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On September 18, 2024, the US <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> delivered a jumbo-sized surprise to the global economy. Not only did they trim their interest rates by a massive 50 basis points to bring their yields down to 5%, but also hinted at further rate cuts in the upcoming months. This move from the fed and several other central banks globally had pushed expectations high for a similar rate slash closer home, from the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> this month. But governor <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword>, in a “picture abhi baaki hai” moment, decided to hold the repo rates here steady, leaving them unchanged at 6.5% for the record 10th straight time. Although, he did tinker with the policy stand, changing it from “rate cuts are absolutely off the table” to a more accommodating “we’re okay with bringing down the rates, if needed”. This, rather neutral, stance from India’s financial custodian sparked hopes for a rate cut in December this year. However, the stubborn inflation levels in September have again dented such hopes. As consumers, you may be wondering what all the hullabaloo this is about, since it hardly makes a difference to your regular financial routine. Well, the majority of both economic growth and inflation is closely connected to this policy stance from the central bank and it does have a rather indirect effect on both our earnings and spending. But more directly, it would have clear implications for those looking to own a house. Even the slightest modification of interest rates, or the lack of it, influences the <keyword id="19916018" type="General" weightage="20" keywordseo="emi" source="keywords">EMI</keyword> you pay significantly. So, all aspiring homebuyers, is this the right time to take out a loan and buy a house? Can you expect a rate cut anytime soon, and what will that mean for your home-owning dreams? We lay it out. <h2>What’s the connection?</h2>You see, buying a house is no small feat, at least financially. The task becomes even more herculean if you are scouting for your own roof in cities like Delhi, Noida, Bangalore or Mumbai where, as Circuit from Munnabhai says, “room shuru hote hi khatam ho jata hai”. Naturally, you’ll have to take a <keyword id="6354730" type="General" weightage="100" keywordseo="home-loan" source="Orion">home loan</keyword> from the bank. Don’t be mistaken, the bank won't give you a loan that covers 100% of the value of the property you want to own. Rather, your loan amount will be equivalent to a certain percentage of the property’s total value. RBI’s guidelines on this are pretty clear: <ul><li>If your loan amount is up to Rs 30 lakh, you can get a loan worth 90% of the property’s value.</li></ul><ul><li>If the loan amount is between Rs 30 lakh and Rs 75 lakh, you are eligible for a loan worth 80% of the property’s value.</li><li>If you are taking a loan of more than Rs 75 lakh, your loan amount will be equivalent to 70% of the property’s value.</li></ul>Now assuming that you have the money, it's all about paying back the principal amount, but not without a little (read hefty) interest added on top. See, when you’re taking a home loan, you are actually signing up for a long-term, even multi-decadal financial commitment, which will unfailingly present itself to your bank accounts and finances every single month, in the form of EMIs, or equated monthly instalments). When you take a home loan, you can choose to pay the interest in two ways (talk about choices!). One is that you decide to keep a fixed rate of interest throughout the tenure of your home loan. So, if you opt for a 25-year fixed-rate home loan at the rate of 8.8% p.a., you’ll have to pay interest at this rate for the next 25 years, till your entire loan is paid off. Yes, you can go backsies and switch to a floating-rate home loan by paying a fee. Floating, as the name suggests, means that your interest rate is not set in stone. But starting October 2019, when it comes to a floating interest rate home loan, your payable interest and EMIs are directly impacted by any changes in <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword>, which were left unchanged by RBI this time around. Why are these two so chummy, you might ask. Well, home loan interest rates are a sum of two things: <ol><li>Repo Rate (the rate at which RBI lends money to banks)</li><li>Operational cost + margins</li></ol>Any plus or minus in this equation would send your home loan interests tanking, or skyrocketing. Vivek Iyer, Partner, Grant Thornton Bharat explains that any change in the repo rates impacts the cost of funds and thereby the home loan interest rates. “When the interest rates are expected to reduce, the corresponding impact will be in the form of a reduced EMI. Home loan borrowers should always try to borrow at a floating rate when interest rates are expected to reduce and at a fixed rate when the interest rates are expected to increase. This minimizes the outflow in the form of EMIs that the home loan borrowers will experience”, he continues. So, no change in repo rates means no change in your home loan interest payout and no financial relief whatsoever. A rate cut, which most experts are anticipating will start this December, would mean your EMI payments come down, and your wallet might save a little more. But there’s also a chance of an UNO reverse happening. In case RBI is in the mood to hike the interest, your home loan EMIs might end up taking more from your pockets. Consider this. You took a floating interest rate home loan worth Rs 50 lakh in January 2022 at 8% p.a., for a period of 20 years. This brings your total monthly EMI to Rs Rs 41,822. But, as luck would (or won't) have it, RBI raised the interest rate by 250 basis points between May 2022 and February 2023, bringing it to its current status of 6.5%. Some back-of-the-envelope calculations suggest that now, your home loan interest payout will also rise by a hefty 2.5%, taking the total to 10.5%. In other words, you’ll have to dish out Rs 49,919 per month as EMI. Now, won't you heave a sigh of relief if the RBI were to bring down the interest rate by say, even 50 basis points, or 0.5%? Agreed, your EMI will come down just marginally, to Rs 48,251. But look at this over a 20-year period, and you’ll see how big the difference is. <h2>Are rates set to change anytime soon?</h2>Generally, RBI hikes the repo rates if it sees inflation spiralling out of control. Then, in a bid to reduce consumer spending, it raises interest rates to make borrowing expensive. But when the apex bank sees sluggish consumption in the economy, inflation in control and wants to boost spending, it slashes down on interest rates, making it more lucrative for people to borrow. As of now, most experts are not anticipating any changes in the interest rates anytime soon. This means home loans are not getting cheaper anytime soon. The CPI data, which came out yesterday, saw inflation rise to 5.49% in September, compared to 3.65% last month. Food and beverage prices jumped to a four-month high of 8.36% in September, as opposed to a 5.3% rise in August. So a rate cut seems a no-go at the moment! Apurva Sheth, Head of Market Perspectives and Research, SAMCO Securities explains that the RBI had probably expected a hardening of inflation and that's why it chose to hold on to the rates in the monetary policy announcement last week. “Now, it seems that RBI will take a cautious stance going ahead and will not be in a hurry into rate cuts like its global peers”, he added. In all this, one thing is clear, in the grand movie of the Indian economy, the RBI has chosen stability over drama. And just like in every good Bollywood film, we're left wondering what twist the sequel will bring. Until then, it might be “The End" for rate cuts, but the show must go on for the Indian economy!

Boom or bust — how RBI’s decision to leave rates unchanged affects homebuyers

“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

<ul><li>Proprietary analysis done by <keyword id="6365707" type="General" weightage="20" keywordseo="ubs" source="Orion">UBS</keyword> shows that borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023.</li><li>New disbursement of personal loans to borrowers with weaker credit profiles accounts for 22% of disbursements, which exposes this segment to a potential downcycle.</li><li>State-owned <keyword id="6368751" type="General" weightage="60" keywordseo="banks" source="Orion">banks</keyword> and non banking financial companies have a much higher share of weak borrowers compared to private banks. </li></ul> There’s a reason why lenders are luring consumers with multiple personal loans. In a bid to shore up loan books, lenders are indiscriminately lending to even those who cannot repay these loans. Raging <keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">inflation</keyword> is not just burning a hole in the pockets of consumers. It is also impairing the ability of retail borrowers to repay their personal loans. In the aftermath of the pandemic, banks are in a better place when it comes to the headline figure on bad loans, but the defaults are rising sharply when it comes to personal loans that now account for more than 10% of outstanding loans for most banks. This is not good news for stock pickers or investors as profitability of lenders – public and some private – will come under pressure because many of these retail borrowers will default. This would lead to higher credit costs and higher provisions. Bank stocks have been rallying this year as at an aggregate level, the gross non performing assets of banks have hit decadal lows. Bank Nifty is now trading at 1.9x its price to book value, which is lower than its 10-year average of 2.2x. Pressure on net interest margins and higher credit costs to impact earnings of banks and shadow banks over FY24 and FY25. Shares of State Bank of India are down 4.4% in the last one month, while that of other private banks is down between 2-4%. While the Reserve Bank of India has been flagging off build up of stress in the retail loans segment, a deep dive into numbers is rather scary. According to analysis done by UBS, a global investment bank, shows that borrowers with more than five personal loans rose from 1% in 2018 to 7.7% in March 2023. Shockingly, new disbursement of personal loans to borrowers with weaker credit profiles accounts for 22% of disbursements, which exposes this segment to a potential downcycle. This is perhaps the reason why RBI is worried over rising stress in the retail loan portfolio of banks. Stress is clearly building up in the retail loan portfolio of leaders, which can be unsecured or secured. Secured loans are typically backed by some form of collateral like gold or property, while unsecured loans are backed by nothing. In June, RBI’s financial stability report said that one in every ten such retail borrowers is missing on making payments for such unsecured loans. The reason it is worrying is that these retail loans have doubled in value between 2021 and 2023 compared to total advances. In their bid to grow loan books, lenders are lending to consumers who are exhibiting their inability to repay such loans. Increasingly a lot of banks are now looking to issue unsecured loans to borrowers as they come with a higher interest rate. With corporates going easy on their borrowings, the retail credit boom has been the growth driver for most banks and non banks in India. According to analysts, state owned banks and non banking financial companies have a much higher share of weak borrowers compared to private banks. However, the stress in retail loans has been building since 2021. HDFC in January 2022 sold stressed retail loans worth Rs 2188 crore to asset reconstruction companies. Proprietary research done by UBS shows that unsecured loans as a percentage of total loans rose to 11.1% for State Bank of India, 12.8% for ICICI Bank and 10.7% for Axis Bank, but fell to 11.9% HDFC Bank (which merged with HDFC Limited) in June 2023. Says UBS in its report, “We believe the probability of regulators increasing the risk weight for personal loans is rising, and a 25% hike could lead to a 7- 40 bps drop in CET-1 ratios of banks we cover (SBI has a low buffer, in our view).” The financial stability report by RBI says "Although the gross non-performing ratio of retail loans at the system level was low at 1.4% as of March 2023, the share of 'special mention accounts' was relatively high at 7.4% for scheduled commercial banks (SCBs) and it accounted for a tenth of their retail assets portfolio," RBI said in the report.

Borrowers with multiple personal loans a big risk to profitability of banks and NBFCs

<ul><li><keyword id="22195" type="General" weightage="20" keywordseo="inflation" source="Orion">Inflation</keyword> is hitting companies hard, who have been forced to borrow more. </li><li>Worse yet, their borrowings are towards funding working capital requirements, not capex.</li><li>Highly leveraged companies will face tough headwinds in the continuing high-interest rate regime.</li></ul>Inflation has shaken up economies all over the world, regardless of their development status. The resultant <keyword id="37018" type="General" weightage="20" keywordseo="interest-rate" source="Orion">interest rate</keyword> hikes are burdening the balance sheets of a majority of Indian companies and affecting their capital expenditure plans. The interest rates were increased for the first time since 2018, ending an era of low interest rates, and upending the business models of many companies. Inflation has been above Reserve Bank of India’s (<keyword id="30067" type="General" weightage="80" keywordseo="rbi" source="Orion">RBI</keyword>) tolerance level for five months straight – the CPI inflation in May was 7.04%, 75% above RBI’s medium-term target of 4%. This forced the central bank to raise interest rates twice in a month, from 4% to 4.9%. As a result, banks and financial institutions immediately announced hikes in interest rates, increasing the borrowing costs for everyone. Yet, credit has grown multifold across segments. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Segment </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Credit growth </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Retail </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">16.4% </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Industry </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">8.7% </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Services </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">12.9% </td></tr></tbody></table>Source: CareEdge, May 2022 <cmsannotation type="cmsannotation" annotationid="Working Capital takes precedence" comment="subhead" text="Working Capital takes precedence">Working Capital takes precedence</cmsannotation> Worse yet, companies are borrowing to meet their working capital requirements, not capex. Essentially, this means that companies are finding it difficult to even get by, forget investing in their future and growth. Working capital loans are usually short-term and attract a higher rate of interest than long-term borrowings. In a high-interest-rate regime – such as the one we are in now – this can prove to be a disaster if the cash crunch continues. According to a report by CareEdge, bank credit grew by ₹14.1 lakh crore over the last 12 months. “The growth was driven by a low-base effect, small-ticket loans, an increase in working capital loans due to higher inflation and shift to bank borrowings on account of rising bond yields,” the report stated. The outstanding liquidity surplus dropped from ₹4.3 lakh crore to ₹3.3 lakh crore – that is a decline of ₹1 lakh crore in just two weeks, from June 3 to June 17. This is a direct result of RBI’s hike in interest rates to tame inflation, but for companies surviving on working capital loans, this only makes matters worse. <cmsannotation type="cmsannotation" annotationid="High-debt companies to face growing headwinds" comment="subhead" text="High-debt companies to face growing headwinds">High-debt companies to face growing headwinds</cmsannotation> While there are plenty of companies in India with no or low debt – some examples include giants like Maruti Suzuki and TVS Motor, apart from Bayer Cropscience and Bharat Electronics, among others – most of the prominent business houses of India have taken on a considerable amount of debt. <table style="border-width: initial; border-style: none;"></colgroup><tbody><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Company/group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 1pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Total debt </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Tata Group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 1pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹2,89,080 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Reliance Industries </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹2,66,305 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Aditya Birla Group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹2,29,857 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Adani Group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹2,18,271 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">L&amp;T </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹1,62,792 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Mahindra Group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹74,667 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Bajaj Group </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;background-color:#d9d9d9;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹61,253 crore </td></tr><tr><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">Total </td><td style="border-left:solid #000000 0.5pt;border-right:solid #000000 0.5pt;border-bottom:solid #000000 0.5pt;border-top:solid #000000 0.5pt;vertical-align:bottom;padding:0pt 5.75pt 0pt 5.75pt;overflow:hidden;overflow-wrap:break-word;">₹13,02,225 crore </td></tr></tbody></table> Source: Company reports, as at March 2022 In a high-interest-rate regime, finance costs become a bigger part of expenses, leaving lesser cash for companies to fund their operations. It also discourages companies from borrowing more and the propensity of using credit to fund capex reduces, as companies look at shorter-term needs to try and minimize costs. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tatas-to-ambanis-adanis-and-birlas-fortunes-of-these-high-debt-companies-could-change-after-rate-hikes/articleshow/92126846.cms">Tatas to Ambanis, Adanis and Birlas – fortunes of these high debt companies could change after rate hikes</a> <a href="https://www.businessinsider.in/finance/news/rbis-efforts-to-save-rupee-has-made-a-big-dent-in-its-forex-reserves/articleshow/92654557.cms">RBI’s ‘Save the Rupee’ bill has hit over $40 billion already and it could add another $40 billion this year</a> <a href="https://www.businessinsider.in/business/corporates/news/ambani-and-adani-valuations-surge-while-tatas-birlas-see-major-declines-in-the-first-half-of-2022/articleshow/92593235.cms">Ambani and Adani valuations surge while Tatas, Birlas see major declines in the first half of 2022</a>

Inflation is making Indian companies borrow more – that's bad news when interest rates are high

Finance Minister Nirmala Sitharaman will be presenting her fifth Budget that may do a tightrope walk between staying fiscally prudent and meeting general public expectations of lower taxes and a wider social security net, while at the same time firing the engines of the economy. Sitharaman had in her first Budget in 2019 replaced leather briefcase -- which had been in used for decades for carrying Budget documents -- with a traditional 'bahi-khata' wrapped in red cloth. Budget 2023-24 would be in paperless form, as done in the last two years, and would be available on the 'Union Budget Mobile App' for hassle-free access by Members of Parliament (MPs) and the general public. Here are the key numbers to watch for in Budget 2023-24, which is widely expected to boost spending towards policies that create jobs, leave more money in hands of the common man and boost manufacturing, while increasing tax revenues. * <keyword id="6365485" type="General" weightage="20" keywordseo="Fiscal-Deficit" source="Orion">Fiscal Deficit</keyword>: The budgeted fiscal deficit, which is the difference between the government expenditure and income, for the current fiscal ending March 2023 is 6.4 per cent, against 6.71 per cent in the last fiscal. The number for 2023-24 would be in focus as it is widely expected that the government would open its purse strings in an election year. * Disinvestment/Privatisation: In current fiscal year the budgeted disinvestment target is likely to be missed, like the past four years. It is expected the government would set a realistic target for next fiscal. * <keyword id="112324" type="General" weightage="20" keywordseo="Capital-Expenditure" source="Orion">Capital Expenditure</keyword>: The government's planned capital expenditure for this fiscal year is budgeted at Rs 7.5 lakh crore, higher than Rs 5.5 lakh crore in the last fiscal. The government has been pushing infrastructure creation and also incentivising states to step up capex. * Tax Revenue: The Budget had pegged direct and indirect tax mop-up at Rs 14.20 lakh crore and Rs 13.30 lakh crore for current fiscal, taking the total figure to Rs 27.50 lakh crore. The government's tax revenues are expected to overshoot the budget estimates by about Rs 4 lakh crore on buoyant income tax and customs duty. * <keyword id="6370254" type="General" weightage="20" keywordseo="Borrowing" source="Orion">Borrowing</keyword>: The government's gross borrowing budget was at Rs 14.31 lakh crore in current financial year ending March 31. The government borrows from the market to fund its fiscal deficit and with tax revenues seeing an uptick, the government has cut its gross borrowings by Rs 10,000 crore to Rs 14.21 lakh crore. The borrowing number would be watched by the market, especially on the back of expected higher capital expenditures to boost growth. * <keyword id="3236955" type="General" weightage="20" keywordseo="Nominal-GDP" source="Orion">Nominal GDP</keyword>: India's nominal GDP growth (real GDP plus inflation) in the current fiscal is estimated to be 15.4 per cent. The numbers for next fiscal would be lower as the inflation has come down. The Budget is expected to give an outline on the nominal GDP growth numbers. Real GDP growth in current fiscal is projected at 7 per cent and come down to 6-6.5 per cent in the next. * Spotlight would also be on spending on key schemes, like NREGA, as well as key sectors like health and education.

Budget for world's fastest growing economy: Key numbers to be watched

Chennai, Tamil Nadu's ruling <keyword id="19897149" type="General" weightage="20" keywordseo="dmk" source="keywords">DMK</keyword>, a key constituent of the INDIA bloc, in its manifesto released on Wednesday promised to repeal the Citizenship Amendment Act, 2019 if the opposition alliance wins the <keyword id="19895394" type="General" weightage="20" keywordseo="lok-sabha" source="keywords">Lok Sabha</keyword> polls. Restoration of statehood to Jammu and Kashmir and holding polls there, scrapping the New Education Policy 2020, slashing fuel prices, annulling Article 361 of the Constitution that provides protection to governors from legal action and appointment of Governors following consultation with Chief Ministers, were among the key promises made by the DMK. The recommendations of the M S Swaminathan committee will be adopted to ensure that MSP for agricultural products "is set at total production cost plus 50 per cent," the DMK said. Also, it announced that if voted to power, the INDIA bloc will withdraw the Agnipath scheme and reintroduce "permanent recruitment service" in the Indian Armed forces. "From now on, population census, including caste-wise census and census concerning people below the poverty line, will be conducted by the Union government once every five years simultaneously." The DMK will firmly insist on the removal of Article 356, which allows the dismissal of duly elected state governments and imposition of President's rule. The Congress party's ally in Tamil Nadu said that "new constraints" on States' borrowing capacity, imposed by the union government beyond the limits in each state's FRBM-equivalent Act will be eliminated. "A recommendation to share cess revenues with states will be made. It will be proposed that the Finance Commission increase the horizontal devolution of tax revenue (to all States together) from 42 per cent to 50 per cent." The Union government's financial contributions to states will be based on the income tax and GST collected in those states. Thus, financial contributions will be assured based on the taxes collected within each state. The finance provided to states will be permanently determined based on the 1971 population. A 33 per cent reservation for women in Parliament and legislative assemblies will be implemented immediately. "DMK will insist that the Union government enact a law providing menstrual leave to women, emphasizing the journey towards gender equality." Petrol and diesel prices "will be set at Rs 75, Rs 65 (per litre)" and cooking gas cylinders shall be made available at Rs 500 (per cylinder). "The introduction of the Uniform Civil Code will be strictly prevented" to preserve India's secular nature as stated in the Constitution's preamble. "The 2019 CAA law will be repealed, and all minorities will be treated equally without any discrimination. The recommendations of the Sachar Committee for the improvement of the lives of Muslims and other minority communities will be implemented." Facilitation will be provided for <keyword id="21027983" type="General" weightage="20" keywordseo="sri-lankan-tamil" source="keywords">Sri Lankan Tamil</keyword> refugees to get Indian citizenship. Assistance will be provided to those who wish to return to Sri Lanka. Also, the manifesto said efforts will be made to implement reservation for minorities at the all-India level, similar to Tamil Nadu. "The financial assistance previously provided to minority educational institutions has now been stopped. Action will be taken to resume this assistance." For "political" reasons, funding from foreign countries to non-governmental organisations (NGOs) has currently been stopped. "The Foreign Exchange Regulation Act will be properly amended, and measures will be taken to ensure these financial aids continue to reach NGOs without any problems." The proposal of 'One Nation, One Election' will be abandoned, and for the allocation of Lok Sabha seats to states, the current practice, based on the 1971 census will continue. All "people-unfriendly" laws introduced by the BJP government over the last 10 years will be reviewed immediately by the INDIA alliance government. The "labour-hostile laws" introduced by the BJP government will be "reformed." Through the Employees' Provident Fund (EPF), the Union government will ensure a minimum pension of Rs 5,000 per month. The number of working days under the Mahatma Gandhi National Rural Employment Guarantee Act will be increased from 100 to 150 days. "A wage of Rs 400 will be provided across states/ union territories nationwide." Disbanding the current NITI Aayog, set up by the BJP regime and establishing again the Planning Commission to draft plans based on the requests of state governments is another assurance the DMK has made. "Measures will be taken to reclaim Kachchatheevu to ensure India's security and to protect the welfare of the fishermen." A mandatory "cooling-off period" of 2 years will be introduced for retired judges and secretaries before they could join private companies or political parties, the manifesto said. Waiving loans and interests for farmers in nationalised and scheduled banks, waiver of educational loans for students, monthly entitlement of Rs 1,000 for all women in every state and formation of <keyword id="21027984" type="General" weightage="20" keywordseo="state-development-council" source="keywords">State Development Council</keyword> by including Chief Ministers were among the promises made by the DMK. Exemption for Tamil Nadu from the NEET exam and complete removal of toll booths on national highways, forms part of poll promises of the Dravidian party. Further, the DMK said amendments will be made to relevant laws to ensure that state governments, elected by the people, appoint Vice-Chancellors to state-run universities, rather than Governors. Stopping government's divestment from public sector enterprises, implementing the Sethusamudram project, law to ban online gambling, setting up a <keyword id="19895345" type="General" weightage="20" keywordseo="supreme-court" source="keywords">Supreme Court</keyword> branch in Chennai, providing statehood for <keyword id="19901639" type="General" weightage="20" keywordseo="puducherry" source="keywords">Puducherry</keyword>, equal funding for all state languages including Tamil, were among the host of other promises made by the DMK. Establishment of Tamil departments in varsities and stopping construction of <keyword id="19950851" type="General" weightage="20" keywordseo="mekedatu" source="keywords">Mekedatu</keyword> dam were also promised by the DMK. "The <keyword id="19996334" type="General" weightage="20" keywordseo="vishwakarma-scheme" source="keywords">Vishwakarma Scheme</keyword>, introduced by the BJP government to encourage caste-based occupations, will be restructured on the basis of social justice."

DMK vows to repeal CAA if INDIA bloc is voted to power

<ul><li>A <keyword id="17512600" type="General" weightage="20" keywordseo="debt-resolution-company" source="Orion">debt resolution company</keyword> offers comprehensive solutions to help individuals overcome their debt burdens. </li><li>The primary goal of a <keyword id="977398" type="General" weightage="20" keywordseo="debt-counsellor" source="Orion">debt counsellor</keyword> is to equip individuals with the knowledge, tools and support necessary to navigate the challenges of debt resolution. </li><li>It is essential to conduct thorough research and compare the fees of different debt resolution companies before making a decision.</li></ul>Dharshan Kumar S, a 30-year old banker, had a <keyword id="180660" type="General" weightage="20" keywordseo="personal-loan" source="Orion">personal loan</keyword> on his <keyword id="6368202" type="General" weightage="20" keywordseo="credit-card" source="Orion">credit card</keyword> and was paying his EMIs on time. But during the lockdown, the family income went down and he could not pay the EMIs, or equated monthly instalments. With his <keyword id="6360217" type="General" weightage="20" keywordseo="loan" source="Orion">loan</keyword> and credit card debt, his outstanding dues rode up to ₹4 lakh and he was struggling to repay. There were creditors coming home and harassing him. That’s when he came across the contact of a debt resolution company on Facebook and approached them for help. <cmsannotation type="cmsannotation" annotationid="Options to deal with outstanding debt" comment="subhead" text="Options to deal with outstanding debt">Options to deal with outstanding debt</cmsannotation> In today's world, loans have become an essential part of our lives, and many individuals find themselves managing multiple debts simultaneously. If you are facing difficulties due to excessive debt, the initial crucial step is to assess and understand the nature of your debts. “It is crucial to identify high-cost debts such as credit cards, and app loans with interest rates as high as 40-48%, personal loans, and accordingly decide where to concentrate your repayment efforts first. The longer one keeps loans open, the more interest one has to pay overtime, and it can eventually spiral into a toxic trap that will lead to delinquency if not repaid on time,” says Ritesh Srivastava, founder and chief executive officer, FREED, a debt relief platform. “There are several options available for individuals who are struggling with outstanding debt,” says Manavjeet Singh, managing director &amp; CEO, CLXNS, a debt collection platform for banks. Debt consolidation, debt counselling, and debt resolution are some of the options. <cmsannotation type="cmsannotation" annotationid="Should you approach a debt resolution platform?" comment="subhead" text="Should you approach a debt resolution platform?">Should you approach a debt resolution platform?</cmsannotation> “When debt has gone out of hand, one should take help from professionals for debt management. While debt restructuring and subsequent resolution will need traditional finance experts, a money coach would be great to help you with behavioural changes,” says Renu Maheswari, co-founder and principal advisor, Finscholarz Wealth Managers. “Nothing comes for free, so weigh the pros and cons and use debt resolution as the last resort,” she adds. <cmsannotation type="cmsannotation" annotationid="How does debt resolution work?" comment="subhead" text="How does debt resolution work?">How does debt resolution work?</cmsannotation> “A debt resolution company offers comprehensive solutions to help individuals overcome their debt burdens. These companies provide services such as debt settlement, consolidation, and elimination. Debt settlement involves implementing financial discipline by setting aside funds for loan repayment in a trust account and thereafter negotiating with the creditors,” says Srivastava. On the other hand, debt consolidation focuses on combining multiple high-cost loans into a single loan. By doing so, individuals can benefit from a reduced interest rate and an extended repayment period. It is helpful for borrowers who are currently repaying their debt but are over-leveraged. <cmsannotation type="cmsannotation" annotationid="The importance of debt counselling" comment="subhead" text="The importance of debt counselling">The importance of debt counselling</cmsannotation> Debt counselling services employ a systematic approach to help individuals burdened by debt achieve a debt-free life. These services involve offering educational resources, guidance on budgeting, and utilising tools and strategies to reduce and eliminate debt. The main objective is to foster financial discipline in borrowers and provide ongoing support throughout the debt relief process, all while avoiding excessive upfront costs. “The primary goal of a debt counsellor is to equip individuals with the knowledge, tools and support necessary to navigate the challenges of debt resolution. By providing financial education, budgeting assistance, and advocating for their clients' interests, these services empower individuals to take control of their financial situation and work towards achieving freedom from debt,” says Srivastava. The fees associated with debt counselling resolution services in India can vary based on the specific services offered and the debt resolution company selected. Many companies offer a free initial consultation, after which fees may be charged for ongoing services. This can be a percentage of the total debt, in case the debt issue is resolved, or subscription fees for other services such as counselling, support for creditor harassment, budgeting. “It is important to carefully research and compare the fees of different debt resolution companies before choosing one,” says Singh. Kumar was counselled on his debt and how he could handle his creditors. Now he has to pay a consolidated amount every month to his debtors and is looking to be debt free soon.

Neck deep in debt? Here’s how some companies are helping habitual borrowers consolidate their loans

Fund raising through overseas bonds is likely to fall in the current financial year due to elevated borrowing cost and weak domestic currency due to international cues, experts believe. According to the data compiled by Prime databases, companies and banks raised Rs 45,237.15 crore so far this year, as compared to Rs 77,845 crore amount raised in the similar period last year. "A higher US interest rates especially in the shorter end of the curve coincided with weakening <keyword id="6355302" type="General" weightage="80" keywordseo="rupee" source="Orion">Rupee</keyword> made the borrowing cost higher for Indian Corporates to tap the foreign bond market," said <keyword id="14789739" type="General" weightage="80" keywordseo="venkatakrishnan-srinivasan" source="Orion">Venkatakrishnan Srinivasan</keyword>, founder and managing partner at <keyword id="14812238" type="General" weightage="50" keywordseo="rockfort-fincorp-llp" source="Orion">Rockfort Fincorp LLP</keyword>, a Mumbai-based debt advisory firm. Due to this, most companies are opting for domestic market for fund raising. For instance, recently NTPC has raised 10 year onshore rupee bond at an aggressive rate of 7.44 per cent annualised and <keyword id="6357132" type="General" weightage="80" keywordseo="canara-bank" source="Orion">Canara Bank</keyword> Tier 2 bond 7.48 per cent which are comparable to 10 years government bond rate. Foreign fund raising has now not remained cheap after the <keyword id="117388" type="General" weightage="80" keywordseo="us-fed" source="Orion">US Fed</keyword> and other central banks across the globe started rising their policy rates to contain inflation which is hovering to a decade high in some countries. For instance, the US Fed hiked interest rates by 75 basis points for the second straight month in July. With this, they have cumulatively hiked 150 basis points in last two months due to rising inflation. Due to this, the yields on <keyword id="105472" type="General" weightage="50" keywordseo="us-treasury" source="Orion">US Treasury</keyword> notes touched 3% on Monday, which was in the last month was 2 per cent in the start of this financial year. There is also a currency risk to the issuers as rupee has depreciated to the record low before appreciating due to various international cues. Meanwhile, ECB borrowings figures too suffered a major setback as per April month data. However, a major chunk of ECBs is coming up for renewal for corporates which may push corporates to refinance their existing borrowings both in offshore especially for those issuers who have natural hedge and some in onshore markets. According to the ICRA, overseas issuances are doubtful in FY2023 due to elevated borrowing costs following a rapid increase in foreign currency benchmark rates, as well as tighter liquidity conditions globally. While private bank issued AT-I in overseas market during FY2022, totalling Rs 128 billion, domestic AT-I issuances picked up steam once the Centre's permission came for most banks in H2 FY2022, as public banks require prior government approval before issuing AT-I bonds. The issuances totalled Rs 300 billion, with demand coming from corporate treasuries, family offices, and high-net-worth individuals, as well as some private banks. Going ahead market participants expect companies and banks to raise funds through domestic corporate bond market because both onshore and offshore both borrowing cost has risen. "we expect more and more corporate bond issuers to tap the domestic rupee bond market as both onshore and offshore borrowing costs are elevated," <keyword id="45963" type="General" weightage="80" keywordseo="srinivasan" source="Orion">Srinivasan</keyword> added. SEE ALSO : <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/sustainability/news/tamil-nadu-government-becomes-the-first-state-in-the-country-to-prepare-an-official-glossary-to-address-lgbtqia-community/articleshow/93776056.cms">Tamil Nadu becomes the first state in the country to prepare an official glossary to address LGBTQIA+ community</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/india-inc-s-credit-profiles-improve-as-earnings-growth-outpaces-debt-sp/articleshow/93779118.cms">India Inc.’s credit profiles improve as earnings growth outpaces debt: S&amp;P</a>

Overseas bond issuances may fall this year on elevated borrowing cost say experts

<ul><li>India climbed 18 spots up to 14th rank in Knight Frank’s global house price index in Q3.</li><li>Globally, <keyword id="112918" type="General" weightage="20" keywordseo="home-prices" source="Orion">home prices</keyword> across the 56 markets grew at an average of 3.5% YoY.</li><li>Home prices in micro markets of tech hubs in India grew in double digits over three years. </li></ul>India climbed 18 spots up to 14th rank in Knight Frank’s global house price index in the third quarter of 2023. Home prices in the country increased 5.9% year-on-year, resulting in a significant upward momentum. Globally, home prices across the 56 markets covered by the Knight Frank’s Global House Price Index grew at an average of 3.5% YoY in September 2023. In the previous quarter, global home prices moved up by 2.2%. As per Knight Frank, the growth in India’s residential market, despite the challenges of higher home loan rates as well as threats of inflation, is due to its stable economic growth. During the pandemic, central and state governments provided sops that triggered the market. "In light of an increased interest cost environment stemming from heightened inflation levels, the robust domestic economic fundamentals, and the escalating aspirational attributes of residential real estate, are driving heightened demand among homebuyers in prominent residential markets within the country,” said <keyword id="1417134" type="General" weightage="50" keywordseo="shishir-baijal" source="Orion">Shishir Baijal</keyword>, CMD of Knight Frank India. A few micro markets in India, especially tech hubs in Hyderabad, Bangalore and Pune, saw sharp prices increase. The price rises in these markets are anywhere between 28-33% in three years, said a report by Anarock. “The upsurge in urbanisation is providing additional momentum to infrastructure development, paving the way for emerging residential hubs in the urban centres of India," said Baijal. In spite of price rises, the Indian housing market has been robust. By the end of the third quarter of 2023, as many as 3.49 lakh units were sold in the top 7 cities, against 3.65 lakh units in 2022. Concurrently, the overall sales value of sold housing inventory also inched up to ₹3.48 lakh crore. In the first nine months of 2023, the total residential property sales value is already 7% higher than all of 2022. “Property prices remained stagnant or experienced a decline for 5-6 years starting from 2013. During this period, the demand was notably low. However, post-Covid, we observed a substantial revival in demand, surpassing the previous highs,” said Prashant Rao, MD of Poulomi Estates. Several factors contributed to the rise in property prices, including pent-up demand, a desire to upgrade, a willingness to spend more for better and modern amenities. Additionally, improvements in the economic scenario and infrastructure development led to an increase in property prices. While property prices surged significantly across the country, Hyderabad consistently outpaced other metros year-on-year, experiencing the highest price rise due to an influx of corporates relocating their base to the city. This trend is expected to persist. Turkey leads the way in global price rises Turkey held the top spot in the rankings since Q1 of 2020. It’s once again the strongest growth of 89.2% on a year on year basis. The south-eastern corner of Europe dominates the top five spots of rankings, with Greece (14%), Croatia (13.7%) and North Macedonia (11%). Japan is the standout performer in the Asia-Pacific region, with 6.3% annual growth, followed by India with 5.9% annual growth. “The resilience of global house prices is surprising in light of rising costs for mortgage borrowers, however strong savings, above inflation pay settlements and low supply of stock for sale are all acting as market supports. The big issue for housing markets in 2024 will remain low market liquidity, with sales volumes down by up to a quarter compared to their recent peaks- only a shift to lower interest rates will lift sales activity,” said Liam Bailey, global head of research, Knight Frank.

India now the 14th priciest residential real estate market

<ul><li>The amount of debt that Indians have taken on has nearly doubled over the past five years. </li><li>Most of the borrowing has been done in the name of buying up more real estate even though it offers the worst returns. </li><li>Gold offers the highest returns yet accounts for only 11% of a household’s total wealth and they borrow against it. </li></ul>The average Indian household has been taking on more debt for nearly half a decade now. In fact, debt has nearly doubled with loans becoming cheaper to pick up over the past five years. This includes everything from <keyword id="35519" type="PERSON" weightage="20" keywordseo="home-loans">home loans</keyword> to vehicle loans — and even <keyword id="185013" type="PERSON" weightage="20" keywordseo="gold-loans">gold loans</keyword>, where gold is given up as collateral in exchange for money. <div type="javascript" title="Custom" contenttype="Image"><cdata><![CDATA[<div class="flourish-embed flourish-chart" data-src="visualisation/3469458"></div>]]></cdata></div> This year alone, loans against gold have increased sharply even as banks are left craving for borrowers. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></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;">Company </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;">Growth in gold loans </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;">Muthoot Finance </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;">32% </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;">Manappuram Finance </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;">33.40% </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;">Overall bank credit growth </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;">5.50% </td></tr></tbody></table>*Data as of July-end except for Manappuram, which is as of June-end <keyword id="1912236" type="PERSON" weightage="20" keywordseo="household-debt">Household debt</keyword> is rising but where is the money going? Indians are famous for their love of gold but the biggest chunk of their investment is still real estate. While Indians still have a lot more gold than the average household in peer economies, their investments in real estate also race ahead — funded mostly by home loans. <div type="image" title="Exhibit 18" msid="77757237" hostid="261" caption="&amp;lt;p&amp;gt;Most of the average Indian&amp;#39;s household wealth is stored in real estate&amp;lt;/p&amp;gt;"></div> India outpaces China, Thailand and other countries around the world both in buying gold and property. But, the return of real estate has not even managed to beat the average inflation rate of the last five years. Whereas gold has given better returns than any other asset. <table style="border-width: initial; border-style: none; width: 468pt; table-layout: fixed;"></colgroup><tbody><tr><td colspan="4" 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;">Returns on various asset classes </td></tr><tr><td colspan="4" 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;">(% of returns from 2008 till...) </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;"> </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;">Till 2014 </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;">Till 2016 </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;">Till 2019 </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;">Real estate </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;">4.9% </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;">4.7% </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;">4.3% </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;">Gold </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;">11.7% </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;">9.5% </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;">10% </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;">Equity </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;">6.8% </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;">5.1% </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;">7.2% </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;">Debt </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;">7.8% </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;">7.7% </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;">7.6% </td></tr></tbody></table> Home loans may be cheap, but they’re harder to pay off Owning property remains an aspiration for the average household in a developing economy like India. However, to buy more real estate, one needs a home loan. And, right now, home loan interest rates are at an all-time low. It makes them attractive but hardly adds to the household net worth. While cheap loans have, to some extent, supported the demand for real estate, they have also kept property prices from falling. So much so that, despite the struggles of the property developers in the last few years, homes have only become less affordable. This affordability ⁠— measured by the amount of EMI compared to the monthly income of a household ⁠— would have only gotten worse in 2020 as the pandemic took away jobs and slashed salaries. SEE ALSO: <a href="https://www.businessinsider.in/science/health/news/oxford-astrazeneca-covid-19-vaccine-phase-ii-trials-will-begin-in-india-today/articleshow/77757085.cms">Oxford-Astrazeneca COVID-19 Vaccine: Phase II trials will begin in India today</a> <a href="https://www.businessinsider.in/business/startups/news/after-facebook-saregama-deal-sharechat-and-t-series-partner-up-for-a-music-licensing-deal/articleshow/77757088.cms">After Facebook-Saregama deal, Sharechat and T-Series partner up for a music licensing deal</a> <a href="https://www.businessinsider.in/business/startups/news/ola-electric-plans-to-hire-2000-co-founder-bhavish-aggarwal-says-electric-two-wheeler-launch-soon/articleshow/77755149.cms">Ola Electric plans to hire 2000 — co-founder Bhavish Aggarwal says electric two-wheeler launch soon</a>

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