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Amid questions on the depleting <keyword id="20776807" type="General" weightage="100" keywordseo="loan-to-deposit-ratio" source="keywords">loan-to-deposit ratio</keyword> in <keyword id="19895091" type="General" weightage="20" keywordseo="Indian-banks" source="keywords">Indian banks</keyword>, a recent report by <keyword id="19896146" type="General" weightage="20" keywordseo="Motilal-Oswal" source="keywords" meta.keywordsubtype="org" meta.entityname="Motilal Oswal" meta.hostid="269" meta.entityid="Motilal Oswal">Motilal Oswal</keyword> suggests that the loan-to-deposit (LD) ratio is likely to subside on its own in the coming months. The debate on loan-to-deposit ratio (LD), particularly concerning sluggish <keyword id="19998084" type="General" weightage="20" keywordseo="deposit-growth" source="keywords">deposit growth</keyword> and potential risks to <keyword id="20089808" type="General" weightage="20" keywordseo="financial-stability" source="keywords">financial stability</keyword> is raised by even the finance minister and the <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-governor" source="keywords">RBI governor</keyword>. However, the report notes that on closer examination, the situation may not be as alarming as it seems. As of 9th August, 2024 the Indian <keyword id="19964544" type="General" weightage="20" keywordseo="banking-sector" source="keywords">banking sector</keyword>'s loan-to-deposit (LD) ratio stood at 77.2 %, which is slightly below its recent peak of 78.2 % on 22nd March 2024, and its all-time high of 78.8 % in September 2013. The report stated that typically a rising LD ratio is indicative of a tightness in the banking sector, potentially indicating overheating. A lower LD indicates that the bank is aggressive in its credit disbursement practises, which could be risky. It highlighted that an analysis of the sector's transactions with the Reserve Bank of India (RBI) through the liquidity adjustment facility (LAF), along with recent trends in the weighted average call rate (WACR), suggests that the current rise in the LD ratio does not indicate tightness, which is why there is no immediate cause of concern. In fact, the report added that the concern over weak deposit growth may be overstated. Historical data show that bank deposits grew at an average rate of 9.5 % during the pre-COVID period (January 2015 to February 2020) and 10.4 % in the post-COVID period (March 2020 to August 2024). Earlier, Finance Minister Nirmala Sitharaman also urged state-run banks to enhance deposit mobilization through attractive offers and focusing on Tier-2 and Tier-3 cities. Loan-to-deposit ratio pegs the total deposits received by the bank against the loans it has offered. It helps in understanding how liquid the bank is. The loan-to-deposit ratio (LDR) is a financial metric that compares a bank's total loans to its total deposits. It's used to assess a bank's liquidity and credit risk, and to inform lending and deposit-taking decisions The report said while the exact measures are unclear, the deposit growth could potentially be increased by making other asset classes less attractive through taxation or interest rates, or by boosting fiscal spending to increase net credit to the government. In its forecast, the report noted that private banks will witness a moderation in their <keyword id="19998083" type="General" weightage="20" keywordseo="credit-growth" source="keywords">credit growth</keyword>, while public sector banks will maintain a healthy credit growth rate. "Our analysis suggests that deposit growth could be raised by either making other asset classes unattractive (through taxation and/or interest rate) or increasing the growth in net credit to the government by pushing fiscal spending higher" the report added. Alternatively, policymakers might consider curtailing loan growth to lower the LD ratio. However, this could slow deposit growth, particularly if corporate credit growth remains weak. Encouraging savers to shift investments from other assets to bank deposits could also be an option, but this carries risks of overreach and potential damage to economic confidence. Das had also flagged the excessive growth, or froth developing in the personal loan space. Notably, while credit growth in unsecured personal loans like credit cards continues to decline, it remains elevated at 23.3% as of June 2024. However, this is a significant reduction from 34.2% witnessed in November 2023. As fiscal spending increases, bank credit to the government is likely to grow, which should elevate deposits and broad money supply. The report said "However, the extent of foreign capital inflows and the RBI's policy for managing these inflows remain uncertain". Last month, RBI governor Shaktikanta Das had also addressed this issue in the 50th meeting of MPC (Monetary Policy Committee). Per him, deposit mobilisation has been lagging credit growth for some time now. This may potentially expose the system to structural liquidity issues. "While there could be a debate regarding ‘deposits funding loans’ vis-à-vis ‘loans funding deposits’, the current regulatory concern stems from the fact that there could be structural changes happening which banks need to recognise and, accordingly, devise their strategies. Households and consumers who traditionally leaned on banks for parking or investing their savings are increasingly turning to capital markets and other financial intermediaries", Das said. Per him, while bank deposits continue to remain dominant as a percentage of financial assets owned by households, their share has been declining consistently, since households are now increasingly allocating their savings to mutual funds, insurance funds, pension funds and other avenues.

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

Mumbai, The rupee turned flat at 82.89 against the US dollar in early trade on Wednesday, resisting pressure amid unabated outflow of foreign funds and increased month-end demand of the American currency. According to forex analysts, crude oil prices hovering above <keyword id="19944038" type="General" weightage="20" keywordseo="usd" source="keywords">USD</keyword> 83 per barrel also weighed on the domestic currency, however, positive equity markets provided cushion and capped a steep fall in the rupee. Investors were also awaiting cues from US GDP data to be released later in the day and domestic GDP (Gross Domestic Product) numbers later this week, they said. At the interbank foreign exchange, the local currency opened at 82.90 and then inched up to trade at the previous day's closing level of 82.89 against the greenback. On Tuesday, the rupee settled 1 paisa lower at 82.89 against the US dollar. The dollar index, which gauges the greenback's strength against a basket of six currencies, was 0.09 per cent higher at 103.92. <keyword id="20241049" type="General" weightage="20" keywordseo="gaurang-somaiya" source="keywords">Gaurang Somaiya</keyword>, forex and bullion analyst <keyword id="19969289" type="General" weightage="20" keywordseo="motilal-oswal-financial-services" source="keywords">Motilal Oswal Financial Services</keyword>, said the dollar index traded neutral against its peers after the US data showed the consumer confidence index for February dropped lower than anticipated. Also, the data on durable goods orders revealed a contraction. "Currently, <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> watch tool suggests that market participants are pricing rate cuts to begin no time before June, and the upcoming core <keyword id="19906790" type="General" weightage="20" keywordseo="pce" source="keywords">PCE</keyword> (Personal Consumption Expenditures) price index tomorrow and GDP figures today will be heavily watched for," he said, adding that the USD-INR (Spot) is expected to trade "sideways and quote in the range of 82.80-83.20". Brent crude futures, the global oil benchmark, were trading 0.49 per cent lower at USD 83.24 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 17.46 points or 0.02 per cent higher at 73,112.68 points. The broader NSE Nifty rose 10.10 points or 0.05 per cent to 22,208.45 points. Foreign institutional investors (FIIs) were net sellers in the capital markets on Tuesday as they sold shares worth Rs 1,509.16 crore on a net basis, according to exchange data.

Rupee turns flat at 82.89 against US dollar in early trade

New Delhi, The <keyword id="6355302" type="General" weightage="20" keywordseo="rupee" source="Orion">rupee</keyword> rose 1 paisa to 83.36 against the US dollar in early trade on Tuesday amid foreign fund inflow and softening of the American currency against its major rivals. According to forex traders, positive cues from the domestic equity market also boosted investors' sentiment while the upward movement of crude oil prices weighed on the Indian currency. At the interbank foreign exchange market, the local unit opened at 83.36 against the greenback. The rupee touched the intra-day peak of 83.35 before trading at 83.36 against the American currency, up 1 paise from its previous close. On Monday, the domestic currency settled at 83.37 against the US dollar. "Yesterday, the dollar against its major crosses also traded with low volatility as market participants remain cautious ahead of the important FOMC (Federal Open Market Committee) policy statement that is scheduled to be released later this week," <keyword id="12834279" type="General" weightage="80" keywordseo="gaurang-somaiya" source="Orion">Gaurang Somaiya</keyword>, forex and bullion analyst at <keyword id="113829" type="General" weightage="80" keywordseo="motilal-oswal-financial-services" source="Orion">Motilal Oswal Financial Services</keyword>, said. He said traders will also keep a tab on the domestic inflation data as well as industrial output numbers to be released later in the day. "We expect the USD-INR (spot) to trade sideways and quote in the range of 83.20 and 83.50," Somaiya said. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.11 per cent higher at 103.58 on Tuesday. Brent crude futures, the global oil benchmark, advanced 0.28 per cent to USD 76.24 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 77.50 points or 0.11 per cent higher at 70,006.03 points. The broader NSE Nifty jumped 32.85 points or 0.16 per cent at 21,029.95 points. Foreign Institutional Investors (FIIs) were net buyers in the capital market on Monday as they bought shares worth Rs 1,261.13 crore, according to exchange data.

Rupee rises 1 paisa to 83.36 against US dollar in early trade

India's investment ecosystem is undergoing a seismic shift, with index investing gaining unprecedented traction among investors, according to a report by Motilal Oswal. The younger generation, including Gen Z and Millennials, shows a stronger inclination towards index funds as compared to older investors. They also prefer index funds over ETFs for better returns and liquidity. A recent report by Axis AMC also highlighted the growing appetite for ETFs, which witnessed net sales of Rs 15,403 crore in October 2024. While 46% of younger investors favor index funds, only 35% of Gen X and Boomers do so. Millennials and Gen X investors also have a keen interest in factor or smart beta funds, reflecting their appetite for innovative, albeit aggressive investment strategies. Passive funds have become a core component of investor portfolios, with 80% of investors increasing their allocation to these funds in 2024, compared to 53% last year. The Axis report echoed similar sentiments, noting that net sales in the passive category inched up to Rs 8,025 crore in October 2024. The combined assets under management (AUM) of passive funds have surged from Rs 7 lakh crore in September 2023 to over Rs 11 lakh crore by September 2024—a 1.5x growth in just one year. The survey also noted a growing popularity of ETFs, with 57% of respondents investing in them, up from 41% in 2023. Of these, 26% invest solely in ETFs, while 31% have diversified between ETFs and index funds. This rising preference is matched by a commitment to long-term investment. A significant 81% of investors plan to hold their passive investments for over three years, highlighting sustained confidence in the growth potential of these funds. Sectoral indices like Nifty IT and Nifty Bank dominate as the top choice for passive fund investors, selected by 67% of respondents. Benchmark indices such as the Nifty 50 and Nifty 500 follow closely, preferred by 61% of investors. A recent, similar report by stock broker Angel One also throws a spotlight on how young India plans and prefers mutual funds when it comes to savings and investments. The report, titled "Young Indians' Saving Habits Outlook 2024," compiled by Fin One, stated that 45% of respondents aged 22-35 have made it a point to save up some of their savings in mutual funds. A year ago, this figure stood at just 32%. Most of these investors make their way into mutual funds via SIPs, or systematic investment plans. 52% of respondents in the age cohort of 22-35 are now using SIPs to invest in mutual funds, up from 44% in the previous year. As for what was the driving factor behind beginning their investment journey, 42% underlined the past performance of funds, while 38% noted that advice from financial advisors remained a key consideration. 38% of young Indians are now increasingly focusing on building an emergency corpus, compared to 28% the year before. This shift underscores the drastic change in financial sensibilities brought forth by the pandemic and the consequent desire for greater financial resilience. In fact, approximately 4 out of every 5 surveyed investors maintained a dedicated, separate savings account. Out of the 1,650 individuals studied under the FinOne survey, a staggering majority made their first foray into the stock market in their early twenties. Nearly 2 in every 5 investors pick stock as their preferred choice of investment, followed by mutual funds and then savings bank accounts. While 45% of those surveyed picked stocks as their chosen investment avenue, 20% preferred mutual funds, and 15% wanted to keep their money in a savings bank account.

Gen Z and Millennials prefer stocks and mutual funds; index funds trump over ETFs, say recent reports

Mumbai, The rupee appreciated by 16 paise to settle at 82.56 against the US dollar on Thursday, marking its third straight day of gains on the back of softening crude oil prices and foreign funds inflows. The upward trend in the past three sessions led to a gain of 57 paise in the Indian currency, rebounding from its all-time low level of 83.11 against the greenback witnessed on Monday. According to reports, the rupee's sharp gain was attributed to the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword>'s move to prevent banks from short-term trading in offshore currency markets. The cautious move by investors ahead of the BRICS summit and US Federal Reserve Chair Jerome Powell's speech at the Jackson Hole Symposium restricted the upward movement of the dollar even as negative sentiment in the domestic equity markets weighed on the Indian currency, forex analysts said. "Expectation is that the Fed Chairman could maintain a hawkish tone and that could extend gains for the greenback," Gaurang Somaiya, Forex and bullion analyst <keyword id="248720" type="General" weightage="50" keywordseo="motilal-oswal-financial" source="Orion">Motilal Oswal Financial</keyword> Services said. At the interbank foreign exchange, the domestic unit opened strong at 82.55 and moved in the range of 82.36 and 82.61 against the American currency. It finally settled at 82.56 against the greenback, registering a gain of 16 paise over its previous close. On Wednesday, the rupee registered the highest single-day gain in more than two months and appreciated by 27 paise to close at 82.72 against the dollar. Earlier, the domestic unit witnessed the maximum intra-day gain of 35 paise on June 16 this year. Anuj Choudhary, Research Analyst at Sharekhan by BNP Paribas said, "Indian rupee gained for the third consecutive day on weakening US dollar and easing crude oil prices. The rupee also gained on reports that the Reserve Bank of India has asked banks not to indulge in short-term trading in the offshore markets." On Wednesday, the dollar initially gained on disappointing PMI data from the Eurozone and the UK but lost its initial gains on weaker-than-expected manufacturing and services PMI from the US. Choudhary said the rupee is expected to trade with a "slight positive bias on extended weakness in the US dollar and retreating crude oil prices". However, weak domestic markets may cap the upside. "Traders may remain cautious ahead of weekly unemployment claims and durable goods orders data from the US while investors may remain cautious ahead of Fed Chair Jerome Powell's speech at Jackson Hole Symposium tomorrow. USDINR spot price is expected to trade in a range of Rs 82.20 to Rs 82.85," he added. Jateen Trivedi, VP Research Analyst at LKP Securities, said India's moon mission with the successful landing of Chandrayaan-3 will attract the global investors' interest in the country's science and technology sector, offering robust support to the rupee. However, the rupee faced resistance due to the elevated level of dollar index hovering above 103. "The market's focus is now centered on the release of the Reserve Bank of India's meeting minutes, scheduled for later in the evening, along with the ongoing Jackson Hole Symposium, which will span over the next few days. "Given these factors, the rupee's trading range is anticipated to fall within 82.30 to 82.90, reflecting the prevailing market dynamics and influences," Trivedi added. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.20 per cent to 103.62. Global oil benchmark Brent crude futures climbed 0.37 per cent to <keyword id="54123" type="General" weightage="80" keywordseo="usd" source="Orion">USD</keyword> 83.52 per barrel. On the domestic equity market front, the <keyword id="53232" type="General" weightage="50" keywordseo="bse-sensex" source="Orion">BSE Sensex</keyword> closed 180.96 points or 0.28 per cent lower at 65,252.34. The broader <keyword id="372424" type="General" weightage="50" keywordseo="nse-nifty" source="Orion">NSE Nifty</keyword> declined 57.30 points or 0.29 per cent to 19,386.70. <keyword id="6438315" type="General" weightage="50" keywordseo="foreign-institutional-investors" source="Orion">Foreign institutional investors</keyword> (FIIs) were net buyers in equities on Thursday as they purchased shares worth Rs 1,524.87 crore, according to exchange data.

Rupee rises for third day on forex inflows, softening crude oil

New Delhi, The <keyword id="6355302" type="General" weightage="20" keywordseo="rupee" source="Orion">rupee</keyword> strengthened for the second consecutive session and appreciated by 28 paise, registering the highest single-day gain in nearly two months, to close at 82.71 (provisional) against the US dollar on Wednesday. Forex traders said IPO-driven inflows and positive tone in the domestic markets supported the upward move. Softening of crude oil prices also supported the domestic unit. However, FII outflows and a strong US dollar capped sharp gains. At the interbank foreign exchange market, the local unit opened at 83.02 against the US dollar and moved in a range of 82.68 to 83.02 in the day trade. The rupee finally settled 28 paise higher at 82.71 (provisional) against the previous close. Earlier, the Indian currency had witnessed the highest single-day gain of 35 paise on June 16 this year. On Tuesday, the rupee had recovered from its all-time low levels and settled higher by 14 paise at 82.99 against the US dollar. "We do not see any sharp appreciation in the rupee as dismal economic data from Europe may lead to a risk averse market which may weigh on riskier currencies," said Anuj Choudhary - Research Analyst at Sharekhan by BNP Paribas. In that case, the US dollar would gain. Any further inflows due to the upcoming IPOs may also support rupee. However, a strong dollar and hawkish comments from US Federal officials may support the greenback which may put downside pressure on rupee, Choudhary said. "Trades may watch out for PMI numbers from the US, while investors may remain cautious ahead of Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday. The USDINR spot price is expected to trade in a range of Rs 82.40 to Rs 83.20," Choudhary added. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.34 per cent to 103.91. Brent crude futures, the global oil benchmark, declined 1.11 per cent to USD 83.10 per barrel. On the domestic equity market front, the BSE Sensex closed 213.27 points or 0.33 per cent higher at 65,433.30. The broader <keyword id="372424" type="General" weightage="50" keywordseo="nse-nifty" source="Orion">NSE Nifty</keyword> advanced 47.55 points or 0.25 per cent to 19,444.00. <keyword id="6438315" type="General" weightage="50" keywordseo="foreign-institutional-investors" source="Orion">Foreign Institutional Investors</keyword> (FIIs) were net sellers in the capital markets on Tuesday as they offloaded shares worth Rs 495.17 crore, according to exchange data.

Rupee sees highest single-day gain in 2 months driven by IPO inflows, upbeat markets

Mumbai, The rupee recovered from its all-time low levels and appreciated by 5 paise to 83.05 against the US dollar in early trade on Monday tracking a positive trend in domestic equities. Forex traders said the rupee is likely to trade with a negative bias on risk aversion in global markets and a rising US dollar. At the interbank foreign exchange, the domestic unit opened at 83.10, then touched a high of 83.05 against the American currency, registering a rise of 5 paise over its last close. On Friday, the rupee edged lower by 1 paisa to settle at an all-time low of 83.10 against the US dollar, weighed down by a negative trend in domestic equities, and foreign fund outflows. The dollar index, which gauges the greenback's strength against a basket of six currencies, rose 0.02 per cent to 103.39. Dollar witnessed its longest winning streak in the last 15 months following safe haven buying on the back of uncertainty in China and better-than-expected economic numbers from the US, said Gaurang Somaiya, forex and bullion analyst, <keyword id="248720" type="General" weightage="50" keywordseo="motilal-oswal-financial" source="Orion">Motilal Oswal Financial</keyword> services. Rising uncertainty over economic recovery in China is leading to weakness in the Chinese Yuan and thereby weighing on the rupee, Somaiya added. Most investors will be taking cues from the BRICS summit and the Jackson Hole Symposium. "We expect the USDINR(Spot) to trade sideways and quote in the range of 82.80 and 83.30," Somaiya said. Brent crude futures, the global oil benchmark, rose 0.73 per cent to <keyword id="54123" type="General" weightage="80" keywordseo="usd" source="Orion">USD</keyword> 85.42 per barrel. In the domestic equity market, the 30-share BSE Sensex was trading 117.43 points or 0.18 per cent higher at 65,066.09. The broader NSE Nifty advanced 26.40 points or 0.14 per cent to 19,336.55. Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Friday as they offloaded shares worth Rs 266.98 crore, according to exchange data. Meanwhile, India's foreign exchange reserves jumped USD 708 million to USD 602.161 billion for the week ended August 11, the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (RBI) said on Friday. This is the first increase in the kitty after declining for three consecutive weeks. In the previous week, the overall reserves had declined USD 2.417 billion to USD 601.453 billion.

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

Ira Alok Puranik

Rupee turns flat at 82.89 against US dollar in early trade

PTI

Rupee rises 1 paisa to 83.36 against US dollar in early trade

PTI

Gen Z and Millennials prefer stocks and mutual funds; index funds trump over ETFs, say recent reports

BI India Bureau

Rupee rises for third day on forex inflows, softening crude oil

PTI

Rupee sees highest single-day gain in 2 months driven by IPO inflows, upbeat markets

PTI

Rupee rises 5 paise to 83.05/USD tracking domestic equities

PTI

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