current and savings account 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.<br /><br /><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 (<keyword id="19942037" type="General" weightage="20" keywordseo="central-board-of-direct-taxes" source="keywords">Central Board of Direct Taxes</keyword>) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of <keyword id="20930760" type="General" weightage="20" keywordseo="securities-transaction-tax" source="keywords">Securities Transaction Tax</keyword> (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period.<br /><br />Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell equity mutual funds, 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.<br /><br />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.<br /><br />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. <br /><br />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. <br /><br />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 equities can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. <br /><br />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. <br /><br /><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”. <br /><br />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. <br /><br />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.<br /><br />The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in deposit growth we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? <br /><br />But with the <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next <keyword id="19918491" type="General" weightage="20" keywordseo="mpc" source="keywords">MPC</keyword> (Monetary Policy Committee) meeting, scheduled for November 2024. <br /><br />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. <br /><br />If not, then that would be a curious case to unravel! But that worry is for another day.<br />

A Deposit Dilemma — What's the fuss about a crisis in Indian bank deposits? Are mutual fund investments to blame?

<keyword id="20207838" type="General" weightage="20" keywordseo="dsp-mutual-fund" source="keywords">DSP Mutual Fund</keyword>'s September 2024 Netra report credits <keyword id="19895063" type="General" weightage="20" keywordseo="india" source="keywords">India</keyword>'s strong economic recovery to increased fiscal expenditure. The report, which tracks current economic trends and market insights through various charts, emphasizes the need for the private corporate sector and households to play a larger role in sustaining the ongoing growth momentum.<br /><br />Netra also pointed out an unsettling calm in the markets, with the Nifty 50 TRI index maintaining an impressive 53-month streak without a 5% decline and 13 years without a drop greater than 10%.<br /><br />Sahil Kapoor, Head of Products and Market Strategist, DSP Mutual Fund, said, "The calm in the markets, marked by an unnerving lack of volatility, is a double-edged sword. While it provides a sense of stability, it also masks underlying risks that could surface unexpectedly, catching investors off guard. To ensure a sustainable recovery, there is a need for the private sector and households to take the lead, transforming fiscal stimulus into lasting economic growth."<br /><br />However, the report notes a shift in market dynamics, with the momentum factor, which has outperformed since the COVID-19 bottom, beginning to lose its dominance. At the same time, the quality factor, which had underperformed over the last four years, is now seeing a resurgence, potentially indicating a change in market leadership that could favour quality-orientated funds, both active and passive.<br /><br />The report highlights the critical role government spending has played in the recovery, with a focus on capital investments crucial for future growth. However, contributions from the private corporate sector and households have lagged. It also draws attention to a slowdown in India's per capita consumption, approaching lows seen in previous cycles. Given that consumption accounts for around 60% of GDP, it is vital that this sector grows at a rate exceeding GDP growth to stimulate private capital expenditure.<br /><br />India's <keyword id="487578" type="General" weightage="20" keywordseo="tax-collections" source="Orion">tax collections</keyword> have demonstrated robust growth, with gross tax revenue showing a five-year compound annual growth rate (CAGR) of 14 %.<br /><br />This growth, largely driven by <keyword id="6354751" type="General" weightage="20" keywordseo="income-tax" source="Orion">income tax</keyword>, indicates a rising dependency on capital gains and stock market performance, introducing new vulnerabilities to the economy.<br /><br />The banking and financial services sector (<keyword id="19910880" type="General" weightage="20" keywordseo="bfsi" source="keywords">BFSI</keyword>) has emerged as a key driver of market earnings, recording a 12 % increase in profit after tax (PAT) growth, significantly outpacing the 4.6 % growth observed in non-BFSI Nifty 50 companies. This disparity underscores the sector's importance in India's economic story and highlights promising investment opportunities. <br /><br />

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