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After reporting <keyword id="21767878" type="General" weightage="20" keywordseo="record-profits" source="keywords">record profits</keyword>, state-owned <keyword id="20459282" type="General" weightage="100" keywordseo="fuel-retailers" source="keywords">fuel retailers</keyword> <keyword id="19908045" type="General" weightage="20" keywordseo="Indian-Oil-Corporation" source="keywords" meta.keywordsubtype="org" meta.entityname="Indian Oil Corporation" meta.hostid="153" meta.entityid="Indian Oil Corporation">Indian Oil Corporation</keyword> (<keyword id="6354733" type="General" weightage="20" keywordseo="IOC" source="Orion">IOC</keyword>), <keyword id="19908646" type="General" weightage="20" keywordseo="BPCL" source="keywords" meta.keywordsubtype="org" meta.entityname="BPCL" meta.hostid="153" meta.entityid="BPCL">BPCL</keyword> and <keyword id="20052221" type="General" weightage="20" keywordseo="HPCL" source="keywords" meta.keywordsubtype="org" meta.entityname="HPCL" meta.hostid="153" meta.entityid="HPCL">HPCL</keyword> posted up to 90 per cent slump in their June quarter earnings as margins fell and they booked under-recovery on the sale of domestic cooking gas LPG at government-controlled rates. IOC, the nation's largest oil firm, reported 81 per cent drop in standalone net profit in April-June - the first quarter of current 2024-25 fiscal year - to Rs 2,643.18 crore as opposed to a profit of Rs 13,750.44 crore a year back, according to a company filing. Net profit also declined sequentially, when compared to an earning of Rs 11,570.82 crore in March quarter. Hindustan Petroleum Corporation Ltd (HPCL) posted 90 per cent drop in profit to Rs 633.94 crore as compared to an earning of Rs 6,765.50 crore in April-June 2023 and Rs 2,709.31 crore in the preceding March quarter. Bharat Petroleum Corporation Ltd (BPCL) net profit dropped to Rs 2,841.55 crore in April-June from Rs 10,644.30 crore a year back and Rs 4,789.57 crore in January-March, its filing showed. The three fuel retailers made extraordinary gains from holding petrol and diesel prices despite a drop in cost. The price freeze was justified in the name of recovering losses they had suffered in the previous year when they did not raise retail prices despite a surge in cost. The gains arising from the price freeze were eroded with petrol and diesel prices being cut by Rs 2 per litre each just before general elections and a fall in refining margins. Also, the three had uncompensated <keyword id="20866844" type="General" weightage="20" keywordseo="LPG-subsidy" source="keywords">LPG subsidy</keyword> - IOC booking under-recovery of Rs 5,156.23 crore in April-June, BPCL Rs 2,015.10 crore and HPCL Rs 2,443.71 crore, according to the filings. As per an order of the oil ministry, when market determined price (MDP) of LPG cylinders is less than its effective cost to customer (ECC), oil marketing companies (OMCs) have to retain the difference in a separate buffer account for future adjustment. However, as on June 30, 2024, the three firms had a net negative buffer as the retail selling price was less than MDP. The three retailers IOC, BPCL and HPCL had reported record profits totalling about Rs 81,000 crore in FY24 (2023-24), which was far more than their annual earnings of Rs 39,356 crore in pre-oil crisis years. This is because they resisted calls to revert to daily price revision and pass on softening in rates to consumers on grounds that prices continue to be extremely volatile - rising on one day and falling on the other - and that they needed to recoup losses incurred in the year, when they kept rates lower than cost. IOC in 2023-24 posted a standalone net profit of Rs 39,618.84 crore compared to Rs 8,241.82 crore in 2022-23. While the company could argue that FY23 was impacted by the <keyword id="21626914" type="General" weightage="20" keywordseo="oil-crisis" source="keywords">oil crisis</keyword>, the FY24 earnings are higher than even the pre-crisis years - Rs 24,184 crore net profit in 2021-22 and Rs 21,836 crore in 2020-21. BPCL posted a net profit of Rs 26,673.50 crore in FY24, higher than Rs 1,870.10 crore earnings in 2022-23 and Rs 8,788.73 crore in FY22. HPCL's 2023-24 profit of Rs 14,693.83 crore is compared with a Rs 8,974.03 crore loss in FY23 and a profit of Rs 6,382.63 crore in 2021-22, according to the filings. The losses in FY23 had led to the finance minister announcing Rs 30,000 crore equity infusion in the three firms. Mid-way through the year, that support was halved to Rs 15,000 crore. The support was to happen by way of equity infusion via a rights issue. But after the record profits of 2023-24, the equity infusion plan has now been scrapped. Finance Minister Nirmala Sitharaman had on February 1 last year, while presenting the annual Budget for the 2023-24 fiscal (April 2023 to March 2024), announced an equity infusion of Rs 30,000 crore in IOC, BPCL and HPCL to support the three state-owned firm's energy transition plans. In the interim budget that the finance minister presented in February this year ahead of the general elections, the capital support to the three oil companies was halved to Rs 15,000 crore. In the full budget for 2024-25, both plans have been scrapped. While other state-owned oil companies like Oil and Natural Gas Corporation (ONGC) and GAIL (India) Ltd too have lined up billions of dollars of investment to achieve net-zero carbon emissions, the equity support was limited to the three fuel retailers, which had suffered huge losses in 2022 when they held retail petrol, diesel and cooking gas (LPG) prices despite a spike in raw material (crude oil) prices, following Russia's invasion of Ukraine. The board of IOC and BPCL had last year approved rights issues to raise to Rs 22,000 crore and Rs 18,000 crore, respectively. The government was to participate in the rights issue. The three companies, which control roughly 90 per cent of India's fuel market, 'voluntarily' have not changed petrol, diesel and cooking gas (LPG) prices, resulting in losses when input costs were higher and profits when raw material prices were lower. They posted a combined net loss of Rs 21,201.18 crore during April-September 2022 despite accounting for Rs 22,000 crore announced but not paid LPG subsidy for the previous two years. Subsequent softening of international prices and government giving out LPG subsidies helped IOC and BPCL post annualised profit for 2022-23, but HPCL was in the red. In FY24, things changed dramatically, and the three firms posted record earnings.

After record profits, state-owned fuel retailers Indian Oil, BPCL and HPCL see profit slump in Q1

<ul><li>Last April, BPCL and other state fuel retailers froze retail petrol and diesel prices to cushion domestic consumers from rising international oil prices. </li><li>That freeze led to the three retailers suffering heavy losses in not just April-June 2022 but also in the subsequent quarter. </li><li>The consolidated net profit of ₹ 10,644.30 crore in April-June compared to a net loss of ₹ 6,147.94 crore in the same period last year. </li></ul>State-controlled <keyword id="155363" type="General" weightage="20" keywordseo="bharat-petroleum-corporation-ltd" source="Orion">Bharat Petroleum Corporation Ltd</keyword> (BPCL) on Wednesday reported a net profit of ₹ 10,644 crore in the June quarter as a freeze on the retail selling price of petrol and diesel despite a fall in oil prices helped turn around fuel marketing margins. The consolidated net profit of ₹ 10,644.30 crore in April-June (first quarter of current 2023-24 fiscal year) compared to a net loss of ₹ 6,147.94 crore in the same period last year, according to a company's filing with the stock exchanges. The earning in the first quarter was 55 % higher than the net profit of ₹ 6,870.47 crore in the preceding January-March quarter. In early April last year, BPCL and other government-owned fuel retailers - Indian Oil Corporation (<keyword id="6354733" type="General" weightage="20" keywordseo="ioc" source="Orion">IOC</keyword>) and Hindustan Petroleum Corporation Ltd (<keyword id="6362419" type="General" weightage="20" keywordseo="hpcl" source="Orion">HPCL</keyword>) - froze retail petrol and diesel prices to cushion domestic consumers from rising international oil prices. That freeze led to the three retailers suffering heavy losses in not just April-June 2022 but also in the subsequent quarter. Margins on petrol and diesel turned positive following softening of international oil prices in the June quarter, but rates were not revised, and the companies recouped losses they incurred last year. The fall in oil prices meant that revenue from operations for BPCL dipped 7 % to ₹ 1.28 lakh crore. The company earned $12.64 on turning every barrel of crude oil into fuel during the quarter ended June 30 against a gross refining margin (GRM) of $27.51 per barrel in the same period last year, the filing said. BPCL also accounted for a ₹ 24.51 crore foreign exchange gain against a forex loss of ₹ 962.53 crore in April-June 2022. Its EBITDA rose 41.8 % quarter-on-quarter to ₹ 15,809.7 crore in April-June. The profit BPCL reported in April-June is multiple times higher than the total net profit of ₹ 2,892.34 crore in the full 2022-23. Freeze on petrol and diesel prices IOC, BPCL and HPCL temporarily abandoned the daily price revision last year and have not revised petrol and diesel prices in line with the cost. And the losses they incurred when the oil prices were higher than the retail selling prices are recouped with rates dropped. Officials said the three firms have been making positive margins on petrol since the fourth quarter of the 2022 calendar year but diesel, which accounts for the bulk of the fuel sales, had been in red. But in May, margins on diesel turned positive with a small 50 paise a litre profit, they said. International oil prices had spiked to $139 per barrel in March 2022 in the aftermath of the Russia-Ukraine war. They cooled to $75 during May-June. At peak, oil firms lost ₹ 17.4 per litre on petrol and ₹ 27.7 a litre on diesel. In the October-December quarter, oil firms earned ₹ 10 a litre margin on petrol but lost ₹ 6.5 on diesel. In the following quarter, the margins on petrol moderated to ₹ 6.8 a litre while diesel earned ₹ 0.5 per litre. Officials said oil prices have firmed up this month, and the basket of crude oil that India buys has averaged $79.37 per barrel so far, making a reduction in rates difficult. Holding prices when input cost was higher than retail selling prices led to the three firms posting net earnings loss. They posted a combined net loss of ₹ 21,201.18 crore during April-September despite accounting for ₹ 22,000 crore announced but not paid LPG subsidy. International oil prices have been turbulent in the last couple of years. It dipped into the negative zone at the start of the pandemic in 2020 and swung wildly in 2022 -- climbing to a 14-year high of nearly $140 per barrel in March 2022 after Russia invaded Ukraine before sliding on weaker demand from top importer China and worries of an economic contraction. But, for a nation that is 85 % dependent on imports, the spike meant adding to already firming inflation and derailing the economic recovery from the pandemic. So, the three fuel retailers, who control roughly 90 % of the market, froze petrol and diesel prices for the longest duration in at least two decades. They stopped daily price revision in early November 2021 when rates across the country hit an all-time high, prompting the government to roll back a part of the excise duty hike it had effected during the pandemic to take advantage of low oil prices. The freeze continued into 2022 but the war-led spike in international oil prices prompted a ₹ 10 a litre hike in petrol and diesel prices from mid-March before another round of excise duty cut rolled back all of the ₹ 13 a litre and ₹ 16 per litre increase in taxes on petrol and diesel effected during the pandemic. That followed the current price freeze that began on April 6, which still continues. (With inputs from PTI)

BPCL swings to profit of ₹10,644 cr in Q1 aided by freeze on retail selling prices

Shares of state-owned behemoth Life Insurance Corporation (<keyword id="19903588" type="General" weightage="20" keywordseo="LIC" source="keywords">LIC</keyword>) have outperformed rivals like <keyword id="20079495" type="General" weightage="20" keywordseo="HDFC-Life" source="keywords" meta.keywordsubtype="org" meta.entityname="HDFC Life" meta.hostid="261" meta.entityid="HDFC Life">HDFC Life</keyword> and <keyword id="21278696" type="General" weightage="20" keywordseo="ICICI-Prudential-Life" source="keywords">ICICI Prudential Life</keyword>, as it placed bets on India's growth sectors, including infrastructure, while the private sector concentrated its bets on tech, consumer and consumer-related <keyword id="19910880" type="General" weightage="20" keywordseo="BFSI" source="keywords">BFSI</keyword> companies. LIC's stock has gained nearly 79% from Rs 620 on June 18, 2023, to Rs 1,109.15 at the closing on Tuesday, according to stock exchange data. In contrast, HDFC Life gave a negative return with Tuesday's closing price of Rs 646.55 on the BSE as compared to Rs 666.55 a year back. ICICI Prudential Life Insurance Co delivered a return of 12%, considering its stock price rise from Rs 582 on June 18, 2023, to Rs 654.10 on June 16, 2024. Over the past one year, <keyword id="19898108" type="General" weightage="20" keywordseo="SBI" source="keywords">SBI</keyword> Life Insurance shares have risen from Rs 1,314 to Rs 1,621.20, delivering a return of 23%. Capital market analysts said <keyword id="19935977" type="General" weightage="20" keywordseo="insurance-companies" source="keywords">insurance companies</keyword> make money in two ways - charging premiums for policies and then investing the premiums into assets. It is the latter that generates the bigger delta in profits, thus impacting value creation and managing risks. Global majors, including Warren Buffet-owned Berkshire Hathaway, have been successful due to their ability to make superior investments. Most Indian insurance companies are yet to capitalise on the emergence of the country's <keyword id="19997284" type="General" weightage="100" keywordseo="infrastructure-sector" source="keywords">infrastructure sector</keyword>, analysts said. Indian insurance companies have concentrated investments in the BFSI, IT, and consumer sectors - all of which have been underperformers in the recent past. Only 8-10% of their investments are in the infrastructure sector. This is far less when compared to global standards. Large global insurance companies -- such as Allianz, Nippon Life Insurance, and Metlife, and other insurers like Berkshire Hathaway -- have much larger exposure ranging from 15 to 30% to the infrastructure sector, analysts noted. Over the past few years, global insurers have been increasingly considering infrastructure investments as 'core' investments as the stable and long-term cash flows of infrastructure assets naturally align with the liabilities of insurers. Additionally, infrastructure assets have defensive characteristics of high barriers to entry, strong pricing power, structural growth, and predictive cash flows, and listed infrastructure can provide investors with inflation-protected income and solid capital growth. <h2>Infra sector outperforming all</h2>For India, a strong government focus on the sector with large spending, supporting initiatives and encouraging policies, and improving governance has helped the infrastructure industry has come of age. This has helped the infra sector to outperform all other sectors, according to analysts. They said the high focus on retail loans, and the strategic reluctance to look at infrastructure for growth opportunities is proving detrimental for the shareholders of such companies. SBI, with its higher exposure to the infrastructure sector, has seen its stock gain 48% in the year (from Rs 592 to Rs 880.95 on Tuesday), while those of its private counterparts HDFC Bank, Kotak Mahindra Bank, ICICI Bank and Axis Bank have gained only in the range of (-)3%to 24%. Kotak and HDFC Banks with negligible exposure to the infrastructure sector are the worst performing, with their shares giving a negative return, stock exchange data showed. Kotak Mahindra Bank shares were at Rs 1,895 on June 18, 2023, and closed at Rs 1,805.20 on Tuesday. HDFC Bank closed at Rs 1,619.20 on BSE on Tuesday, down from Rs 1,679 a year back.

Exposure to India's infra sector helps LIC, SBI outshine peers

Over the past few months, there’s been a lot of brouhaha about the lagging pace of bank deposits in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialization of household savings in the country, or the rising preference of Indians towards mutual funds and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian equity markets through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. 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 <keyword id="20250971" type="General" weightage="20" keywordseo="franklin-templeton" source="keywords">Franklin Templeton</keyword>, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. 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 <keyword id="4000333" type="General" weightage="100" keywordseo="household-deposits" source="Orion">household deposits</keyword> really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. Also, we can’t forego the fact that the share of Indian <keyword id="20319599" type="General" weightage="20" keywordseo="households" source="keywords">households</keyword> in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and savings account deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (<keyword id="19942037" type="General" weightage="20" keywordseo="central-board-of-direct-taxes" source="keywords">Central Board of Direct Taxes</keyword>) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of <keyword id="20930760" type="General" weightage="20" keywordseo="securities-transaction-tax" source="keywords">Securities Transaction Tax</keyword> (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell equity mutual funds, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. 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 equities 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 deposit growth we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next <keyword id="19918491" type="General" weightage="20" keywordseo="mpc" source="keywords">MPC</keyword> (Monetary Policy Committee) meeting, scheduled for November 2024. 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.

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

<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?

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

India's strong economic recovery is led by fiscal expenditure: DSP MF

<ul><li>71% of <keyword id="16562257" type="General" weightage="20" keywordseo="founders-of-early-stage" source="Orion">founders of early-stage</keyword> companies plan to raise <keyword id="549785" type="General" weightage="100" keywordseo="venture-debt" source="Orion">venture debt</keyword> in 2023. </li><li>74% of VCs surveyed said they would recommend their portfolio companies to take on venture debt in 2023. </li><li>Venture debt disbursed increased 2.6 times from 2019 to 2022.</li></ul>A lot has changed in the last one year in the <keyword id="1948071" type="General" weightage="80" keywordseo="Indian-start-up" source="Orion">Indian start-up</keyword> landscape. In per a survey by India Venture Debt Report by <keyword id="9353689" type="General" weightage="50" keywordseo="Stride-Ventures" source="Orion">Stride Ventures</keyword>, 82% of founders said they will strive for <keyword id="6515078" type="General" weightage="20" keywordseo="profitability" source="Orion">profitability</keyword> and prioritize scaling their startups in 2023. Also, 79% of VCs want to focus on profitability, while only 21% want to focus on growth. This is in contrast to 2022 when 68% of founders and 55% of VCs focused on growth rather than profitability. The survey also revealed that 71% of founders of early-stage companies plan to raise venture debt in 2023, compared to 50% of late-stage founders and 20% of growth-stage founders. Says Ishpreet Singh Gandhi, founder and managing partner, Stride Ventures, “Venture debt has become one of the key growth enablers for Indian startups.” Additionally, 74% of VCs surveyed would recommend their portfolio companies to take on venture debt in 2023. The survey results also highlighted that 62% of founders and 44% of VCs consider "engaging with bank limits" as the most important value-added service offered by a venture debt fund, with "advisory on corporate financial services" being the second most preferred service for 28% of founders and 33% of VCs. Bank limits are defined by a bank to set up amount and duration based restrictions on the transactions that can be carried out by the user. This is a change from 2022, where advisory on corporate financial services was considered the most important value-added service. <cmsannotation type="cmsannotation" annotationid="Agritech, healthtech, SaaS receive fewer venture debt prospects" comment="subhead2" text="Agritech, healthtech, SaaS receive fewer venture debt prospects">Agritech, healthtech, SaaS receive fewer venture debt prospects</cmsannotation> Finally, the survey indicated that agritech, healthtech, and SaaS sectors are receiving fewer venture debt prospects according to founders and VCs. Out of a total of 170-180 venture debt deals recorded in 2022, the fintech sector emerged as the leading sector with 31% of the share, followed by consumer and agritech sector startups. The report also highlights the potential of B2B replacing fintech in 2023 for the most attractive sector for venture debt, closely followed by consumer and EV. The report also reveals that the venture debt ecosystem in India is thriving, with a 2.6 times increase in the debt amount disbursed from 2019 to 2022. The report indicates that Series D and startups beyond that stage raised the most debt in 2022, while pre-Series A stage startups completed the highest number of debt deals. Geographically, the report recorded Delhi NCR as the most active location for venture debt deals in 2022, followed by Bangalore and Mumbai. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/adani-ports-jsw-steel-indusind-bank-top-the-nifty50-list-with-highest-promoter-pledges/slidelist/98008939.cms">Adani Ports, JSW Steel, IndusInd Bank top Nifty50 list with highest promoter pledges</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/sell-off-in-adani-group-shares-resumes-after-george-soros-comments/articleshow/98008647.cms">Sell-off in Adani group shares resumes after George Soros’ comments</a>

As profitability takes priority, venture debt finds favour with startup founders: Strides report

New Delhi, <keyword id="7636498" type="General" weightage="20" keywordseo="Tata-Consumer-Products" source="Orion">Tata Consumer Products</keyword> Ltd (TCPL) on Wednesday reported a 29.67 per cent rise in consolidated net profit to Rs 358.57 crore in the first quarter ended June 30 on the back of a strong growth in its domestic business. The company had posted a net profit of Rs 276.51 crore in the April-June quarter a year ago, TCPL, earlier known as Tata Global Beverages Ltd, said in a BSE filing. Its revenue from operations was up 12.45 per cent to Rs 3,741.21 crore during the quarter under review as against Rs 3,326.83 crore in the corresponding period of the preceding fiscal. "Revenue from operations increased by 12 per cent as compared to the corresponding quarter of the previous year, mainly driven by strong growth of 16 per cent in India business, 3 per cent in international business and 5 per cent in non-branded business," TCPL said in an earnings statement. The "profit before exceptional items and tax at Rs 495 crore is higher by 23 per cent reflecting strong growth in the India branded business and improved performance in international and non-branded business," it said. Total expenses of the Tata Group FMCG arm stood at Rs 3,304.36 crore, up 11.68 per cent in the first quarter of the current fiscal compared to the year-ago period. TCPL's total income in the June quarter was at Rs 3,798.96 crore, up 12.99 per cent. In the June quarter, TCPL's overall branded business was up 13.11 per cent to Rs 3,372.75 crore. It was at Rs 2,981.82 crore in the corresponding quarter last fiscal. TCPL's branded businesses include tea, coffee, water and other various value-added business. Its revenue from the Indian market in the branded business was at Rs 2,477.93 crore, up 15.51 per cent. In the coffee segment, it continued the strong performance with a revenue growth of 21 per cent in the domestic market. "For the quarter, the India foods business delivered 24 per cent revenue growth and 6 per cent volume growth," the company said. Revenue from its non-branded business, which includes plantation and extraction business for tea and coffee, was at Rs 377.05 crore, up 7.2 per cent in the June quarter. Tata Starbucks -- a 50:50 joint venture between Tata Consumer Products Ltd and Starbucks Corporation -- also recorded "strong revenue growth" of 21 per cent in the June quarter. TCPL Managing Director &amp; CEO Sunil D'Souza said that during the June quarter, it saw positive results from the interventions put in place for the branded tea business, which grew volumes for the second consecutive quarter. "We continue to maintain volume growth momentum in Salt, despite the pricing actions taken earlier to manage inflation," he added. The company continued to accelerate innovation across categories with a number of new launches to expand our total addressable market. "Our growth businesses (Tata Sampann, Tata Soulfull and NourishCo ) continued their strong growth trajectory, they grew by 58 per cent this quarter and accounted for 20 per cent of the India branded business. Tata Starbucks continued to deliver a strong performance along with store expansion," he said. Shares of Tata Consumer Products Ltd on Wednesday settled at Rs 874.10 on BSE, up 0.67 per cent from the previous close.

You Searched For "indian corporate profit" and got 8 results

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

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

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India's strong economic recovery is led by fiscal expenditure: DSP MF

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As profitability takes priority, venture debt finds favour with startup founders: Strides report

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