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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

Prime Minister Narendra <keyword id="19899684" type="General" weightage="20" keywordseo="Modi" source="keywords">Modi</keyword> on Friday said the government is making necessary <keyword id="20861068" type="General" weightage="20" keywordseo="policy-changes" source="keywords">policy changes</keyword>, like removal of <keyword id="20279287" type="General" weightage="20" keywordseo="Angel-Tax" source="keywords">Angel Tax</keyword>, to promote the <keyword id="19945816" type="General" weightage="100" keywordseo="fintech" source="keywords">fintech</keyword> sector, even as he asked the <keyword id="19962476" type="General" weightage="20" keywordseo="regulators" source="keywords">regulators</keyword> to take additional measures to check cyber frauds which can have a crippling impact on startups. Lauding the fintechs for democratising <keyword id="19976433" type="General" weightage="20" keywordseo="financial-services" source="keywords">financial services</keyword>, Modi said the sector, which has attracted USD 31-billion investment in the last 10 years, has played a key role in denting the parallel economy. The Prime Minister was addressing the Global Fintech Fest (GFF) 2024, jointly organised by the Payments Council of India, the National Payments Corporation of India and the Fintech Convergence Council. He said the domestic economy and the capital market are in a celebratory mood at a time when the nation is also going through a festive period. Modi underlined that the government is making all necessary changes on the policy level to assist the fintech sector and gave examples of doing away with Angel Tax, allocating Rs 1 lakh crore to encourage research and innovation in the country and implementing the Digital Personal Data Protection Act. Broadly, fintech refers to entities utilising technologies for providing financial services. Expressing the need to put an end to <keyword id="19901142" type="General" weightage="20" keywordseo="cyber-fraud" source="keywords">cyber fraud</keyword>, he urged the regulators to take major initiatives to boost digital literacy. It is equally important to ensure cyber fraud does not come in the way of the growth of fintech and startups in the country, Modi said. In his speech, the Prime Minister also cautioned about the dangers of a parallel economy for the world. Fintech, he said, has played an impactful role in denting such a system and credited the emergence of transparency. He said that digital technology has introduced transparency in India and gave the example of the implementation of Direct Benefit Transfer used in hundreds of government schemes that has prevented leakages in the system. "Today, people can see the benefits of aligning with the formal banking system," he said. Modi further said the trinity of Jan Dhan, Aadhaar and Mobile have broken down the mentality of 'Cash is King' and made way for approximately half of the <keyword id="20004116" type="General" weightage="20" keywordseo="digital-transactions" source="keywords">digital transactions</keyword> in the world taking place in India. "India's <keyword id="19900911" type="General" weightage="20" keywordseo="upi" source="keywords">UPI</keyword> has become a major example of fintech in the world," he said, adding that it has enabled 24X7 banking services in every village and city in all weather conditions. Underlining the role of fintech in democratising financial services, the Prime Minister gave examples of readily available loans, credit cards, investments and insurance. He said that fintech has made access to credit easy and inclusive, and gave the example of PM SVANidhi scheme that has enabled street vendors to avail collateral-free loans and further expand their business with the help of digital transactions. "Sustainable <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> is India's priority today," he said and emphasised that the government is creating robust, transparent and efficient systems to strengthen financial markets with advanced technologies and regulatory frameworks. About 800 speakers, including policymakers, regulators, senior bankers, industry captains, and academicians, from India and other countries are participating in the fest.

Removed Angel Tax, taking policy measures to promote fintech sector: PM Modi

<keyword id="19956758" type="General" weightage="20" keywordseo="finance-minister" source="keywords">Finance Minister</keyword> <keyword id="19916618" type="General" weightage="20" keywordseo="nirmala-sitharaman" source="keywords">Nirmala Sitharaman</keyword> on Tuesday announced a <keyword id="20274081" type="General" weightage="20" keywordseo="credit-guarantee-scheme" source="keywords">credit guarantee scheme</keyword> for facilitating <keyword id="22087606" type="General" weightage="20" keywordseo="term-loans" source="keywords">term loans</keyword> for <keyword id="19910977" type="General" weightage="20" keywordseo="MSMEs" source="keywords">MSMEs</keyword> to purchase machinery and equipment without collateral or third-party guarantee. In her Budget speech in the Lok Sabha, she said the Budget provides special attention to micro, small &amp; medium enterprises (MSMEs) and manufacturing, particularly labour-intensive units. "We have formulated a package, covering financing, <keyword id="20961204" type="General" weightage="20" keywordseo="regulatory-changes" source="keywords">regulatory changes</keyword> and technology support for MSMEs to help them grow and also compete globally, as mentioned in the interim budget," she said. The credit guarantee scheme for MSMEs in manufacturing will operate on the pooling of credit risks of such entities. "A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger," the minister announced in the Budget. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reduced loan balance. She also announced a new mechanism for facilitating the continuation of bank credit to MSMEs during their stress period. Sitharaman said that while being in the 'special mention account' (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and avoid getting into the NPA stage. "Credit availability will be supported through a guarantee from a government-promoted fund," she added. In another move to help MSMEs, the minister announced a new assessment model for credit to the sector. She said public sector banks will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. "They will also take a lead in developing or getting developed a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy," she added. The new assessment model, she said, is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria. It will also cover MSMEs without a formal accounting system. Mohammad Athar (Saif), partner and leader capital projects and infrastructure development, PwC India, said the credit guarantee scheme and <keyword id="22514802" type="General" weightage="20" keywordseo="e-commerce-export-hubs" source="keywords">e-commerce export hubs</keyword> for MSMEs will enable demand creation and boost India's aspiration of achieving USD 1 trillion in exports by 2030, driven by MSMEs. Sitharaman also announced that to enable MSMEs and traditional artisans to sell their products in international markets, e-commerce export hubs will be set up in public-private-partnership (PPP) mode. These hubs, under a seamless regulatory and logistic framework, will facilitate trade and export-related services under one roof. Vivek Jalan, Partner, Tax Connect, a multi-disciplinary firm, said, as requested by the trade and industry bodies and laid down by the Economic Survey, for MSME businesses, the compliance burden is also sought to be relaxed. Litigations will be reduced in the new <keyword id="22517694" type="General" weightage="20" keywordseo="Vivaad-Se-Vishwas-Scheme" source="keywords">Vivaad Se Vishwas Scheme</keyword>, he added. Rumki Majumdar, Economist, Deloitte India, said the credit guarantee schemes for MSMEs in the <keyword id="19955573" type="General" weightage="20" keywordseo="manufacturing-sector" source="keywords">manufacturing sector</keyword>, facilitating term loans for the purchase of machinery, and formulating packages to finance technology support to them will go a long way to providing access to finance and increasing investments, which have been key challenges in the sector.

FM announces credit guarantee scheme, other measures for MSMEs

India could see a shift in foreign direct investment (FDI) trends in the second term of Donald Trump (Trump 2.0) as President of the United States, says a research report by the State Bank of India. The report highlighted that under his first term, Trump 1.0, the Trump administration made sweeping regulatory changes aimed at attracting investments back to the U.S., which impacted FDI inflows globally, including India. It added that if similar policies are reintroduced in Trump 2.0 also, it could create challenges for emerging markets like India, which rely on FDI as a significant driver of economic growth. Notably, a recent Kotak report highlighted that a complete Republican control over all arms of the US government would mean increased US earnings via corporate tax cuts, higher tariffs on imports into the US and greater US fiscal deficits. The first two could spell doom for emerging markets like India and China, since foreign investors will make a beeline for investing more money in the US markets, which will come at the cost of intense selloff in emerging markets. However, higher fiscal deficits will eventually lead to the dollar weakening after the initial euphoria dies down. "India may see shifts in foreign direct investments (FDIs) during Trump 2.0. The Trump 1.0 administration saw significant regulatory changes aimed at attracting investments back to the US," the SBI report stated. However, given that India has been gradually diversifying its sources of FDI (foreign direct investments), this trend could serve as a buffer against any potential decline. Moreover, domestic institutional investors have been stepping up big time, maintaining some balance to the massive exodus of FIIs over the past month. So far in November 2024, FIIs have withdrawn Rs 19,849 crores from the cash segment in Indian markets, while DIIs have poured in Rs 14,014.18 crores as of November 10th, 2024. "India is no longer dependent on the traditional sources of FDI inflows... unlike the recent past, FDI is now coming in many new sectors," noted the SBI report. Unlike a decade ago, when most FDI inflows came from a limited number of traditional sectors, India is now attracting investment in a wide array of industries, including renewable energy, sea transport, medical devices, and surgical appliances. Data suggests over the last 24 years, i.e., between April 2000 and June 2024, FDIs have poured in $1,013.4 billion in the Indian economy. Out of this, 67%, i.e., $689.88 billion, has come in just the last 10 years. The report added there are up to 12 emerging sectors showing strong FDI interest, which could help offset any loss of inflows in conventional sectors if there is a shift in global investment patterns under another Trump administration. In the last financial year, the top 5 sectors that have received the highest quantum of FDI inflow include the services sector (finance, banking, insurance, and business) which makes up about 16% of the inflows. This is followed computer software &amp; hardware, which constitute around 15% of total FDI flows. Trading and telecommunications follows with a share of 6% each, and Automobile Industry comes next with a 5% share. In the short term, the potential for increased U.S. tariffs, more restrictive H-1B visa policies, and a stronger dollar could bring some volatility to India's trade and investment landscape. However, in the long term, these challenges might also encourage India to expand its manufacturing capabilities, diversify export markets, and focus on becoming economically more self-reliant. Notably, India has maintained a merchandise trade surplus with the U.S. despite tariffs imposed during Trump's first term. This indicates that Indian exports have remained resilient, and there is potential to strengthen this trade relationship further by capitalizing on emerging sectors and reducing dependency on traditional industries. Suman Chowdhury, Executive Director &amp; Chief Economist, Acuité Ratings &amp; Research Limited cautions that in the medium to long term, the trade relationship with the US may see a structural improvement. "Higher tariff and trade restrictions in the US with China should translate into better opportunities for exports of manufactured goods from India", he adds.

FDIs may shift to US under Trump 2.0 but it is unlikely to severely impact FDIs inflow to India, says SBI Report

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

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

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

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

<ul class="summary-list"><li>US bank stocks surged following Donald Trump's presidential election victory.</li><li>Markets see looser regulations and changes in oversight spurring more profits for banks. </li></ul>US bank stocks rallied on Wednesday after Donald Trump <a target="_blank" class="" href="https://www.businessinsider.com/donald-trump-wins-presidential-election-race-2024-11">cruised to victory</a> in the presidential election, with markets eyeing a better environment for dealmaking and lending to drive stronger profits. Shares of the largest US banks soared ahead of the opening bell. JPMorgan and Bank of America both rose 6%, Citi rose 8%, and Wells Fargo jumped 10%. Goldman Sachs and Morgan Stanley climbed 6% and 8%, respectively. The SPDR S&amp;P Bank exchange-traded fund climbed 8%. Investors flocked to <a target="_blank" class="" href="https://www.businessinsider.com/market-impact-presidential-election-scenarios-trump-harris-stocks-bonds-crypto-2024-10">financial stocks</a> as a popular "Trump trade" in the weeks leading up to the election, with allies of the president-elect stating that Trump planned to <a target="_blank" class="" href="https://www.reuters.com/markets/us/if-trump-wins-he-plans-free-wall-street-burdensome-regulations-2024-04-12/">unravel many of the regulations</a> imposed on the banking sector after the 2008 financial crisis.According to Gerard Cassidy, a large-cap bank analyst from RBC Capital Markets, Trump's victory is likely to see some top regulators ousted, including the heads of agencies like the Consumer Protection Bureau and the Office of the Comptroller of the Currency.More banks could also consolidate in the coming years, assuming Trump's cabinet and advisors adopt a "pro-business" stance, Cassidy speculated. Commercial lending could also pick up, potentially causing bank revenue to beat expectations next year, he added."We've been very optimistic and bullish about the bank stocks all year, and last night's win by Trump continues that bullishness," Cassidy said in an interview with <a target="_blank" class="" href="https://www.cnbc.com/video/2024/11/06/outlook-for-banks-from-a-regulatory-standpoint-is-quite-positive-says-rbcs-gerard-cassidy.html">CNBC</a> Wednesday morning. "We're going to see a real change in anti-trust, and we're going to see a change in banking regulation as well, and that's going to be positive for the banks."Leading up to the election, analysts also said they saw a fresh wave of dealmaking under Trump amid a potentially looser anti-trust stance from his administration. That could result in increased advisory revenue for big banks and help drive up profits.

Bank stocks soar after Donald Trump's election victory

<keyword id="19991358" type="General" weightage="100" keywordseo="Indian-markets" source="keywords">Indian markets</keyword> are navigating choppy waters as global economic shifts, from rate cuts to evolving political climates, create new pressure points across the financial landscape, according to a recent report by ANI attributed originally to the Union Bank of India. The domestic stock and bond markets showed signs of strain, with <keyword id="19910363" type="General" weightage="20" keywordseo="bond-yields" source="keywords">bond yields</keyword> witnessing slight adjustments. India’s 10-year government bond yield dipped to 6.82%, a decrease from the previous session, reflecting cautious investor sentiment as the markets react to shifting global indicators. Meanwhile, the 5-year bond yield remained steady at 6.76%, a signal of lingering hesitation amid economic unpredictability. In the currency market, the rupee faced a notable decline, ending the day at ₹84.3725 against the US dollar, slipping from its prior close of ₹84.2800. Market analysts point to significant capital outflows as a key factor, with investors moving funds to perceived safer assets overseas. This migration has weighed heavily on the rupee, underlining the currency’s vulnerability in an environment of global economic flux. India’s stock market bore the brunt of this volatility, with key indices falling over 1%, effectively erasing the gains of a previous rally. This abrupt drop reportedly reflects renewed investor anxiety, largely triggered by the recent <keyword id="20189882" type="General" weightage="20" keywordseo="US-presidential-election" source="keywords">US presidential election</keyword> results. Experts suggest that the election has introduced a fresh layer of uncertainty, not only for the US economy but for global markets, impacting everything from policy decisions to investor sentiment. Analysts are also keeping a close eye on upcoming decisions by central banks, which will likely shape the path forward for the Indian equities market. Commodities showed contrasting trends, with Brent crude prices falling on lower demand expectations, as economic indicators point toward cautious spending globally. Gold, on the other hand, experienced a modest rise as investors sought refuge in safe-haven assets, highlighting a shift towards risk aversion among market participants. Globally, major central banks made coordinated efforts to sustain economic growth, with the Bank of England (BoE) announcing a 25 basis-point cut, lowering its benchmark rate to 4.75%. The BoE’s Monetary Policy Committee (MPC) largely backed this move to counter inflation, which has been declining, albeit gradually. Across the Atlantic, the US Federal Reserve mirrored this action with its own 25 basis-point cut, a sign of confidence in the ongoing economic recovery. Both rate cuts, though modest, signal a global trend towards caution as economies work to balance growth with stability. In Asia, the People’s Bank of China (PBoC) maintained its supportive stance. Governor Pan Gongsheng sought to reassure foreign investors by reaffirming the PBoC’s commitment to growth-oriented policies. Pan emphasized enhanced communication and pledged to open China’s financial services sector further, aiming to attract more international participants. Europe, meanwhile, faced mixed economic signals. Germany reported a steep 2.5% drop in industrial production in September, signalling a slowdown in manufacturing, while the Eurozone saw a mild 0.5% rise in retail sales, reflecting cautious consumer optimism in the region. Adding another layer to the global economic landscape, the European Union’s Climate Change Service warned that 2024 could be the hottest year on record, underscoring urgent climate challenges just as the UN COP29 climate summit approaches. The summit, set to take place in Azerbaijan, aims to rally increased funding for climate action, though tempered expectations linger in light of recent US political shifts. On the domestic front, Niti Aayog CEO BVR Subrahmanyam spoke about India’s potential role in pivotal global trade agreements, specifically the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). These partnerships, Subrahmanyam suggested, could bolster India’s Micro, Small, and Medium Enterprises (MSME) sector, which currently accounts for 40% of India’s exports, offering a strategic advantage for Indian trade in an interconnected world. As the Indian markets digest these developments, experts believe continued volatility could be the theme for the coming months. (with ANI inputs)

Indian markets under pressure as global rate cuts stir uncertainty, new report says

Investors continued to push significant money into sectoral, or thematic funds, with the category seeing inflows worth Rs 18,117.18 crores during August 2024. The inflows in this category remained largely flat last month, changing negligibly from Rs 18,386.35 crores in July 2024. During August, 5 new thematic mutual fund NFOs were launched, which raised a total of Rs 10,093.57 crore. <h2>42nd consecutive month of positive inflows</h2>This takes the total tally of existing sectoral fund schemes to 179. The next category with most schemes offered (42) is <keyword id="103549" type="General" weightage="20" keywordseo="ELSS" source="Orion">ELSS</keyword> (equity-linked savings scheme). Himanshu Srivastava, Associate Director – Manager Research, Morningstar Investment Research India cautioned that investors should be cautious while selecting funds specially from the sector/thematic category. Such funds offer a very high-risk high return investment proposition and may not fit in the portfolio of every investor. "Either investors should themselves understand the dynamics of the underlying sector or theme to take a prudent investment decision, or they should have a strong advice available to them, who can help them take the right decision", he advised. Inflows in small-cap funds tapered significantly, and are now largely in line with funds garnered by large-cap and mid-cap funds. In August, large-cap funds saw inflows worth Rs 2,636.86 crore, while large and mid cap funds amassed Rs 3,293.74 crore. Small-cap funds raked in Rs 3,209.33 crore during the month. "With large cap segment faring relatively better from valuation point of view, investors have shifted their attention towards this category again. Besides, large cap funds add stability to the portfolio during the times of market volatility, and this could be another reason for investors to invest in these funds, given heightened volatility observed in the markets in the recent times. Additionally, with the valuation high in the mid and small cap segments, some shift towards large caps is not surprising", continued Srivastava. Also, investors showed far more proclivity for <keyword id="6357979" type="General" weightage="20" keywordseo="Mutual-Funds" source="Orion">mutual funds</keyword> spread over various market caps, as opposed to a single one. This is evident in the amount garnered by flexi-cap funds, which amassed Rs 3,513.16 crore. All in all, the equity segment saw total inflows of Rs 34,302.82 crores in August, making it the 42nd consecutive month of net inflows in this segment. Even the number of folios in equity jumped 3.16%, up from Rs 13.8 crore in July to Rs 14.3 crore in August. In hybrid funds, balanced advantage funds saw inflows worth Rs 3,215.06 crore, while multi-asset allocation funds received Rs 2,826.89 crore. <h2>Debt inflows take a dip</h2>As for debt categories, they saw inflows worth Rs 45,169.36 crore during the month, higher than their equity counterparts. However, this was significantly lower than the inflows it registered in July, which stood at Rs 1,19,587.60 crore. The biggest contributors to this quantum were <keyword id="428654" type="General" weightage="20" keywordseo="liquid-funds" source="Orion">liquid funds</keyword> and overnight funds, which received Rs 13,594.87 crore, and Rs 15,105.93 crore respectively. And despite various PSU stocks having a good run on the bourses, banking and PSU funds saw outflows worth Rs 1,549.99 crores, the highest in debt segment. Nehal Meshram, Senior Analyst, Research, Morningstar Investment Research India highlighted that overnight funds, liquid funds and money market funds accounted out 86% of the overall debt inflow last month. "This trend reflects a preference for low-risk and highly liquid investment options. Investors also showed a preference for categories with shorter maturity profiles, such as short term, corporate bond and ultra short duration funds, for temporary parking of funds. Medium duration funds, which had consistently seen outflows, reported marginal inflows in August for the first time in 15 months", she explained. During the month, about 63,93,602 new SIPs were registered.

Sectoral funds rake in Rs 18,117.18 crore during the month, debt schemes see more inflows than equities, notes AMFI data for August

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="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> announced the decision of the newly formed six-member MPC (<keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword>) today, following the conclusion of the three-day meeting, which began on October 7, 2024. Treading along expected lines, RBI rate-setting panel left the repo rate unchanged at 6.5% for the 10th consecutive time, in its 51st meeting today. The decision was made by a majority, with 5 out of 6 members voting for leaving the rate unchanged. This is the fourth bi-monthly monetary policy review for FY25, and the first since three external members were appointed to the panel earlier this month. The tenure of the previous three members had come to an end on October 4, 2024. While the outgoing members include Ashima Goyal (emeritus professor, Indira Gandhi Institute of Development Research), Shashanka Bhide (honorary senior advisor, National Council of Applied Economic Research); and Jayanth R. Varma(professor, Indian Institute of Management, Ahmedabad), the income members are Ram Singh (Director, Delhi School of Economics), Saugata Bhattacharya, an economist; and Nagesh Kumar (Director and chief executive, Institute for Studies in Industrial Development). <h2>Wait and Watch </h2>RBI also changed its policy stance to neutral, while remaining committed to growth and bringing down inflation to its target of 4%. This means that at present, the bank is not inclined to either increase or decrease the interest rates, but will take a call depending on macroeconomic conditions and prevailing factors. "Taking all these factors into consideration, the real GDP growth for 2024-25 is projected at 7.2%, with Q2 at 7%, Q3 at 7.4% and Q4 at 7.4%", he said. As for inflation, Das highlighted that headline inflation had softened significantly in July and August and even food inflation experienced a certain degree of correction during these two months. Keeping this in mind, CPI inflation for 2024-25 i.e. current year is projected at 4.5%, with Q2 at 4.1%, Q3 at 4.8% and Q4 at 4.2%. CPI for first quarter of next financial year i.e. 2025-26 is estimated at 4.3%. "It's with a lot of effort that inflation horse has been brought to the stable, i.e. closer to the target and within the tolerance span, compared to its place or heightened levels two years ago. We have to be very careful about opening the gate, as the horse may simply hold again. We must keep the horse in tight leash, so that we do not lose control", Das added. Most economists had anticipated a change in the central bank's current policy stance of 'withdrawal of accommodation'. This policy stand indicates that any interest rate cuts are presently off the table. However, given the ongoing geopolitical crisis and Fed's jumbo rate cut by 50-basis points last month, RBI may bring about a cut in interest rates, sooner than later. However, since food inflation remains high at 5.42% as of July 2024, experts had also estimated that now might not have been a good time for RBI to bring down interest rates. Moreover, PMI (purchase managers index) indices, which help in gauging the health of manufacturing and service sectors in the country, presently stand at a multi-month low, and even the core sector output is witnessing a contraction after 42 straight months. As Suman Chowdhury, Executive Director &amp; Chief Economist, Acuité Ratings &amp; Research had highlighted, the current circumstances are not really conducive for RBI to opt for any affirmation action towards an easier monetary policy. "While the fear of the inflation “elephant” may have subsided with the CPI headline print well within 4.0% over the last two months and a favorable monsoon, the concerns around the stability of food inflation still linger among policy makers. The RBI may wait till December 2024 or February 2025 to make a rat cut, he continued. <h2>Housing sector rejoices</h2>From the point of view of homebuyers, the relatively affordable home loan interest rate regime will continue at a critical time for the Indian housing market - the festive season - amid rising housing prices and tapered sales. Q3 2024 saw average housing prices rise by a cumulative 23% in the top 7 cities even as average prices in these markets collectively rose to approximately Rs 8,390 per sq. ft. by Q3 2024-end, from Rs 6,800 per sq. ft. in Q3 2023. "The unchanged home loan rates are much-needed demand support in the ongoing festive quarter. We are expecting faster sales momentum in Q4 2024 when compared to the preceding quarter. This year's festive quarter may see similar demand to that seen in this period a year ago, if not higher. Over 1.27 lakh units were sold across the top 7 cities back in Q4 2023. Unchanged interest rates will play and important role in achieving and maintaining this momentum", says Anuj Puri, Chairman - ANAROCK Group

RBIs MPC meet concludes today: Repo rate left unchanged at 6.5%

The residential market shows a positive outlook, with 51% of stakeholders predicting higher sales over the next six months. However, a notable 24% expect stability, while 25% predict a potential decrease, reflecting a balanced yet cautious sentiment, as per a recent <keyword id="19895043" type="General" weightage="20" keywordseo="Knight-Frank" source="keywords" meta.keywordsubtype="org" meta.entityname="Knight Frank" meta.hostid="261" meta.entityid="Knight Frank">Knight Frank</keyword> report. The outlook for residential launches is also positive, with 61% expecting an increase, suggesting continued demand. A more tempered view is held by 20% of respondents who expect stability, and 19% foresee a decrease in launches. The Indian <keyword id="20152263" type="General" weightage="20" keywordseo="real-estate-sector" source="keywords">real estate sector</keyword> continues to reflect a positive outlook for the near future, though with a more cautious approach. In terms of pricing, 63% of stakeholders expect a rise, but 36% anticipate stable prices, and a very small minority predict a decline. G Hari Babu, National President, National Real Estate Development Council (<keyword id="20429653" type="General" weightage="20" keywordseo="naredco" source="keywords">NAREDCO</keyword>), said, "The residential and office markets continue to show notable activity, signaling ongoing growth and opportunity. Developers and other key stakeholders, including banks and financial institutions, are maintaining a positive outlook." He added, "This suggests that while there may be short-term challenges, the sector is well-positioned to adapt and thrive. The continued optimism and activity in the market highlight the sector's ability to sustain its momentum and drive forward, amidst changing conditions." The <keyword id="22822547" type="General" weightage="20" keywordseo="office-leasing-market" source="keywords">office leasing market</keyword> shows signs of strong recovery, with 63% of respondents predicting an increase in leasing activity, driven by positive business sentiments and <keyword id="21313740" type="General" weightage="20" keywordseo="economic-revival" source="keywords">economic revival</keyword>. However, 24% expect stability, and 13% foresee a decline. New office supply also remains a point of interest, with 47% expecting an increase, while 29% anticipate stability, and 24% forecast a decrease. Furthermore, 67% of stakeholders expect office rents to rise, signaling confidence in the market's ongoing growth, even as 27% anticipate stable rents and 7% expect a decrease. The <keyword id="20635920" type="General" weightage="20" keywordseo="future-sentiment-score" source="keywords">Future Sentiment Score</keyword>, which measures stakeholders' outlook over the next six months, saw adjustments across various regions. The North Zone score slightly decreased from 65 in Q1 2024 to 63 in Q2 2024, though it remains firmly optimistic. The South Zone witnessed a more significant drop from 76 to 65, signaling a moderated outlook. In the East Zone, the score fell from 77 to 65, largely influenced by the discontinuation of the 2% stamp duty cut. The West Zone also saw moderation, with the score dipping from 73 to 66, though it too, remains optimistic. The overall Developer Future Sentiment score decreased from 72 to 61, reflecting a more guarded approach. Developers, while cautious, continue to remain optimistic due to strong sales since early 2023. On the other hand, the Non-Developer Future Sentiment core, which includes financial institutions and PE funds, also moderated from 73 to 68. This shift indicates stakeholders' careful consideration of macroeconomic concerns. Optimism in India's broader economic scenario remains strong, with 59% of respondents expecting an improvement, reflecting confidence in the country's economic resilience. However, 24% foresee stability, and 17% predict a decline, underscoring global economic uncertainties. Meanwhile, 51% of respondents anticipate increased funding availability for real estate investments, reflecting continued confidence in the financial sector's support for the real estate market. Shishir Baijal, Chairman and Managing Director of Knight Frank India Pvt Ltd, noted, "As we transition through 2024, a host of factors are playing out globally. The global economic landscape shows resilience despite ongoing challenges. Inflation rates are gradually aligning with central bank targets, enabling a more supportive monetary policy. India, benefiting from stable post-election conditions, remains a strong growth beacon." He added, "Domestic consumption is robust, supported by consumer loans, though there are some signs of growth moderation. Food inflationary pressures persist, but are converging overall towards price stability targets. With a projected GDP growth rate of 7.2% for FY 2025, India's outlook remains positive. An effective monetary policy by the Reserve Bank of India has helped sustain growth with price stability, positioning India as one of the fastest-growing large economies globally." The Current Sentiment score, which reflects stakeholders' view of the market compared to six months ago, moderated from a decadal high of 72 in Q1 2024 to 65 in Q2 2024. This suggests a more measured outlook as stakeholders navigate evolving global economic conditions. Despite the dip, the score remains indicative of optimism. Looking forward, the Future Sentiment index also adjusted from 73 in Q1 2024 to 65 in Q2 2024, signaling a positive yet more conservative outlook for the near term. While macroeconomic uncertainties may dampen enthusiasm, stakeholders continue to show confidence in the sector's resilience and adaptability.

You Searched For "banking sector changes" and got 11 results

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

Ira Alok Puranik

Removed Angel Tax, taking policy measures to promote fintech sector: PM Modi

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FM announces credit guarantee scheme, other measures for MSMEs

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FDIs may shift to US under Trump 2.0 but it is unlikely to severely impact FDIs inflow to India, says SBI Report

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

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

Ira Alok Puranik

Bank stocks soar after Donald Trump's election victory

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Indian markets under pressure as global rate cuts stir uncertainty, new report says

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Sectoral funds rake in Rs 18,117.18 crore during the month, debt schemes see more inflows than equities, notes AMFI data for August

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RBIs MPC meet concludes today: Repo rate left unchanged at 6.5%

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Despite budget provisions, residential housing market will see sales growth, notes recent report by Knight Frank

ANI

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