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“Ye le beta, humare khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.” 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? 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. 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! 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. <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! 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! Table 1: Growth in gold loans <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;">Year </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;">Amount (In Rs crore) </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 </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 </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 </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 </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 </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 </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 </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 </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 </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 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: RBI data 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. 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. <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. 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. 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. 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. 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). 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. <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. 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. 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. 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. <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. 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. 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. <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. 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. Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly. “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.”. 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. “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="For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire" height="900" width="1200" msid="114064202" hostid="261" caption="&amp;lt;p&amp;gt;For the unversed, trading in futures and options can be akin to setting their hard-earned money on fire&amp;lt;/p&amp;gt;"></div> Once upon a time, there thrived a wild, wild land. Here, it was all about super high monetary stakes, lightning-fast trade deals, and bucketloads of money shifting hands every single second. This wilderness lured millions of individuals with the promise of super duper high returns. But, at what cost? Welcome to the unforgiving, ultra-risky wild west of <keyword id="19991165" type="General" weightage="20" keywordseo="Indian-equity-markets" source="keywords">Indian equity markets</keyword> called the <keyword id="145718" type="General" weightage="100" keywordseo="Futures-and-Options" source="Orion">futures and options</keyword>. Here, everyone seems to just fly right through the bright red-flagged warnings of financial risks to earn even a fraction of these promised returns. Most burn themselves in the process, but carry on nevertheless, as if nothing ever happened. <h2>Chasing the cloudy profits</h2>The data conclusively proves that every 9 out of 10 individuals only lost their hard-earned money in this land. But hey, what do the numbers know? Some hide their losses out of shame, some out of fear. The proponents, meanwhile, proudly boast unusually high returns on their investments, some open social media channels while others encourage their friends and family to take the plunge. Naturally, news of this unstoppable and humongous en-masse migration to the F&amp;O (futures and options) town has reached sheriff <keyword id="19901201" type="General" weightage="20" keywordseo="SEBI" source="keywords" meta.keywordsubtype="org" meta.entityname="SEBI" meta.hostid="261" meta.entityid="SEBI">SEBI</keyword>, galvanising them into action. After all, it was time to put a leash on this madness and save the common man. The inhabitants of this town doubled in the last 2 years, from 51 lakh in FY22 to 96 lakh in FY24—99.8% of whom were small and mid-income traders. But profits? Well, that's a different, rather completely absent story. <h2>Que Sera Sera, much?</h2>A recent report by SEBI (Securities and Exchange Board of India) that studied profits and losses made by traders in the equity derivatives segment between FY22-24 exposed the mad mania of futures and options trading in India, especially since the pandemic. Per the report, 91.1% of individual traders, or about 73 lakh traders had only lost money trading in futures and options in FY24. Between FY 22-24, over 1 crore traders, or about 92.8% of individual traders, had lost Rs 2 lakh each. But once bitten, twice shy? Well, not in this case. More than 75% of individuals, who had only made losses trading in F&amp;O in FY22 and FY23, continued to trade vigorously in FY24 as well, without any changes in the bottom line, which remained deep in red and negative. So, then all these traders must be uber-rich, with tons of cash and not much care to spare? Nope. 76% of traders in the F&amp;O space in FY24 had an annual income of less than Rs 5 lakh. 2 years ago, their share stood at 71%. And their choice of poison? Options! In FY24, 60% of traders made losses trading in futures, but a whopping 91.5% burnt their funds trading in options. Mind you, futures are riskier than options. With futures, which require significant capital investment, the buyer and seller both are contractually bound to adhere to the pre-determined strike price of the futures or options contract, irrespective of whether the prevailing prices are higher or lower (and thus, resulting in losses for either the buyer or seller). With options, since this adherence ain't necessary, individuals end up taking debt to take highly leveraged positions while trading here. <h2>Scale of the explosion</h2>Anyone who trades even infrequently will tell you that a demat account is the mitochondria or powerhouse of the trading cell. As of August 2024, India had over 17.1 crore <keyword id="20957284" type="General" weightage="20" keywordseo="demat-accounts" source="keywords">demat accounts</keyword>, which are a prerequisite for trading in the markets. India is the 9th biggest country in the world, in terms of total demat accounts. Did you know that our demat accounts are at par with the entire population of Bangladesh? Talk about scale! Just 4 years ago, in March 2020, this number was a mere 4 crore. Naturally, the total F&amp;O turnover on both <keyword id="20004725" type="General" weightage="20" keywordseo="NSE" source="keywords" meta.keywordsubtype="org" meta.entityname="NSE" meta.hostid="261" meta.entityid="NSE">NSE</keyword> and BSE has hit the roof, and also broken it. As of October 4, 2024, the total futures and options turnover on NSE stood at a massive Rs 4,78,27,27,750.30 crore. Good luck counting the thousands! <table style="border-width: initial; border-style: none;" 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;">Year </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;">Total Turnover (Both Futures and Options) (In Rs Crore) </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;">2020-21 </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;">64,36,03,951.51 </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;">2021-22 </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;">1,69,52,33,134.47 </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;">2022-23 </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;">3,82,23,26,468.06 </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;">2023-24 </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;">7,99,27,67,152.43 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table>Source : NSE Another metric that underlines the meteoric growth of trading in India is the collection of STT or <keyword id="20930760" type="General" weightage="20" keywordseo="Securities-Transaction-Tax" source="keywords">Securities Transaction Tax</keyword>. As of September 2024, India's STT mop-up had gone past Rs 26,000 crore. Traders have to pay STT whenever they buy or sell any security in the market. So, more trading brings in more STT, and hence, more revenue for the government, so they're not really complaining. After all, this is certainly what they'd call enviable growth. As of August 2023, our STT collection stood at about Rs 21,599 crores. And in FY20-21, India's STT collection had been Rs 16,000 crore. If only our salaries also managed to grow at this rate! <h2>So, what's happening?</h2>Two things. One, it's the big bulls who are raking in all the moolah. And it's the younger lot (those aged under 30) who are propping them up for this. In FY24, 43% of individual traders in the market were less than 30 years of age. In just one year, this number has swelled by 12 percentage points from just 31% of individual traders. But who says ageing is bad? Wrinkles and silver hair seemingly have a propensity of incurring lesser losses in the market. In FY24, only 79% of traders aged above 60 years made losses, as compared to 93% of those aged below 30. Small and mid-income traders, which make up 98% of the total trader base, witnessed average losses per person of Rs 65,000 and Rs 1.5 lakh in FY24 in futures and options, respectively. The winner here? Clearly, the big bulls, who declared an annual income of over Rs 1 crore, ended up with average profits of Rs 96,000 per person this year. <h2>What’s the sheriff up to?</h2>The government has finally swung into action, hiking the STT rate for F&amp;O during this year’s budget. Effective October 1, 2024, the STT on futures stands at 0.02%, up from 0.0125%. For options, it was upped to 0.1% versus 0.0625% previously. Small margins, but huge impact oncoming. Says Puneet Sharma- CEO and Fund Manager at Whitespace Alpha, “SEBI aims to enhance market stability while safeguarding investor interests, reflecting the regulator's intent to balance risk management with market participation”. But this might come with its own share of challenges, too. “Stricter norms around leverage, transparency, and capital adequacy could limit the ability of investors to determine their own risk appetite, thereby stifling innovation in trading strategies. Over-regulation in an environment that thrives on strategic flexibility and creativity could dampen the market’s dynamism, affecting India's competitiveness in the global derivatives landscape”, he observes. SEBI recently came out with a set of guidelines that aim to thwart <keyword id="19972907" type="General" weightage="20" keywordseo="retail-investors" source="keywords">retail investors</keyword>' participation in futures and options and hinder them from taking undue risks. Here's a quick recap of what's to come for the residents of the F&amp;O town Margin Requirements: To battle the high volatility and chaos which is generally seen on expiry days(i.e the last mandated date, post which an option becomes invalid), SEBI will put in place an extreme loss margin (ELM) of 2% for all open short options on the day of expiry. Translation? Traders will need to pony up more cash upfront, leaving them with fewer funds to take on risky bets. It ain't a choice: No more of one expiry every single day! Going ahead, an exchange like BSE or NSE will just be able to offer weekly expiries, that too, only on one benchmark index, as opposed to an entire buffet it currently offers. At present, NSE offers weekly options contracts for its financial index, bank and midcap indices. But say goodbye to this, and hello to derivatives on only 1 index per exchange. Raising the bar: Effective November 30, 2024, the minimum contract value for index derivatives will be upped to Rs 15 lakh, from the present Rs 5-10 lakh. The hope is that by making it ultra-expensive to enter these trades, investors will be dissuaded from taking on risky trades. Pay upfront: Starting February 2025, those trading in options will have to pay the entire options premium upfront, even before their trades are executed. This is because options generally carry very high leverage, and paying a significant sum upfront can force traders to think twice. Invigilation Pro Max: Starting April 1 2025, to make sure that the number of positions for equity index derivatives does not slyly slip over the mandated limit, especially on expiry days when trade volumes are huge, the exchanges will have to take a minimum of 4 position snapshots randomly. The question is, will these injections of sobriety be enough to calm down the steroid-fed bull of the futures and options market in India? Well, only time and market turnover will tell! For more insights into the financial markets and business news, stay tuned to our site and social media handles. And don’t forget to subscribe to Business Insider India’s newsletters for your weekly dose of Simply Put! Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified and registered advisors for professional and personalised financial advice.

SIMPLY PUT: SEBI is on a mission to take on the wild, wild west of futures and options in India. Here’s why, what, and how

<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> “Ye le beta, humare khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.” 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? 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. 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! 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. <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! 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! Table 1: Growth in gold loans <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;">Year </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;">Amount (In Rs crore) </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 </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 </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 </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 </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 </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 </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 </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 </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 </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 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: RBI data 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. 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. <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. 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. 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. 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. 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). 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. <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. 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. 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. 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. <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. 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. 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. <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. 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. Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly. “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.”. 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. “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.

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

The entire country celebrating Raksha Bandhan today. But are you one of those elder siblings still mulling and stuck over the perfect gift to give your younger ones? Well, then it is time for you to move beyond your traditional gift ideas like sweets, gadgets, clothes, and jewelry, and invest in their future prosperity. How? By gifting them <keyword id="19905382" type="General" weightage="20" keywordseo="stocks" source="keywords">stocks</keyword>, or even mutual fund units. Here's a deep dive into how you can lay the foundations of a lasting bond with your siblings, and cement their financial future, one stock and one mutual fund unit at a time. <h2>How can I gift shares ?</h2>You can swiftly transfer shares online, provided both you and your siblings have a <keyword id="19977340" type="General" weightage="20" keywordseo="demat" source="keywords">demat</keyword> account. Many brokerage firms like Zerodha, Groww and others also offer this facility. For this, you will need to input details like your sibling's name (who you wish should receive these shares), particulars of their demat account, the amount of shares you wish to give as gift, and the name and 12-digit ISIN number of the company whose stocks you want to transfer. In addition, you will also have to provide the beneficiary owner ID of your siblings, reason for transferring these shares, and bank account details. In order to kickstart the process, you'll have to initiate what is known as an off-market settlement. This means without the stock exchange coming into the picture, two parties i.e. you and your sibling will mutually settle shares. For this, you will have to submit a delivery instruction slip (DIS) to your DP, or depository participant, which serves as a bridge between you and the depository. When you are transferring shares, you are essentially transferring your ownership of such stocks to them, and thus, you need to inform your DP and depository of the same. At present, there are only 2 depositories present in the country, namely NSDL and CDSL. You can submit this DIS both online and offline. If you have more than one siblings you wish to transfer shares to, remember to use separate DIS for each recipient's account. Once you initiate the transfer, your broker will send an email and SMS to the recipient, who will have 7 days to accept this. But remember, once you've transferred these shares, there is no provision to revoke this transfer. And just like with your clothes, accessories and everything else in life, your siblings will have full freedom and ownership to do whatever they deem fit with these shares! However, what you can certainly do, and make this gift more meaningful, is drive home the value of holding these securities for the long term, so that they are able to make the most of this investments. Ideally, a good start would be to start investing in stocks of large-cap, blue-chip companies, and them eventually complement them with small and midcap stocks, which offer higher legroom for growth. Per brokerage firm Master Capital Services Ltd, "consider choosing stocks from well-established companies with a solid track record and growth potential. It is essential to consider risk tolerance, investment horizon, and financial goals before selecting stocks for your brothers and sisters. The finest present you could give your siblings this year would be long-lasting financial stability". If you're looking for some stock recommendations you can consider for your siblings, we have you covered as well: <h4>Larsen &amp; Toubro Ltd. </h4>Why you should consider this? The company has shown consistent revenue growth and profitability in the past years while maintaining stability with its ROCE &amp; ROE of around 19% and 15%. L&amp;T has a significant global presence, with projects and operations in various international markets. This geographic diversification helps in tapping into global opportunities and reduces dependence on the domestic market. <h4>HCL Technologies Ltd. </h4>Why you should consider this? HCL Technologies is one of the IT giants of India, which is ranked amongst the top five Indian IT services companies in terms of revenues. HCL offers a wide array of IT, business services, engineering, R&amp;D services, and software products with operations in 60 countries. The company has been investing heavily in digital technologies, including cloud computing, artificial intelligence (AI), and automation. This focus aligns with current industry trends and positions the company to capture growth in the high-demand areas. <h4>TATA Motors Ltd.</h4>Tata Motors Limited is a leading manufacturer of automobiles and one of the largest OEM in India offering a wide range of passenger and commercial vehicles. Tata motors owns the flagship brand of Jaguar and Land Rover (JLR) which is a dominant automobile player in the global market. Its early entry in the electric vehicle segment has positioned it well ahead of many competitors and currently, it enjoys the largest market share in the EV segment in India. The focus on innovation and sustainability, along with a robust product lineup, positions Tata Motors well for future growth and market opportunities. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">Tax Implications of gifting shares</h2>The best part about gifting shares is that it is tax-exempt, since you're giving it to your relative. This means your sibling will not be liable to pay any taxes on this gift. However, to be on the safer side, make sure that the market value of the shares that you gift them does not exceed Rs 50,000, or else your siblings, i.e. the recipient will have to incur a tax liability. If your siblings decide to sell these gifted shares, they will have to pay LTCG (long-term capital gains) tax at the rate of 12.5%, or STCG (short-term capital gains) tax at the rate of 20%, depending on how long they hold these securities for. <h2>Gifting mutual fund units? </h2>Unfortunately, you cant transfer your mutual fund units to your siblings. The transfer of mutual fund units is only possible in case the unitholder passes away. But the one thing you can certainly do is start an SIP, or systematic investment plan (SIP) in their name. With as much as Rs 5,000 per month, invested over a period of 10 years, you 'll have invested Rs 6,00,000 for you siblings, which would have earned returns worth Rs 5,61,695, taking their total corpus to Rs 11,61,695. You can even start an SIP with just Rs 500/month in their name. You can nudge them into continuing this, so that you instill the value of financial discipline and long-term investing in them. Remember, at the end of the day, the true value of your gift lies not just in its monetary worth, but in the knowledge, responsibility, and financial acumen that you will pass on to your siblings. So, this <keyword id="22639140" type="General" weightage="100" keywordseo="Rakshabandhan" source="keywords">Rakshabandhan</keyword>, consider tying not just a rakhi, but also a knot of financial empowerment.

Move over regular gifts! Gift your sister stocks, MF units this Rakhi

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

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

<ul><li>In some cases, companies are unable to send dividends due to incorrect mailing addresses, lost cheques, or failure on the part of shareholders to encash the dividend cheques. </li><li>Shareholders may not get the credit of dividends to their bank accounts due to change in their bank account details or accounts becoming dormant. </li><li>Unclaimed shares can occur if a shareholder forgets about investments, passes away without leaving instructions to heirs, or fails to update their contact information. </li><li>Read more to find out how you can recover your investments from the IEPF. </li></ul> Investing money in various financial instruments such as stocks, bonds, mutual funds, and other securities can help generate substantial returns over time, along with the potential to receive passive income through dividends. Investors get much calculative while investing because at a point of time they will be expecting a handsome return from their investments. However, in some cases, the dividends accruing on these investments remain unpaid because of various reasons, such as when a company declares a dividend but is unable to send it to the shareholders due to incorrect mailing addresses, lost cheques, or failure on the part of shareholders to encash the dividend cheques. In some cases, shareholders may not get the credit of dividends to their bank accounts in the first place because of change in their bank account details or the accounts becoming dormant. Unclaimed shares can occur if a shareholder forgets about their investments, passes away without leaving clear instructions for their heirs, or fails to update their contact information with the company because of which they don’t get the dividends. In some cases, the shareholder may not even be aware that they own shares in a particular company due to various corporate actions. In both cases, the company is required to hold the unclaimed dividends and shares in trust for the shareholder. These unclaimed dividends are then transferred to the <keyword id="161459" type="General" weightage="50" keywordseo="investor-education-and-protection-fund" source="Orion">Investor Education and Protection Fund</keyword> (IEPF) account, which is managed by the <keyword id="6376435" type="General" weightage="50" keywordseo="ministry-of-corporate-affairs" source="Orion">Ministry of Corporate Affairs</keyword>. The <keyword id="2980446" type="General" weightage="50" keywordseo="iepf-authority" source="Orion">IEPF Authority</keyword> was established by the government under the Companies Act 2013 with the aim of promoting investor education and awareness, as well as protecting the interests of investors. Its significance can be highlighted by the fact that by the end of the Financial Year 2022, it is safeguarding unclaimed dividends of listed companies to the tune of a staggering ₹5,685 crore and a staggering 117 crore of unclaimed shares have been transferred to the IEPF Authority. As per Section 125 (2) (c) and Rule 7 (1) of the Investor Education and <keyword id="17056549" type="General" weightage="50" keywordseo="protection-fund-authority" source="Orion">Protection Fund Authority</keyword> of the Companies Act 2013, companies should transfer the amount of the unpaid dividends to the IEPF Authority’s account. According to the IEPF rules, shareholders can claim amounts by submitting the IEPF-5 Form for unclaimed dividends, matured debentures, matured deposits, and shares, refundable application fees, interest on fractional share sale proceeds, preference share redemption proceeds, etc., that are unclaimed for a minimum time period of seven years. Also, the IEPF maintains a database of unclaimed dividends and shares, and investors can claim their such dividends and shares by following the prescribed process. The objective of the IEPF is to ensure that the unclaimed dividend amount is returned to the rightful owners and that their interests are protected. During the recent Union Budget 2023 announcement, the Finance Minister emphasized the need for an efficient and streamlined process for investors to reclaim their unclaimed shares and unpaid dividends. As a result, an integrated IT portal will be established to make this process much easier and more convenient. This portal will enable shareholders to claim their unpaid or unclaimed shares/dividend amount through a simple and user-friendly procedure. Process of getting money back from IEPF If you have invested in a company’s shares and are facing difficulties in getting your investments back, you can follow the process below to recover your investments from the IEPF: Step 1: Check the IEPF website The first step is to go to the IEPF website, which is iepf.gov.in. On the homepage, click on the 'Claim Refund' tab to proceed. Then click on the “Upload eForms” link on the left side of the page which will take you to the MCA login page. Step 2: Login on the MCA Portal If you have a login ID, login using the same on the MCA Portal and click on “MCA Services” and then click on “IEPF-5”. Step 3: Fill out the online form Next, you need to fill out the refund claim form online on the website. Provide all the required details, such as your name, address, PAN number, and bank details. Also, provide details of your investment, such as the company's name and the dividends unclaimed. Step 4: Attach Documents Attach all the necessary documents, such as your PAN card, cancelled cheque, <keyword id="105386" type="General" weightage="50" keywordseo="demat-account" source="Orion">demat account</keyword> client master list and any other documents that prove your entitlement to the investment in the company. Step 5: Submit the Form After filling out the form and attaching the documents, submit it to the IEPF Authority. Once the form is submitted online, a SRN acknowledgement will be created, which can be used to track the status of your claim. Step 6: Send physical documents to Nodal Officer After submission, print the form and send the physical copy duly signed with all supporting documents to the Nodal Officer of the Company. Step 7: Company will file Verification Report On receipt of physical documents, the Nodal Officer of the company will verify the documents and send an online E-Verification Report with Approval to the IEPF Authority. Step 8: IEPF Authority will approve The IEPF authorities will verify your claim and may ask for additional documents or information if required. The verification process may take some time, and you may need to follow up with the authority for updates. After verification, the IEPF Authority will send an Approval email to the registered email id of the claimant. Step 9: Receive the Refund If your claim is verified and approved, the IEPF Authority will initiate the refund process, and then your amount will be credited to your bank account and the shares to the Demat Account. However, recovering unclaimed shares and unpaid dividends from the IEPF can be a challenging task for some shareholders, especially senior citizens, NRIs, legal heirs of deceased shareholders for which shareholders might need the assistance of a professional who has the requisite domain knowledge. Moreover, shareholders can avail various recovery advisors who offer services including issue of duplicate shares, issue of succession certificates, undertaking name deletion, and claim from IEPF. By providing such services, companies aim to simplify the process for shareholders and ensure that they can reclaim their rightful share of unclaimed dividends and shares without any hassle. (The writer is the co-founder &amp; CEO of GLC Wealth Advisor LLP)

Getting back unpaid dividends, unclaimed shares: Insights into the process to claim from IEPF Authority

<keyword id="35210" type="General" weightage="20" keywordseo="sebi" source="Orion">Sebi</keyword> on Wednesday ordered the attachment of bank and demat accounts of <keyword id="7428433" type="General" weightage="80" keywordseo="shivi-holdings" source="Orion">Shivi Holdings</keyword> to recover Rs 5.35 crore in a matter related to fund diversion case of <keyword id="223505" type="General" weightage="100" keywordseo="religare-finvest" source="Orion">Religare Finvest</keyword>. Religare Finvest Ltd (RFL) is a subsidiary of Religare Enterprises Ltd (REL). The recovery proceedings against Shivi Holdings have been initiated to recover Rs 5.35 crore, which includes interests, all costs, charges and expenses etc, the <keyword id="6355630" type="General" weightage="50" keywordseo="securities-and-exchange-board-of-india" source="Orion">Securities and Exchange Board of India</keyword> (Sebi) said in the attachment order. In its notice, Sebi asked all the banks, depositories and mutual funds not to allow any debit from the accounts of Shivi Holdings. However, credits have been allowed. Further, the market watchdog has directed all banks to attach all accounts, including lockers, of all the defaulter. Last month, Sebi had ordered banks and depositories to attach bank and demat accounts of erstwhile promoters of Religare Enterprises -- Shivinder Mohan Singh and four other entities to recover Rs 32.10 crore in the same matter. The entities are -- Malav Holdings, RHC Holding, ANR Securities and Religare Corporate Services (now known as Finserve Shared Services). They were also the former promoters of REL. The case relates to the diversion of funds to the tune of Rs 2,473.66 crore of Religare Finvest Ltd (RFL), a subsidiary of Religare Enterprises Ltd (REL), during FY 2014-15 till FY 2017-18, in the garb of loans through layers of entities for the ultimate benefits of entities controlled by the erstwhile promoters -- Singh brothers. Sebi noted that these diverted funds never came back to RFL. The diversion of funds was never disclosed to the shareholders of REL, which misled them to remain invested in the shares of REL or deal in the securities of REL. Thus, the apparent diversion of funds led to indirect manipulation of the price of shares of REL, Sebi said in its order. By indulging in such acts, they violated the provisions of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms. SEE ALSO: <a href="https://www.businessinsider.in/budget/news/from-cheaper-smartphones-to-100-5g-labs-here-are-the-top-tech-announcements-in-budget-2023-24/articleshow/97527763.cms">From cheaper smartphones to 100 5G labs, here are the top tech announcements in Budget 2023-24</a><a href="https://www.businessinsider.in/budget/news/government-to-set-up-three-centres-of-excellence-in-artificial-intelligence/articleshow/97520242.cms"></a> <a href="https://www.businessinsider.in/budget/news/government-to-set-up-three-centres-of-excellence-in-artificial-intelligence/articleshow/97520242.cms">Budget 2023 gives a boost to artificial intelligence – government to set up three centers of excellence</a> <a href="https://www.businessinsider.in/tech/news/after-iphones-apple-reportedly-starts-manufacturing-components-for-airpods-in-india/articleshow/97515033.cms">After iPhones, Apple reportedly starts manufacturing components for AirPods in India</a>

Religare Finvest case: Sebi orders attachment of bank, demat accounts of Shivi Holdings

<ul><li>Shares of CDSL have gained 3% on July 9 as the depository’s <keyword id="240048" type="PERSON" weightage="20" keywordseo="demat-accounts">demat accounts</keyword> have reached 40 million. </li><li>Retail investors’ growing interest in investing in financial markets have benefited the depository. </li><li>Central Depository Services’ subsidiary that manages KYC records of mutual fund inverters now has over 30 million KYC records of investors.</li></ul>Shares of Central Depository Services (CDSL) have seen a four fold increase (296%) since March 2020 because the number of small investors in the country has grown sharply in the last year. On July 9, the stock gained 3% as the depository’s demat accounts reached 40 million. The company earns a major part of the revenue from the annual fee by listed securities to the depositor followed by transactional charges by brokers for every transaction that is settled. Central Depository Services’s subsidiary that manages KYC (know your customer) records of mutual fund investors now has over 30 million investors in its database. <div type="image" title="CDSL demat accounts" height="900" width="1200" msid="84268414" hostid="261"></div>Source: CDSL The sell-off in equities made the share markets attractive right after the COVID-19 outbreak in the first three months of 2020. That lured a bunch of new investors to open new accounts. The subsequent bull run ⁠— the Sensex has gained as much as 40% since March 2020 then ⁠— led to many more joining in the fear of missing out. “This journey of financial inclusion has to enhance to engage with a higher number of persons to foray into the securities market to achieve the objective to make India a capital market hub that is highly focused on corporate governance, technology, investor protection, transparency and sustainability,” said Nehal Vora, managing director and chief executive of CDSL in a press release on July 8. Tech startups like Zerodha, Groww and Upstox, which provide an easy and convenient way of investment, have also gained immensely from this wave. Zerodha holds 18.85% market share with 3.4 million unique active investors followed by Upstox with 10.9% market share with 1.9 million unique active investors, reveals data by stock market analytics platform Trade Brains. <div type="image" title="Top 5 broking firm active clients" height="900" width="1200" msid="84268454" hostid="261"></div>Source: Trade Brains CDSL’s net profit grew to ₹201 crore in the financial year 2021 from ₹106 crore in March 2020, a rise of 50%. Total income rose to ₹400 crore from ₹284 crore during the period. <div type="image" title="CDSL net profit" height="900" width="1200" msid="84268481" hostid="261"></div> SEE ALSO - <a href="https://www.businessinsider.in/tech/news/google-calendars-new-rsvp-option-will-let-you-specify-how-you-want-to-attend-a-meeting/articleshow/84237490.cms">Google Calendar’s new RSVP option will let you specify how you want to attend a meeting</a> <a href="https://www.businessinsider.in/business/corporates/news/tcs-hires-over-20000-in-june-quarter-its-highest-ever-quarterly-addition/articleshow/84240423.cms">TCS has loaded up half a million peeps as it expects many to move on</a>

CDSL stock has skyrocketed 296% since March 2020 on surge in retail demat accounts

Sebi on Monday ordered the attachment of bank and demat accounts of <keyword id="31906" type="General" weightage="50" keywordseo="sahara-group" source="Orion">Sahara Group</keyword> firm, its chief <keyword id="31933" type="General" weightage="100" keywordseo="subrata-roy" source="Orion">Subrata Roy</keyword> and others to recover Rs 6.42 crore for violating regulatory norms in the issuance of optionally fully convertible debentures (OFCDs). The recovery proceedings against five entities -- <keyword id="486078" type="General" weightage="50" keywordseo="sahara-india-real-estate-corporation" source="Orion">Sahara India Real Estate Corporation</keyword> (now known as Sahara Commodity Services Corporation), Subrata Roy, <keyword id="1595961" type="General" weightage="80" keywordseo="ashok-roy-choudhary" source="Orion">Ashok Roy Choudhary</keyword>, Ravi Shanker <keyword id="20551" type="General" weightage="80" keywordseo="dubey" source="Orion">Dubey</keyword> and Vandana <keyword id="15888278" type="General" weightage="80" keywordseo="bharrgava" source="Orion">Bharrgava</keyword> -- for Rs 6.42 crore, includes interest, all costs, charges and expenses, the Securities and Exchange Board of India (Sebi) said in the attachment order. In its notice, Sebi asked all banks, depositories and mutual funds not to allow any debit from accounts of Sahara India Real Estate Corp, Subrata Roy, Ashok Roy Choudhary, Dubey and Bharrgava. However, credits have been permitted. Further, the market watchdog has directed all banks to attach all accounts, including lockers, of the defaulters. The regulator, in its order in June, levied a fine totalling Rs 6 crore on Sahara India Real Estate Corp, Subrata Roy, Ashok Roy Choudhary, Dubey and Bharrgava. The case relates to the issuance of OFCDs by Sahara India Real Estate Corporation and Sahara Housing Investment Corporation during 2008-09. They raised money through the public issue of securities by issuing OFCDs without following the various procedures intended to protect the interest of the investors, in respect of public issues, prescribed under the norms, as per Sebi order. According to Sebi, the subscription towards the OFCDs was solicited by the two companies from the general public throughout the country, without adequately informing them about the risks involved in the instruments. The issuance was allegedly done in contravention of the provisions of the Sebi's ICDR (Issue of Capital and Disclosure Requirements) Regulations and PFUTP (Prohibition of Fraudulent and Unfair Trade Practices). SEE ALSO: <a href="https://www.businessinsider.in/stock-market/news/capital-intensive-cyclical-and-value-stocks-to-continue-their-outperformance/articleshow/95659482.cms">Capital-intensive, cyclical and value stocks to continue their outperformance</a> <a href="https://www.businessinsider.in/thelife/personalities/news/top-five-billionaires-in-2022-elon-musk-gautam-adani-and-bill-gates/articleshow/96509847.cms">After a round of musical chairs, Musk, Gates and Adani are among 2022’s top 5 billionaires</a> <a href="https://www.businessinsider.in/stock-market/news/sah-polymers-ipo-to-open-on-dec-30-price-band-set-at-61-65-a-share/articleshow/96514593.cms">Sah Polymers IPO to open on Dec 30, price band set at ₹61-65 a share</a>

You Searched For "demat accounts" and got 9 results

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