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New Delhi: Markets regulator <keyword id="19901201" type="General" weightage="100" keywordseo="Sebi" source="keywords">Sebi</keyword> has proposed a minimum ticket size or <keyword id="21732014" type="General" weightage="20" keywordseo="investment-threshold" source="keywords">investment threshold</keyword> of Rs 1 crore for the RBI-regulated originators and unregulated entities engaged in securitisation activities. The proposal also introduced limitations on the number of investors in <keyword id="22496291" type="General" weightage="20" keywordseo="private-placements" source="keywords">private placements</keyword>, allowing <keyword id="23778966" type="General" weightage="20" keywordseo="securitized-debt-instruments" source="keywords">securitized debt instruments</keyword> (SDIs) issued privately to be offered to a maximum of 200 investors. If this limit is exceeded, the issuance must be classified as a public issue. Public offers should remain open for a minimum of three days and a maximum of 10 days, with advertisement requirements aligned with Sebi's regulations for non-convertible securities. Additionally, the regulator has suggested that all securitized debt instruments should be issued and transferred exclusively in demat form. SDIs are financial products created by pooling together various types of debt -- such as loans, mortgages, or receivables -- and then selling them as securities to investors. This process, known as securitisation, allows the originator (such as a bank) to convert illiquid assets into liquid ones, providing an alternative source of funding. Investors in these instruments receive returns based on the performance of the underlying debt pool, and the risk is spread across multiple assets, offering potentially attractive returns. The current framework is based on Sebi's 2008 regulations, with updates from the Reserve Bank of India's (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) 2021 directions on securitising standard assets. The Securities and Exchange Board of India (Sebi) is now considering updates to the regulatory framework for securitized debt instruments and sought public comments till November 16 on the proposals. Regarding risk management, Sebi has proposed that originators retain a minimum risk retention of 10 per cent of the securitised pool or 5 per cent for receivables with a maturity of up to 24 months. A minimum holding period requirement will also be specified by Sebi for underlying receivables to ensure that originators maintain an interest in the underlying assets, the regulator said in a consultation paper. The regulator further suggested including an optional clean-up call for originators, allowing them to repurchase up to 10 per cent of the original value of the assets. This call is optional and intended to help manage the pool's longevity without mandating additional commitments from the originator. Liquidity facilities, essential to handle timing mismatches in cash flows, should either be provided directly by the originator or through an appointed third party. The updated definition of "debt/receivables" limits permissible underlying assets to listed debt securities, accepted trade receivables, rental incomes, and equipment leases while disallowing single-asset securitisation. The proposal establishes minimum track record requirements for both originators and obligors. Originators should have a minimum of three years of operating experience, while trade receivables specifically require at least two cycles of successful, default-free payments.

Sebi proposes Rs 1 crore minimum investment, mandatory demat form for securitized debt instruments

<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?

Mumbai, The <keyword id="19922074" type="General" weightage="20" keywordseo="reserve-bank" source="keywords">Reserve Bank</keyword> on Tuesday barred <keyword id="20838865" type="General" weightage="20" keywordseo="jm-financial-products-ltd" source="keywords">JM Financial Products Ltd</keyword> from providing any form of financing against shares and debentures, including sanction and disbursal of loans against <keyword id="19913114" type="General" weightage="20" keywordseo="initial-public-offering" source="keywords">initial public offering</keyword>, with immediate effect. The company can, however, continue to service its existing loan accounts through the usual collection and recovery process, the Reserve Bank said in a statement. <keyword id="20838864" type="General" weightage="20" keywordseo="jm-financial-products" source="keywords">JM Financial Products</keyword> has been directed to cease and desist, with immediate effect, from doing any form of financing against shares and debentures, including sanction and disbursal of loans against Initial Public Offering (IPO) of shares as well as against subscription to debentures. RBI said the action is necessitated due to certain serious deficiencies observed with respect to loans sanctioned by the company for IPO financing as well as NCD subscriptions. The RBI carried out a limited review of the books of the company on the basis of the information shared by the <keyword id="19901204" type="General" weightage="20" keywordseo="securities-and-exchange-board-of-india" source="keywords">Securities and Exchange Board of India</keyword> (SEBI). The business restrictions imposed will be reviewed upon the completion of a special audit to be instituted by the RBI and after rectification of the deficiencies to the satisfaction of RBI.

RBI bars JM Financial Products from financing against shares, debentures

Mumbai, <keyword id="7340328" type="General" weightage="20" keywordseo="reserve-bank-governor-shaktikanta-das" source="Orion">Reserve Bank Governor Shaktikanta Das</keyword> on Monday said the central bank has noticed "excessive dominance" by one or two board members even in "big commercial banks" and asked the lenders to desist from such practices. Board discussions have to be free, fair and democratic, Das said, addressing directors of <keyword id="117575" type="General" weightage="50" keywordseo="urban-cooperative-banks" source="Orion">Urban Cooperative Banks</keyword> (UCBs) at a meeting organised by the <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (RBI) here. "There should not be an over-dominance or excessive dominance by one or two members of the board, or the chairman or the vice-chairman. We have seen this even in big commercial banks... wherever we have seen this, we have told the bank that this is not the way," he said. He said all directors need to be given a chance to speak and a particular director's say should not be the final one on a matter. The governor, who made the point while illustrating the importance of a well-functioning board, however, did not elaborate further. In the past, the Indian banking system has witnessed problems at the promoter-led YES Bank, which had to be bailed out in an SBI-led initiative, which was supported by the RBI and the government. YES Bank Co-Founder Rana Kapoor, who was also its Chief Executive and Managing Director, was arrested in connection with the irregularities at the bank. Earlier this month, Uday Kotak, the Chief Executive and Managing Director of Kotak Mahindra Bank, resigned from his post and will continue as a non-executive board member. Das said directors in UCBs -- who are elected to the post -- need to have expertise in various aspects of banking, such as risk management, information technology, etc. He urged directors to go through agenda notes, which are prepared in advance, and ask relevant questions. While a managing director should have the freedom to act as per what she or he feels right, it is also important for directors to get their doubts clarified, Das added.

RBI found excessive dominance by 1-2 board members even in big commercial banks: Das

New Delhi, The government has permitted <keyword id="19951327" type="General" weightage="20" keywordseo="gst" source="keywords">GST</keyword> Network to share data about GST-registered businesses, based on their consent, with the <keyword id="19922074" type="General" weightage="20" keywordseo="reserve-bank" source="keywords">Reserve Bank</keyword>'s 'Public Tech Platform for Frictionless Credit'. The move will help entities get loans faster on the basis of shared Goods and Services Tax (GST)-related information. The platform, created by the Reserve Bank of India (<keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword>) subsidiary Reserve Bank Innovation Hub, is intended to enable seamless flow of necessary information to lenders to help in disbursing credit. In a notification, the Central Board of Indirect Taxes and Customs (CBIC) has said "the Central Government, on the recommendation of the Council, notifies 'Public Tech Platform for Frictionless Credit' as the system with which information may be shared by the common portal based on consent...". The platform has been developed for the operation of a large ecosystem of credit, to ensure access of information from various data sources digitally. The financial service providers and multiple data service providers can converge on the platform using standard and protocol driven architecture, the notification said. Moore Singhi Executive Director <keyword id="19994271" type="General" weightage="20" keywordseo="rajat-mohan" source="keywords">Rajat Mohan</keyword> said with appropriate consent from the supplier/recipient, GSTN is empowered to disclose specific details submitted in the GST registration application, along with data from outward tax returns, monthly and annual tax returns, and invoice preparations. "This arrangement ensures that borrowers cannot withhold any transactional information provided to lenders or the government portal. It enhances credit efficiency by minimising costs and the time required for processing. "Moreover, lenders gain access to authenticated monthly sales and purchase data directly from government-sanctioned sources, allowing for a more accurate and timely assessment of credit risk," <keyword id="19973713" type="General" weightage="20" keywordseo="mohan" source="keywords">Mohan</keyword> said. GST filings will become a crucial factor for businesses seeking to obtain credit and leverage government-sponsored credit programmes in future, Mohan added.

GSTN to share data with RBI's frictionless credit platform

Ahead of college admissions, <keyword id="56459" type="General" weightage="50" keywordseo="university-grants-commission" source="Orion">University Grants Commission</keyword> (<keyword id="44171" type="General" weightage="100" keywordseo="ugc" source="Orion">UGC</keyword>) has warned students against unrecognised or 'fake' institutions operating in the country. In the last two years, the UGC has identified 27 such 'fake' higher educational institutions in the country. With the admission process around the corner, students across the country have been asked to beware of educational institutions that are not established as per the UGC Act but offer degrees in contravention of stated provisions. According to <keyword id="693288" type="General" weightage="50" keywordseo="union-education-ministry" source="Orion">Union Education Ministry</keyword>, the degrees provided by such institutions will not be valid for further studies or jobs. Recently, the UGC detected two unrecognised institutions and is likely to soon release a fresh list of such institutions. According to a recent notice issued by the UGC, the 'Open International University for Alternative Medicines' and the '<keyword id="17077663" type="General" weightage="50" keywordseo="national-board-of-alternative-medicines" source="Orion">National Board of Alternative Medicines</keyword>' are running courses in violation of the UGC Act 1956. The UGC appealed to students across the country not to take admission in these institutions as their degrees will not be valid for further education or job. Earlier, the UGC had also issued a similar notice against the All India Institute of Public and Physical Health Science, a higher educational institution in Delhi. The UGC in its notice advised students not to take admission in "self-styled" institutes. The UGC from time to time releases lists of such unrecognised colleges, universities and institutes to make students aware of institutions, which are fraudulently offering degree courses. It also keeps an eye on such self-styled institutions in the interest of students. Last year, the UGC identified about 24 such higher educational institutions and declared the degrees awarded by them "invalid and fake". According to the UGC, students should thoroughly examine it before taking admission in higher educational institutions. Students and parents should make sure that the concerned educational institution is recognised by the UGC. These educational institutions can be verified on the UGC website. Significantly, the UGC and All India Council for Technical Education (AICTE), which promotes technical education in India, have also issued a warning against the educational institutions of Pakistan. In this joint advisory issued for Indian students, it was said that Indian students should not take admission in any college or educational institution in Pakistan. According to the UGC, students pursuing education in Pakistan will not be eligible to get jobs and higher education in India. UGC and AICTE have said that Indian students should not go to Pakistan for higher education. An Indian student going to Pakistan to pursue technical education, higher education or any other course will not be able to take admission in India for further studies or jobs. SEE ALSO: <a href="https://www.businessinsider.in/finance/news/rbi-revises-indias-fy24-growth-outlook-expects-softer-inflation-on-the-back-of-lower-commodity-prices/articleshow/99290005.cms">RBI revises India’s FY24 growth outlook, expects softer inflation on the back of lower commodity prices</a> <a href="https://www.businessinsider.in/finance/news/rbis-monetary-policy-committee-keeps-repo-rate-unchanged-at-6-5/articleshow/99284354.cms">RBI’s Monetary Policy Committee keeps repo rate unchanged at 6.5%, for now</a> <a href="https://www.businessinsider.in/stock-market/news/after-the-ides-of-march-analysts-pick-best-stocks-that-can-be-bought-on-dips/articleshow/99272438.cms">After the Ides of March, analysts pick best stocks that can be bought on dips</a>

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Sebi proposes Rs 1 crore minimum investment, mandatory demat form for securitized debt instruments

PTI

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

Ira Alok Puranik

RBI bars JM Financial Products from financing against shares, debentures

PTI

RBI found excessive dominance by 1-2 board members even in big commercial banks: Das

PTI

GSTN to share data with RBI's frictionless credit platform

PTI

UGC cautions Class 12 students against fake univs; says no to higher studies in Pak

IANS

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