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<ul><li>The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword> will conclude the three-day <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (<keyword id="19918491" type="General" weightage="20" keywordseo="MPC" source="keywords">MPC</keyword>) meeting today.</li><li>The central bank is expected to announce its decision on policy rates.</li><li>The <keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has maintained the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> at 6.50% for the past nine meetings.</li></ul>The Reserve Bank of India (RBI) is set to conclude the three-day Monetary Policy Committee (MPC) meeting today, with Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword> expected to announce the central bank's decision on policy rates. The meeting, which <a href="https://www.businessinsider.in/finance/news/rbis-monetary-policy-committee-meeting-begins-today-announcement-on-october-9/articleshow/113999887.cms">began</a> on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50% for the past nine meetings. The repo rate has remained steady since the RBI adopted a cautious stance to balance inflation control and <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword>. Key factors that the MPC is weighing include persistent inflationary pressures, particularly in food prices, as well as global economic uncertainties. According to data from the Ministry of Statistics &amp; Programme Implementation, while All India Consumer Price Index (CPI) inflation moderated to 3.65% in August--within the RBI's target band of 2-6%. <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">Food inflation</keyword> remains elevated at 5.65%, above the central bank's medium-term target of 4%. This, coupled with rising global crude oil prices due to geopolitical tensions in West Asia, has intensified concerns over inflation. Despite these challenges, the RBI has so far opted for a status quo on the repo rate, aiming to foster economic recovery after the pandemic. However, today's announcement will be closely watched to see if the central bank shifts its stance, especially given the external pressures and uncertainties surrounding global markets. Economists, however, have noted that the RBI will not make any changes in its policy stance before December. "With the focus on taming headline inflation, the RBI is likely to hold the rates although the core inflation is within the limit. It is possible the RBI may shift to the neutral stand" said M Govind Rao, Member, of the Fourteenth Finance Commission and former Director, of the National Institute of Public Finance and Policy. On September 18, the US Federal Reserve announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. "In this overarching macroeconomic setting of heightened geopolitical tensions, core inflation inching upwards, oil price volatility, and high food inflation, we anticipate a change in the RBI's policy stance from "withdrawal of accommodation" to "neutral" at its forthcoming MPC meeting on October 9, 2024. However, we do not see any rate action coming and the benchmark interest rates may not undergo any change" said Manoranjan Sharma, Chief Economist, Infomerics Ratings. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/byd-emax-7-electric-mpv-launched-in-india-starting-at-26-9-lakh/slidelist/114046121.cms">BYD eMax 7 electric MPV launched in India starting at ₹26.9 lakh</a> <a href="https://www.businessinsider.in/personal-finance/news/heres-how-a-reddit-user-was-able-to-get-an-iphone-16-at-under-27000/articleshow/114035179.cms">Here’s how a Reddit user was able to get an iPhone 16 at under ₹27,000</a> <a href="https://www.businessinsider.in/stock-market/news/hyundai-swiggy-ather-upcoming-large-ipos-in-india/slidelist/114014140.cms">Hyundai To Swiggy: Everyone wants to cash in on the IPO bonanza</a>

RBI MPC announcement today: Rates unlikely to change, RBI may change stance to neutral

“Ye le beta, humare khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.” How many times have we seen similar dialogues repeat itself in Bollywood films of the 70s and 80s—abject poverty and a frail-looking old mother pleading to her son to pawn the family’s heirloom gold ornaments to a jeweller, all to get a few bucks? Well, if you’d ask that son in 2024, he’d rather hit the loan button on his <keyword id="105386" type="General" weightage="20" keywordseo="Demat-account" source="Orion">Demat account</keyword> than pawn his mother’s gold jewellery. Given how Indians are rapidly resorting to taking loans against their investments in shares and mutual funds, these might as well be a cherished family heirloom in today’s time. Fair warning though; it's not as if gold and loans against it are going down in India’s lending scene. It's very much the opposite, shining brighter than ever! The secured loan category is having its time in the spotlight, and people are certainly looking beyond land and property to get their hands on some extra monies! But what is funding the steep rise behind these loans? And are they as failsafe and secure as they’re made out to be? We decode for you in this week’s Simply Put. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">The great Indian pawning party</h2>Pawning one’s gold has been, by far, the OG Indian financial move to get a loan. That continues well into 2024, and apparently, more so when India decides to wed and celebrate! Data from <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword> suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024. It looks like Gold took the motto of rise and shine too seriously! Table 1: Growth in gold loans <table class="redcator-table-advance" style="border-width: initial; border-style: none; background-color: rgb(255, 255, 255); font-size: 16px; line-height: 1.6em; box-shadow: none; width: 468pt; font-family: Merriweather; table-layout: fixed; padding-bottom: 10px !important; background-image: inherit !important; background-position: inherit !important; background-size: inherit !important; background-repeat: inherit !important; background-attachment: inherit !important; background-origin: inherit !important; background-clip: inherit !important;"></colgroup><tbody><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">Year </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">Amount (In Rs crore) </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2022 </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">85,009 </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">March 2023 </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">89,370 </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2023 </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">97,426 </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">March 2024 </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">1,02,562 </td></tr><tr><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">September 2024 </td><td style="border-width: 1pt; border-style: solid; border-color: rgb(0, 0, 0); padding: 5pt; font-size: 16px; vertical-align: top; overflow: hidden; overflow-wrap: break-word;">1,47,081 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: RBI data While the world continues to be riled up in multiple geopolitical crises in 2024, gold has been making merry of these tough times. Thus far this year, <keyword id="3886593" type="General" weightage="20" keywordseo="domestic-gold" source="Orion">domestic gold</keyword> prices have grown by 23%, outperforming benchmark indices like Nifty and Sensex by a mile, which have gone up by 9.85% and 8.86%, respectively. The growth in gold loan disbursal rates month on month this year could also put Nifty and Sensex’s growth to shame. In just September 2024, gold loans grew an astounding 51%, up from 40.9% in August, 30.5% in June, and just 14.8% in March. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">Hey, wait up for me, says LAS</h2>In lockstep with the elder, gold loan sibling, advances against shares and bonds have also been inching up since 2022. Data from RBI (Reserve Bank of India) notes that as of September 2022, the outstanding quantum of loans that were taken against shares (LAS) and bonds stood at Rs 7,397.94 crores. This inched up to Rs 7,764 crore in September 2023. Come 2024, and it looked like this was LAS’ time to shine. Loans swiftly skyrocketed, with outstanding loans in this category going up from Rs 8,492 crore in March 2022 to a staggering Rs 9,546 crore at the end of September 2024. Naturally, the smoke of LAS has its fire in the record inflows that Indians are pouring into the stock market and mutual funds month on month. Per AMFI (<keyword id="134904" type="General" weightage="20" keywordseo="Association-of-Mutual-Funds-in-India" source="Orion">Association of Mutual Funds in India</keyword>), the net AUM (assets under management) of India’s mutual fund industry grew to Rs 67,25,614.61 crores in October 2024, up from Rs 67,09,259.24 crores in September 2024. Even the number of retail mutual fund folios, which include equity, hybrid, and solution-oriented mutual funds, burgeoned to 17,23,52,296 in October, as compared to 16,81,61,366 in September. The same goes for stock investments in India, where the number of new demat accounts that are added every month just simply refuses to climb down. As of last month, total demat accounts in the country stood at 17.9 crore, which is more than the entire population of full-fledged nations like Japan (12.45 crore), Russia (14.38 crore), and Bangladesh (17.3 crore). In fact, since February this year, the monthly growth of LAS has been hitting double digits. From 11.3% in March to 21.6% in May to 26.8% in August, growth in LAS has been exceptional, hitting 22.9% in September this year. For context, monthly growth in the LAS segment was at a mere 5% in September 2023. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">What's driving the growth?</h2>It's a win-win for both the bank and the customer. Customers love them because LAS is available at a lower interest rate compared to unsecured personal loans. You can get a loan at an interest rate of anywhere between 9 and 12% by pledging your gold, MF units, or shares. Compare this to over 10-28% rates, which is the range where unsecured personal loans charge interest. Banks love <keyword id="827883" type="General" weightage="100" keywordseo="Secured-Loans" source="Orion">secured loans</keyword> since they are well-secured. In case you default on paying back, the bank can sell off your gold, shares, or mutual fund units to recover the amount. This takes a lot of stress off the banks, which are already dealing with secured loans’ riskier sibling-<keyword id="947940" type="General" weightage="20" keywordseo="unsecured-lending" source="Orion">unsecured lending</keyword>. High NPAs (non-performing assets) and non-payments in the unsecured borrowing space have already put RBI on red alert, which is why the apex bank is tightening the screws on unsecured lending, which was well on its way to becoming a ticking time bomb. As a result, credit growth has moderated to 12.8% YoY in October, as against the 19.3% rise recorded in the year-ago period. Yet it's not like the banks won't feel the heat. Analysts at Nomura note that <keyword id="23954457" type="General" weightage="20" keywordseo="personal-loan-delinquencies" source="Orion">personal loan delinquencies</keyword> in India that have been overdue by over 90 days rose to 5.1% in the last financial year, as opposed to just 3.9% in the year prior. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">How does it work?</h2>Both these loans work on a similar principle: Your <keyword id="857141" type="General" weightage="20" keywordseo="loan-amount" source="Orion">loan amount</keyword> is equal to a certain percentage of the actual market value of your asset. This is known as the LTV (loan-to-value ratio). In the case of gold and debt mutual funds, RBI mandates that this LTV be about 75-80%. So, for every Rs 100 of gold or debt mutual fund unit you pledge, your maximum loan amount cannot exceed Rs 80. If you pledge gold, which has a market value of Rs 10 lakh, you can take a loan of up to Rs 8,00,000. In the case of shares and mutual fund units, this limit is set at 50%. So, your shares worth Rs 5,00,000 can only get you a loan worth Rs 2,50,000. But the bright side? You can continue earning returns on your investments and pay interest only on the amount you use, since this loan works as an overdraft facility. <h2 style="margin-bottom: 0.7em; line-height: 1.3; color: rgb(0, 0, 0); font-size: 24px; background: 0px 0px; text-rendering: optimizelegibility;">Super safe, you say?</h2>Interest rates on both of these loans are very much dependent on the market value of the asset, which wildly fluctuates on a day-to-day basis. So, in case the value of your asset falls, you’ll have to keep a margin or more of the same asset in order to continue with the loan and maintain the LTV balance. Failure to do so could mean the bank can even sell off your asset. Says financial planner Nema Chaya Buch. “Yes, LAS offers easy availability of funds since these loans come with a lower interest rate as compared to personal loans. Also, you continue to earn average returns of 10–13% on your equity investments. But the downside is, in case of emergency, those pledged securities cannot be sold. Also, if the equity market goes down, then the bank may ask for additional collateral. Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly. “This allows you to maximize the loan amount based on your collateral while also addressing financial needs without having to liquidate your investment portfolio. However, there are notable disadvantages to consider. The market risk is significant; a substantial decline in market value could lead to margin calls, which may incur fees and charges if there are delays or prepayments, ultimately increasing the effective cost of borrowing. Furthermore, failure to make timely payments could result in the loss of your assets.”. Umesh Mohanan, ED &amp; CEO, of Indel Money, cautions that one should have a sufficient quantity of gold to get the loan amount one wants. "According to the current RBI rules, the loan applicant/borrower can draw up to 75% of the total market value of the collateral/gold jewellery. So, always carry a sufficient quantity of gold based on one’s loan requirement. “The most important thing is that the valuation of the gold depends on the purity of the gold. If the borrower pledges gold with higher purity, such as 24 carats or 22 carats, he will get the maximum loan amount," he adds.

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

<div type="image" title="Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024." msid="115250619" hostid="261" sizebytes="118350" caption="&amp;lt;p&amp;gt;Data from RBI suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024.&amp;lt;/p&amp;gt;"></div> “Ye le beta, humare khaandani sone ke gehne. Ise girvi rakhva de, shayad kuch paise aa jaye ghar main.” How many times have we seen similar dialogues repeat itself in Bollywood films of the 70s and 80s—abject poverty and a frail-looking old mother pleading to her son to pawn the family’s heirloom <keyword id="18712" type="General" weightage="20" keywordseo="gold" source="Orion">gold</keyword> ornaments to a jeweller, all to get a few bucks? Well, if you’d ask that son in 2024, he’d rather hit the loan button on his <keyword id="19977340" type="General" weightage="20" keywordseo="demat" source="keywords">Demat</keyword> account than pawn his mother’s gold jewellery. Given how Indians are rapidly resorting to taking loans against their investments in shares and mutual funds, these might as well be a cherished family heirloom in today’s time. Fair warning though; it's not as if gold and loans against it are going down in India’s lending scene. It's very much the opposite, shining brighter than ever! The secured loan category is having its time in the spotlight, and people are certainly looking beyond land and property to get their hands on some extra monies! But what is funding the steep rise behind these loans? And are they as failsafe and secure as they’re made out to be? We decode for you in this week’s Simply Put. <h2>The great Indian pawning party</h2>Pawning one’s gold has been, by far, the OG Indian financial move to get a loan. That continues well into 2024, and apparently, more so when India decides to wed and celebrate! Data from <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> suggests that the outstanding amount on gold loans has swelled from Rs 85,009 crore in September 2022 to Rs 1,47,081 crore in September 2024. It looks like Gold took the motto of rise and shine too seriously! Table 1: Growth in gold loans <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Year </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Amount (In Rs crore) </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2022 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">85,009 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2023 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">89,370 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2023 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">97,426 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">March 2024 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,02,562 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">September 2024 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">1,47,081 </td></tr></tbody><tbody></tbody><tbody></tbody><tbody></tbody><tbody></tbody></table> Source: RBI data While the world continues to be riled up in multiple geopolitical crises in 2024, gold has been making merry of these tough times. Thus far this year, domestic gold prices have grown by 23%, outperforming benchmark indices like Nifty and Sensex by a mile, which have gone up by 9.85% and 8.86%, respectively. The growth in gold loan disbursal rates month on month this year could also put Nifty and Sensex’s growth to shame. In just September 2024, gold loans grew an astounding 51%, up from 40.9% in August, 30.5% in June, and just 14.8% in March. <h2>Hey, wait up for me, says <keyword id="23953567" type="General" weightage="20" keywordseo="las" source="keywords">LAS</keyword></h2>In lockstep with the elder, gold loan sibling, advances against shares and bonds have also been inching up since 2022. Data from RBI (Reserve Bank of India) notes that as of September 2022, the outstanding quantum of loans that were taken against shares (LAS) and bonds stood at Rs 7,397.94 crores. This inched up to Rs 7,764 crore in September 2023. Come 2024, and it looked like this was LAS’ time to shine. Loans swiftly skyrocketed, with outstanding loans in this category going up from Rs 8,492 crore in March 2022 to a staggering Rs 9,546 crore at the end of September 2024. Naturally, the smoke of LAS has its fire in the record inflows that Indians are pouring into the stock market and mutual funds month on month. Per AMFI (<keyword id="20090034" type="General" weightage="20" keywordseo="association-of-mutual-funds" source="keywords">Association of Mutual Funds</keyword> in India), the net AUM (assets under management) of India’s mutual fund industry grew to Rs 67,25,614.61 crores in October 2024, up from Rs 67,09,259.24 crores in September 2024. Even the number of retail mutual fund folios, which include equity, hybrid, and solution-oriented mutual funds, burgeoned to 17,23,52,296 in October, as compared to 16,81,61,366 in September. The same goes for stock investments in India, where the number of new demat accounts that are added every month just simply refuses to climb down. As of last month, total demat accounts in the country stood at 17.9 crore, which is more than the entire population of full-fledged nations like Japan (12.45 crore), Russia (14.38 crore), and Bangladesh (17.3 crore). In fact, since February this year, the monthly growth of LAS has been hitting double digits. From 11.3% in March to 21.6% in May to 26.8% in August, growth in LAS has been exceptional, hitting 22.9% in September this year. For context, monthly growth in the LAS segment was at a mere 5% in September 2023. <h2>What's driving the growth?</h2>It's a win-win for both the bank and the customer. Customers love them because LAS is available at a lower interest rate compared to unsecured personal loans. You can get a loan at an interest rate of anywhere between 9 and 12% by pledging your gold, MF units, or shares. Compare this to over 10-28% rates, which is the range where unsecured personal loans charge interest. Banks love <keyword id="827883" type="General" weightage="100" keywordseo="secured-loans" source="Orion">secured loans</keyword> since they are well-secured. In case you default on paying back, the bank can sell off your gold, shares, or mutual fund units to recover the amount. This takes a lot of stress off the banks, which are already dealing with secured loans’ riskier sibling-unsecured lending. High NPAs (non-performing assets) and non-payments in the unsecured borrowing space have already put RBI on red alert, which is why the apex bank is tightening the screws on unsecured lending, which was well on its way to becoming a ticking time bomb. As a result, credit growth has moderated to 12.8% YoY in October, as against the 19.3% rise recorded in the year-ago period. Yet it's not like the banks won't feel the heat. Analysts at Nomura note that personal loan delinquencies in India that have been overdue by over 90 days rose to 5.1% in the last financial year, as opposed to just 3.9% in the year prior. <h2>How does it work?</h2>Both these loans work on a similar principle: Your loan amount is equal to a certain percentage of the actual market value of your asset. This is known as the <keyword id="20051485" type="General" weightage="20" keywordseo="ltv" source="keywords">LTV</keyword> (loan-to-value ratio). In the case of gold and debt mutual funds, RBI mandates that this LTV be about 75-80%. So, for every Rs 100 of gold or debt mutual fund unit you pledge, your maximum loan amount cannot exceed Rs 80. If you pledge gold, which has a market value of Rs 10 lakh, you can take a loan of up to Rs 8,00,000. In the case of shares and mutual fund units, this limit is set at 50%. So, your shares worth Rs 5,00,000 can only get you a loan worth Rs 2,50,000. But the bright side? You can continue earning returns on your investments and pay interest only on the amount you use, since this loan works as an overdraft facility. <h2>Super safe, you say?</h2>Interest rates on both of these loans are very much dependent on the market value of the asset, which wildly fluctuates on a day-to-day basis. So, in case the value of your asset falls, you’ll have to keep a margin or more of the same asset in order to continue with the loan and maintain the LTV balance. Failure to do so could mean the bank can even sell off your asset. Says financial planner Nema Chaya Buch. “Yes, LAS offers easy availability of funds since these loans come with a lower interest rate as compared to personal loans. Also, you continue to earn average returns of 10–13% on your equity investments. But the downside is, in case of emergency, those pledged securities cannot be sold. Also, if the equity market goes down, then the bank may ask for additional collateral. Raghvendra Nath, MD, Ladderup Wealth Management notes that taking a LAS is best when the value of your securities has appreciated significantly. “This allows you to maximize the loan amount based on your collateral while also addressing financial needs without having to liquidate your investment portfolio. However, there are notable disadvantages to consider. The market risk is significant; a substantial decline in market value could lead to margin calls, which may incur fees and charges if there are delays or prepayments, ultimately increasing the effective cost of borrowing. Furthermore, failure to make timely payments could result in the loss of your assets.”. Umesh Mohanan, ED &amp; CEO, of Indel Money, cautions that one should have a sufficient quantity of gold to get the loan amount one wants. "According to the current RBI rules, the loan applicant/borrower can draw up to 75% of the total market value of the collateral/gold jewellery. So, always carry a sufficient quantity of gold based on one’s loan requirement. “The most important thing is that the valuation of the gold depends on the purity of the gold. If the borrower pledges gold with higher purity, such as 24 carats or 22 carats, he will get the maximum loan amount," he adds.

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

<ul><li>The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword>’s <keyword id="20104157" type="General" weightage="20" keywordseo="monetary-policy" source="keywords">monetary policy</keyword> meeting is set to begin today.</li><li>The central bank will announce the outcome of the <keyword id="22684891" type="General" weightage="20" keywordseo="MPC-meeting" source="keywords">MPC meeting</keyword> on October 9.</li><li><keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword> has kept the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged for the last nine consecutive meetings.</li></ul>The Reserve Bank of India (RBI) is set to begin its three-day monetary policy meeting on Monday and will run from October 7 to October 9. All eyes are on the outcome, as the central bank has kept the repo rate unchanged for the last nine consecutive meetings. The repo rate, currently at 6.50%, has remained steady since the RBI adopted a cautious stance to balance inflation control and economic growth. The Monetary Policy Committee (MPC), headed by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword>, is expected to weigh key factors like inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation continues to be a challenge, particularly in food and fuel prices, which saw a surge earlier this year. As per the data from the Ministry of Statistics &amp; Programme Implementation, though the All India Consumer Price inflation in August was 3.65%, which is under the RBI target band the food inflation stands at 5.65% and it remains above the RBI's medium-term target of 4%. Despite these inflationary pressures, the RBI has opted for a status quo on the repo rate, primarily to support economic recovery post-pandemic. However, there are rising concerns that external factors, like the rising global crude oil prices and tensions in West Asia, may compel the RBI to reconsider its current stance. Earlier this month the central government appointed three new members to the monetary policy committee. The MPC comprises three members from the RBI and three external members appointed by the Central Government. The newly reconstituted committee consists of the Governor of the Reserve Bank of India as the Chairperson, ex officio; the Deputy Governor of the Reserve Bank of India, in charge of monetary policy--Member, ex officio, and one officer of the Reserve Bank of India, nominated by the Central Board -- Member, ex officio. The new external members included in the MPC are Professor Ram Singh, Director, Delhi School of Economics, University of Delhi, Saugata Bhattacharya, economist; and Dr. Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development. Market participants and analysts are closely monitoring this meeting for any forward guidance on future rate actions. Many believe the central bank will continue its wait-and-watch approach, but a surprise rate hike cannot be entirely ruled out. On September 18, the <keyword id="19901377" type="General" weightage="20" keywordseo="US-Federal-Reserve" source="keywords">US Federal Reserve</keyword> announced a steep 50 basis points interest cut in its review meeting. US Fed announced the rate cuts after holding interest rates steady for eight straight meetings. The outcome of the MPC meeting will be announced on October 9 and will set the tone for future monetary policies amid the changing global economic landscape. The Reserve Bank of India (RBI) will commence its three-day monetary policy meeting on Monday, October 7th, and continue until October 9th. The result of this meeting is eagerly anticipated, as the central bank has maintained a steady repo rate for the past nine consecutive meetings. The repo rate has remained at 6.50% since the RBI adopted a cautious approach to balance inflation control and economic growth. The Monetary Policy Committee (MPC), led by RBI Governor Shaktikanta Das, will consider various factors, including inflationary trends, global economic uncertainties, and domestic growth prospects. Inflation remains a challenge, particularly in food and fuel prices, which surged earlier this year. According to data from the Ministry of Statistics &amp; Programme Implementation, All India Consumer Price inflation in August was 3.65%, within the RBI's target band, however, food inflation stands at 5.65%, exceeding the RBI's medium-term target of 4%. Despite inflationary pressures, the RBI has opted to maintain the repo rate to support economic recovery post-pandemic. Nonetheless, rising concerns about external factors, such as increasing global crude oil prices due to tensions in West Asia, may prompt the RBI to reassess its current stance. Earlier this month, the central government appointed three new members to the monetary policy committee. The MPC consists of three members from the RBI and three external members appointed by the Central Government. It is worth noting that on September 18, the US Federal Reserve announced a substantial 50 basis points interest rate cut in its review meeting, reversing its previous stance of holding rates steady for eight consecutive meetings. With inputs from ANI. SEE ALSO: <a href="https://www.businessinsider.in/business/auto/news/september-auto-sales-automakers-report-a-decline-mahindra-and-mahindra-overtakes-tata-motors/articleshow/113925972.cms">September Auto sales – Automakers report a decline, Mahindra and Mahindra overtakes Tata Motors</a> <a href="https://www.businessinsider.in/business/auto/news/ola-electric-continues-to-lose-market-share-as-bajaj-auto-and-tvs-motor-gain/articleshow/113900252.cms">Ola Electric continues to lose market share as Bajaj Auto and TVS Motor gain</a> <a href="https://www.businessinsider.in/business/telecom/news/airtel-is-using-ai-powered-technology-to-block-spam-calls-and-messages/articleshow/113691942.cms">Airtel is using AI-powered technology to block spam calls and messages</a>

RBI's monetary policy committee meeting begins today, announcement on October 9

Ah, <keyword id="18712" type="General" weightage="20" keywordseo="Gold" source="Orion">gold</keyword>! The shiny metal that's been making humans lose their minds since time immemorial. And yet, from King Midas to our neighbourhood aunty and even our moms (and secretly dads), everyone seems to have a super soft spot for the bullion. But here's the kicker: right now, gold prices are breaking all records on their upward trajectory! As of today, prices of 24k carat gold have passed the Rs 80,000 mark per 10 grams. And if experts are to be believed, this train isn't stopping anytime soon! So, as shiny as gold might look, adding even a bit of its glitter as we start decking up for the festive season might not be so easy on your pockets. But let's admit it—we love our gold and can't live without it. No wonder India is the second-largest consumer of the yellow metal in the world, only behind <keyword id="1334" type="General" weightage="20" keywordseo="China" source="Orion">China</keyword>. Such is our fondness for the metal that the <keyword id="20195223" type="General" weightage="20" keywordseo="world-gold-council" source="keywords">World Gold Council</keyword> had to up our 2024 annual demand forecast to 850 tonnes, up from the previously estimated 750 tonnes. However, our love for gold isn't just about looking fabulously embellished and blinding people with its bling. Indians also see gold as a long-term, trusty investment, supporting our other hard-earned assets, especially when high <keyword id="22195" type="General" weightage="20" keywordseo="Inflation" source="Orion">inflation</keyword> rates pull our returns down. After all, while inflationary pressures generally weaken the purchasing power of our regular paper money, gold is built differently. When the world is buckling to inflation, gold gains value during these times. This is also why it is considered a solid hedge against inflation. With Diwali and Dhanteras knocking at our doors, the inflation demon continued to bother India like a guest who refused to leave. Just last month, the Consumer Price Index (CPI) stood at 5.49%, much higher than the anticipated levels. Moreover, the diverging policy stances among central bankers worldwide, growing geopolitical tensions, tough job markets, and extreme weather events are only adding to the uncertainty. In such economically uncertain times, what should your gold strategy be this festive season? To buy or not to buy, that is the question. Well, let’s get to it. <h2><keyword id="20050894" type="General" weightage="100" keywordseo="gold-etfs" source="keywords">Gold ETFs</keyword> to the rescue</h2>See, buying physical gold jewellery is certainly a flex, but also a financial fuss. First, you pay a heavy amount to buy gold. Not to mention all those extra, hefty jewellery-making charges. And then you pay even more money to keep it safe in a bank locker, lest it get stolen. But what if we tell you that you can own pure <keyword id="3311599" type="General" weightage="20" keywordseo="24K-gold" source="Orion">24k gold</keyword>, minus all these frills? Welcome, Gold ETFs (Exchange Traded Funds). Simply put, gold ETFs are like the cool cousins of your traditional gold investments. Instead of stashing gold bars under your mattress like those maniac millionaires we see in Bollywood films, you can now invest and trade in gold through the stock market. It's basically buying units of an ETF on the stock exchange that directly mirror the ongoing domestic prices of gold. Generally, gold ETFs are equivalent to 99.5% pure physical gold bars, and each ETF unit denotes actual, one gram of gold. And let's face it, who would not want that golden glow in their lives? Gold ETFs have witnessed an over seven-fold surge in their AUM (assets under management) in just the last five years. From Rs 5,613.22 crore in September 2019 to Rs 39,823.50 crore in September 2024, gold ETFs seem to be in-thing. Inflows in gold ETFs have shot up by a whopping 2,695% over the last 5 years. In September 2019, gold ETFs had garnered a mere Rs 44.11 crore. Compare that to the inflows worth Rs 1,232.99 crore gold ETFs received last month. Talk about growing, or glowing popularity! In fact, in just 2024, inflows in gold ETFs have surged by nearly 88% since the beginning of this calendar year. From Rs 657.46 crore in January 2024 to Rs 1,232.99 crore in September 2024, good old gold is never out of season. <h2>So, how do these ETFs work? Should I invest in them now?</h2>All you need is a Demat account. Log into your account, choose the gold ETF scheme you want to invest in, and voila! You’re now a bullion-aire! All your gold ETF units will be stored in this account. Then, you can buy and sell gold ETFs just like you buy shares—in real-time. So, if gold prices inch upwards, which is where gold is currently going, the value of your ETF units will also rise in lockstep. Ashwini Kumar, Senior Vice President and Head of Market Data at ICRA Analytics, says that of late, gold ETFs have been increasingly gaining popularity among investors due to the liquidity, safety and transparency they offer. "With the escalating global geopolitical tensions boosting the ‘safe-haven’ appeal of the bullion, investors are preferring to park their funds in gold ETFs as compared to investing in physical gold, as there is no hassle of storing it. The heightened activity in gold ETFs is also driven by the prospects of an imminent further interest rate cut by the <keyword id="20078761" type="General" weightage="20" keywordseo="u-s-federal-reserve" source="keywords">U.S. Federal Reserve</keyword> in the coming months,” he added. “Investors with a short- to medium-term investment horizon may consider investment through gold ETFs. A buy-on-dips strategy here may help investors capitalise on a temporary correction in prices. Also, given the current market dynamics where equities are showing mixed trends, a modest, 5-10% allocation to gold may serve as a hedge against inflation and market volatility, which may help you balance risks in an optimum manner,” Kumar noted. <h2> Wait, there is no dearth of options</h2>But if ETFs make you go WTF, there’s always digital gold. You can invest in the yellow metal without actually physically holding it for as low as Rs 1. The best part? You can buy or sell this gold 24 X7 seamlessly via multiple apps without having to pay storage costs. On your behalf, your gold is stored in insured vaults by the seller. But remember, digital gold continues to remain unregulated territory in the country, where you venture at your own risk. In 2021, market watchdog SEBI had even asked its members to desist from selling digital gold. Then there are gold mutual funds and the Sarkari SGBs, or sovereign gold bonds. While gold mutual funds invest primarily in gold ETFs, SGBs are issued by the <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> and are also a reliable substitute for holding physical gold. However, with the RBI currently putting brakes on issuing SGBs, investing in them is out of the question. Plus, you should only get your hands on SGBs if you're in for the long haul. Apart from a 2.5% p.a. interest, you don't have any yearly earnings from them. Moreover, no premature redemption is allowed before 5 years, and you'll have to wait a good 8 years to maximise your returns. <h2> Okay, tell me about returns</h2>In contrast, the seventeen gold ETF schemes currently present in the market offer an average one-year return of 29.12%. Stay with it a little longer, and you can end up with returns worth 16.93% and 13.59% over a 3 and 5-year period, respectively. If you look at it, these returns are comparable with the returns delivered by actual, physical gold. Data from Value Research indicates that gold, as a commodity, has delivered returns worth 27.24%, 16.53%, and 14.18% over a 1, 3, and 5-year period, respectively. So, worth investing, right? <h2>What are the risks?</h2>See, stock markets are as unpredictable as monsoons in Mumbai. One significant market correction can wash away your returns, and one sunny day or an upswing can leave you wallowing in wealth. Since your gold investments are directly linked to these markets, you should steel yourself up for some volatility. Plus, international gold prices are in dollars. So, if our rupee decides to take a nosedive, your returns might look a bit tarnished. Also, know that your ETF might not always perfectly mirror gold prices, which is also known as a tracking error. It's like expecting your Zomato-ordered food to look exactly like the picture on the menu—it's close, but not quite. Then there’s the taxation bit. The budget this year brought down the <keyword id="20552259" type="General" weightage="20" keywordseo="ltcg" source="keywords">LTCG</keyword> (long-term capital gains tax) on gold ETFs from the previous 20% to 12.5% (sans indexation). LTCG is what you pay if you sell your ETF units after 12 months. If you sell your gold ETF units within a year and make handsome returns, the tax you’ll have to pay will be equivalent to your income tax slab rate. <h2>Is gold just for old?</h2>A survey by fintech firm Moneyview thinks otherwise. Per their findings, over 85% of the 3,000 respondents it talked to considered gold to be a valuable asset for wealth preservation, with its intrinsic value and historical performance continuing to drive consumer confidence. Particularly, young investors in the age group of 25–40 years are also investing in gold via both physical and digital ways to build wealth for retirement and other long-term goals. So, young or old, everyone’s going for gold. So, this festive season, with gold prices going north, investing in gold can add that much-needed glitz to your financial attire. But remember, don't go overboard since gold isn't exactly a high-return-yielding asset. But whether you're a seasoned investor looking to diversify or a newbie trying to make their way in the markets, investing in gold offers you a glittering safety cushion. Just remember, while gold can make your portfolio shine, it's your smart investment decisions that truly make you golden. Disclaimer: The content on this website is for informational purposes only and should not be construed as investment advice. We recommend readers consult certified, qualified, and registered advisors for professional and personalised financial advice.

Can investing in gold this festive season add the much-touted Midas touch to your investments?

Earlier today, RBIs MPC (Monetary Policy Committee) decided to leave the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5%, while changing the policy stance toward neutral. The aim, as <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> maintained, was to strike a balance between taming domestic <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> and maintaining target growth. A neutral stance gives the RBI the flexibility to adjust <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> based on the direction of inflation, as opposed to its previous stand of withdrawing accommodation, which eliminates any possibility of rate cuts. While a change of stance doesn’t necessarily mean a cut should follow, most experts view this as a prelude to a possible rate cut in December this year, or even February next year. Says Deepak Ramaraju, Senior Fund Manager, Shriram AMC, "The RBI stance has changed to neutral, indicating that its primary focus is to balance growth and inflation. Growth has been resilient and given the short-term pressure on inflation, RBI may continue to hold interest rates unchanged in Q3 FY 2025. Based on inflation moderating below 4.5% and course of geo-political concerns, the RBI may undertake a rate cut decision in Q4 FY 2025". So, what does this mean for your investments? How will this decision impact your existing funds? We take a look. <h2>Good time to invest in high-yield deposits</h2>This is a good time to invest in high-yield <keyword id="19975805" type="General" weightage="20" keywordseo="fixed-deposits" source="keywords">fixed deposits</keyword> and long-term bonds. That's because with rate cuts imminent in the upcoming quarters, you'd be able to lock-in your funds with the prevailing, relatively higher interest rate right now. As for the yellow metal or gold, it is generally considered a safe haven asset during turbulent market times. That's why you should consider making it a part of your investments, or increasing its weightage in your overall portfolio, depending on your needs. Vijay Kuppa, CEO, InCred Money highlights that with deposit rates at elevated levels, one has an ideal opportunity for locking in high-yield fixed deposits."At the same time, high borrowing costs also make a compelling case for increasing debt allocations in investment portfolios, which offer a buffer against potential equity market corrections, which might occur due to <keyword id="19955176" type="General" weightage="20" keywordseo="geopolitical-tensions" source="keywords">geopolitical tensions</keyword>", he continues. With the chronic crisis in Middle-East flaring up again, as Israel looks to target Lebanon and Iran, you can expect some volatility and downturns in the <keyword id="19949641" type="General" weightage="20" keywordseo="equity-markets" source="keywords">equity markets</keyword>, both in India and globally, in the times to come. Over the last 5 days, Sensex has dipped by over 1,900 points, or about 2.38%, and Nifty has also gone down by 2.23%. With this set to continue for some time, you can reconsider and evaluate your investments in debt. Mahendra Kumar Jajoo, CIO – Fixed Income, Mirae Asset Investment Managers (India) explains that the market is confident of a rate cut in the times to come, and that the <keyword id="20066775" type="General" weightage="20" keywordseo="bond-market" source="keywords">bond market</keyword> has already started pricing in the same. "We have already seen some of this already, with 10Y GOI yields at around 6.75%, having already eased significantly in last few months. So, if investors wait for rate cut to invest, it may be too late for them. Also, with corporate credit picking up, investing in corporate bond funds for a period of 3-5 years can also serve the investor well. Investors having a long term investment horizon and appropriate risk appetite can also invest in gilt funds", he continues. <h2>Dont exit the markets yet </h2>Though short-term biases of FII may continue towards Chinese markets keeping pressure on the equity markets, the resilient domestic flows can defy deep corrections in the equity markets despite high valuations. The markets may trend positive with subsequent rate cuts by the US Fed later this year. Hence, it wont be advisable to completely exit the equity markets during these times, notes Avnish Jain, Head - Fixed Income, Canara Robeco Mutual Fund Jain advises to take a buy on dips approach towards the stock markets i.e. adding quality stocks to your portfolio during times of market downturn. Shrikant Chouhan, Head Equity Research, Kotak Securities says that the current market texture is volatile, hence level based trading would be the ideal strategy for the day traders. "For the bulls now, 25,050/81,700 would be the key level to watch out. Above the same market could retest the level of 25,200-25,225/82,000-82,300. On the flip side, 24,900/81,200 would be the key support zone for the traders. Below the same, the selling pressure is likely to accelerate. Below the same, market could slip till 24,800-24,780/81,000-80,700", explains Chouhan. <h2>Time to buy a home? Maybe! </h2>No rate cut can spell some good news for homebuyers who are looking to get their hands on real estate during the festive season. Even as home loan rates remain steady as of now, homebuyers may have to wait until December or beyond to get any tangible relief in their home loan EMIs. Vimal Nadar, Head of Research, Colliers India explains that a change in stance from “withdrawal of accommodation” to “neutral” indicates its clear direction for a possible reduction in interest rates in the foreseeable future. This ongoing stability in repo rate should provide a significant thrust to residential real estate during these festive months as home loan interest rates are likely to remain steady. "Typically, Q4, marked by higher inclination of homebuyers to wrap-up property purchases during the auspicious period combined with instantaneous liquidity benefit aided by developers offering attractive discounts, has historically provided the final push to housing sales across the major markets in the country", he added.

RBI leaves repo rate unchanged. What does this mean for you?

The <keyword id="20018890" type="General" weightage="20" keywordseo="digital-infrastructure" source="keywords">digital infrastructure</keyword> has made the <keyword id="20572901" type="General" weightage="20" keywordseo="loan-sanctioning" source="keywords">loan sanctioning</keyword> system adopt an online mode, but the <keyword id="21614839" type="General" weightage="20" keywordseo="loan-recovery" source="keywords">loan recovery</keyword> still requires a 'feet on the street' approach, says <keyword id="20506781" type="General" weightage="20" keywordseo="swaminathan-j" source="keywords">Swaminathan J</keyword>, Deputy Governor of Reserve Bank of India (RBI). Speaking at a media event in Mumbai, the deputy Governor of RBI noted that with the digital infrastructure at place, many <keyword id="22721545" type="General" weightage="20" keywordseo="fintech-players" source="keywords">fintech players</keyword> are giving loans to customers with poor credit profiles, and up on default, use aggressive recovery tactics. "While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending <keyword id="22791879" type="General" weightage="20" keywordseo="small-value-loans" source="keywords">small-value loans</keyword> to customers who often have a poor credit profiles" said the deputy governor. He emphasized that the business model of many fintech platforms involves offering small-value loans to customers who often have poor credit profiles. This has led to the adoption of aggressive recovery strategies, which on many occasions also crosses ethical boundaries. He also highlighted one particularly concerning practice that involves the invasion of customers' privacy, where recovery agents access the personal data and contacts of borrowers and use that as a threat practice. Swaminathan cautioned that such tactics not only infringe on individuals right to privacy, but also risk damaging the reputation of regulated lenders associated with these fintech platforms. He also highlighted RBI's regulations on outsourcing, that even though regulated financial entities delegate certain activities to third parties, they remain ultimately accountable for the actions of their outsourced agents. The deputy governor also noted that the digitisation allows banks and NBFCs to leverage data for greater insights into their customers' requirements and behaviour, which can be used for developing bespoke products apart from facilitating better risk management and compliance. He stated that the role of RBI as a regulator is to establish guardrails or a balanced framework that encourages innovation while ensuring that risks are managed prudently. The deputy governor also indicated the primary goal of RBI is to ensure the stability and integrity of the financial system and not to hinder business operations.

Loan sanctioning has gone digital, but recovery still needs a 'feet on the street' approach, says RBI Deputy Governor

The <keyword id="19899810" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="keywords" meta.keywordsubtype="org" meta.entityname="Reserve Bank of India" meta.hostid="261" meta.entityid="Reserve Bank of India">Reserve Bank of India</keyword>'s (<keyword id="19899808" type="General" weightage="20" keywordseo="RBI" source="keywords">RBI</keyword>) <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC) has decided to keep the <keyword id="20094323" type="General" weightage="100" keywordseo="repo-rate" source="keywords">repo rate</keyword> steady at 6.5%. This decision, announced by RBI Governor <keyword id="19913110" type="General" weightage="20" keywordseo="Shaktikanta-Das" source="keywords">Shaktikanta Das</keyword> early today, marks the ninth consecutive time the central bank has maintained the current rate, which was last adjusted in February 2023. The MPC's decision was made by a majority vote of 4:2, reflecting a cautious approach to balance economic growth and <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword> control. But what exactly is repo rate and how does it impact you? Read on as we explain. <h2>Understanding the Repo Rate</h2>The repo rate, or repurchase agreement rate, is a critical monetary policy tool used by the RBI. It is the rate at which the central bank lends money to commercial banks and financial institutions against government securities. By adjusting the repo rate, the RBI influences the money supply, which in turn affects inflation and economic activity. <h2>How does it impact you?</h2>Changes in the repo rate have significant implications for both borrowers and savers. When the repo rate increases, banks incur higher costs to borrow funds from the RBI. To maintain their profit margins, these institutions raise interest rates on loans, leading to higher borrowing costs for consumers. Conversely, a lower repo rate reduces borrowing costs, resulting in lower EMIs for various loans, including home, personal, and education loans. Fixed deposit interest rates are also influenced by the repo rate. An increase in the repo rate can lead banks to offer higher interest rates on fixed deposits to attract more funds, benefiting depositors. On the other hand, a decrease in the repo rate might result in lower <keyword id="20772297" type="General" weightage="20" keywordseo="fixed-deposit-rates" source="keywords">fixed deposit rates</keyword>, affecting returns for savers. <h2>Relationship between repo rate and inflation</h2>As the lender of last resort, the RBI provides short-term funds to commercial banks through the repo rate mechanism. By doing so, it influences the interest rates that banks offer to their customers. This ability to control the cost of borrowing is a powerful tool for the RBI to manage economic stability. In times of inflation, the RBI raises the repo rate to curb borrowing and encourage saving. Higher interest rates make loans more expensive, reducing consumer spending and slowing down inflation. Conversely, in a deflationary environment, the RBI lowers the repo rate to stimulate borrowing and spending, thereby boosting economic activity. For example, there's a very popular bakery that everyone loves in a fictional town. This bakery makes the best bread and pastries, and almost everyone in town buys their daily bread from there. During a period of low inflation, the central bank of the town (similar to the Reserve Bank of India) sets a low repo rate, meaning it's cheap for commercial banks to borrow money. As a result, banks borrow money at a low cost and are willing to lend more money to the residents at lower interest rates. The residents find it easy and cheap to get loans, so they have more money to spend. With more disposable income, people in the town buy more bread and pastries. The bakery sees a surge in demand. With everyone having more money to spend, the demand for bread and pastries increases rapidly. The bakery struggles to keep up with the demand and starts raising prices. As the prices of bread and other goods in the town go up, inflation starts to rise. The central bank notices that inflation is getting too high, making everyday goods more expensive for everyone. To control this inflation, the central bank decides to increase the repo rate. During a high inflation period, with the increased repo rate, it's more expensive for commercial banks to borrow money. Consequently, banks in the town start lending less money and at higher interest rates. The residents find it harder and more expensive to get loans, so they have less extra money to spend. With less disposable income, fewer people buy bread and pastries. The demand decreases. With lower demand, the bakery reduces its prices to attract more customers. As the prices of goods in the town start to stabilise or even decrease, inflation comes under control.

RBI keeps repo rate unchanged at 6.5%: What is repo rate and how it affects you

A research report by the <keyword id="19934368" type="General" weightage="100" keywordseo="state-bank-of-india" source="keywords">State Bank of India</keyword> (SBI) highlights the continuous upward trend in credit growth in Indian <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword>, which is outpacing the growth of deposits. This trend persists even as Indian households have substantially increased their investments in <keyword id="19929240" type="General" weightage="20" keywordseo="mutual-funds" source="keywords">mutual funds</keyword> and equities. For the last several months, investments of over Rs 21,000 crore are being done in mutual funds. Last month, during an event, <keyword id="20151998" type="General" weightage="20" keywordseo="RBI-Governor" source="keywords">RBI Governor</keyword> <keyword id="19913110" type="General" weightage="20" keywordseo="shaktikanta-das" source="keywords">Shaktikanta Das</keyword> noted that households are opting for capital markets over banks to invest or park their savings. However, the <keyword id="20352499" type="General" weightage="20" keywordseo="SBI-report" source="keywords">SBI report</keyword> states, "Latest fortnightly credit and deposit growth number shows credit growth continues to outpace deposit, though moderated from last year growth of 16.2 percent (June'23 YoY)." Specifically, for the fortnight ending July 12, 2024 the report noted that the credit growth for All Scheduled Commercial Banks stood at 14 per cent on a year-on-year basis, while deposit growth was reported at 11.3 per cent. Furthermore, the report also served a significant increase in credit to the industrial sector, which rose from 5.1 percent in March 2023 to 8.4 percent in March 2024, and recorded 8.1 percent growth in June 2024 year-on-year. This indicates a robust demand for credit within the industrial sector. Despite big savings going towards the capital markets, banks have managed to gather an incremental deposit of Rs 7.02 lakh crore in the year-to-date (YTD) period ending July 12, 2024. In comparison, the incremental credit extended by the banks amounted to Rs 3.80 lakh crore during the same period. This discrepancy illustrates that while credit growth is substantial, deposit growth remains essential to maintain balance. Additionally, the report highlighted that banks' reliance on high-cost deposits, such as Certificates of Deposit (CDs), has more than tripled. This increase is a response to the need to match the rising credit demand, showing how banks are adjusting their funding strategies to accommodate the growing demand for loans. <keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> Governor stated last month, "While bank deposits continue to remain dominant as a percentage of the financial assets owned by the households, their share has been declining, with households increasingly allocating their savings to Mutual Funds, Insurance Funds, and Pension Funds."

Credit growth in banks continues to exceed deposits, says new SBI report

The decline in <keyword id="22920992" type="General" weightage="100" keywordseo="loan-to-deposit-ratios" source="keywords">loan-to-deposit ratios</keyword> (LDR) within the banking system has been attributed to lower <keyword id="22920578" type="General" weightage="20" keywordseo="money-creation" source="keywords">money creation</keyword> by the <keyword id="6354335" type="General" weightage="20" keywordseo="Reserve-Bank-of-India" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>) and higher <keyword id="20335010" type="General" weightage="20" keywordseo="profits" source="keywords">profits</keyword> accrued by banks over the past two years, according to <keyword id="2258232" type="General" weightage="20" keywordseo="Nomura-report" source="Orion">Nomura report</keyword>. One of the contributors to the decline in systemic LDR is the lower net money creation by the RBI over the fiscal year 2023-24. Cumulative net fresh money creation during this period amounted to only Rs 0.6 trillion, a contrast to approximately Rs 20 trillion created in the three fiscal years preceding it (FY20-22). This represents a drop in money supply compared to previous years. In the fiscal year 2023-24, the net money creation by the RBI was virtually neutral, recording -1 per cent in FY23 and +1 per cent in FY24, against a 20-year average of +3 per cent and a higher +4-5 per cent in the earlier three years. This moderation in money supply, a discretionary move by the RBI, has had a notable impact on the LDR, limiting the ability of banks to expand their lending relative to deposits. Another crucial factor influencing the decline in LDR is the substantial increase in <keyword id="387788" type="General" weightage="20" keywordseo="bank-profits" source="Orion">bank profits</keyword> over the last two years. In FY24, the total profit of banks was 1.8 per cent of the previous year's deposits, a rise from the average of 0.1 per cent observed between FY16-20. This increase in profitability, while indicative of strong financial performance, has led to a reduction in deposits as banks appropriate a larger portion of these profits. The relationship between bank profits and deposits is intrinsic; banks generate profits from their operations, which are ultimately derived from depositors' funds. As banks' profits rise, the balance sheet needs to be adjusted accordingly, often leading to a reduction in deposits. Consequently, higher profits can result in a diminished deposit base, further impacting the LDR. The elevated LDR, driven by these factors, should be viewed as a cyclical phenomenon rather than a systemic issue. The argument that banks are failing to mobilize deposits or that money is being diverted elsewhere is misplaced. Instead, flows into capital markets and the muted growth in currency in circulation over the past two years do not directly impact system deposits. Banks have continued to create deposits through credit expansion, and the factors leading to the higher LDR are beyond their control. The lower money creation by the RBI is a cyclical issue that is expected to correct over time, while the higher bank profits reflect a positive trend rather than a problem.

Lower money creation by RBI, substantial rise in banks profits behind decline in loan-to-deposits ratios in banks: Nomura

Mumbai (Maharashtra) [India], September 28 (ANI): The <keyword id="6354335" type="General" weightage="50" keywordseo="reserve-bank-of-india" source="Orion">Reserve Bank of India</keyword> (<keyword id="30067" type="General" weightage="50" keywordseo="rbi" source="Orion">RBI</keyword>) has released preliminary data on India's Balance of Payments (BoP) for the first quarter (Q1) of the fiscal year 2023-24, covering the period from April to June. The data reveals significant developments and trends in India's economic position on the global stage. One of the standout features of India's BoP in Q1: 2023-24 was the substantial narrowing of the Current Account Deficit (<keyword id="52599" type="General" weightage="50" keywordseo="cad" source="Orion">CAD</keyword>). The CAD decreased to USD 9.2 billion, equivalent to 1.1 per cent of GDP, showing an improvement from USD 17.9 billion, or 2.1 per cent of GDP, in the same quarter of the previous fiscal year (Q1: 2022-23). However, it was higher than the CAD recorded in the preceding quarter, which stood at USD 1.3 billion (0.2 per cent of GDP). The widening of the CAD on a quarter-on-quarter basis was primarily attributed to several factors. A higher trade deficit, coupled with a decrease in the surplus of net services and a decline in private transfer receipts, contributed to this trend. Net services receipts registered a sequential decrease in Q1: 2023-24, mainly due to a decline in exports of computer, travel, and business services. However, it's important to note that these receipts remained higher on a year-on-year basis. Private transfer receipts, primarily consisting of remittances by Indians employed overseas, moderated to USD 27.1 billion in Q1: 2023-24 from USD 28.6 billion in the previous quarter (Q4: 2022-23). Despite this decrease, they witnessed an increase on a year-on-year basis. The income account, which reflects payments of investment income, showed a decline to USD 10.6 billion in Q1: 2023-24 from USD 12.6 billion in Q4: 2022-23. However, this figure was still higher than the previous year. In the financial account, notable changes were observed. Net foreign direct investment decreased to USD 5.1 billion in Q1: 2023-24 from USD 13.4 billion a year ago. Net foreign portfolio investment recorded significant inflows of USD 15.7 billion compared to net outflows of USD 14.6 billion in Q1: 2022-23. Net external commercial borrowings to India recorded an inflow of USD 5.6 billion in Q1: 2023-24, contrasting with an outflow of USD 2.9 billion in the previous year. Non-resident deposits recorded net inflows of USD 2.2 billion in Q1: 2023-24, a notable increase compared to USD 0.3 billion in Q1: 2022-23. As of the end of June 2023, India's external debt reached USD 629.1 billion. This marked an increase of USD 4.7 billion over its level at the end of March 2023. The data from RBI's Balance of Payments report for Q1: 2023-24 reflects the dynamic nature of India's economic landscape. Despite fluctuations, the narrowing of the current account deficit and increased foreign investment inflows signal positive developments in India's global economic interactions. Analysts and policymakers will closely monitor these trends, as they have significant implications for India's overall economic stability and prospects in the coming fiscal year.

India's balance of payments shows improvement in Q1 FY24

The Reserve Bank of India (RBI) may begin lowering <keyword id="19950650" type="General" weightage="20" keywordseo="interest-rates" source="keywords">interest rates</keyword> around October, provided that external factors like weather conditions and international commodity prices do not cause any disruptions, the credit rating agency, Crisil said in its report. The credit rating agency further anticipated that it expects "two rate cuts this fiscal." It said that the decision of the <keyword id="19913109" type="General" weightage="20" keywordseo="Monetary-Policy-Committee" source="keywords">Monetary Policy Committee</keyword> (MPC) decision to hold rates in its recent announcement was due to the elevated <keyword id="19999654" type="General" weightage="20" keywordseo="food-inflation" source="keywords">food inflation</keyword>. The climate conditions such as weather events are frequently changing and they need to be monitored. Going ahead, it anticipated that the macroeconomic environment would be better, creating a background for a rate cut. "The food challenge to a rate cut is expected to ease as agriculture prospects look better than last year. The monsoon has been above normal (7 per cent above the long period average as of August 7), and sowing has picked up across major foodgrains. As agriculture prospects become clearer by September, we expect it to pave the way for a rate cut," the S&amp;P's arm added in its report. In a move reflecting its cautious approach amid ongoing economic uncertainties, the RBI has decided to keep the <keyword id="20094323" type="General" weightage="20" keywordseo="repo-rate" source="keywords">repo rate</keyword> unchanged at 6.5 per cent. The decision to keep the repo rate steady comes amidst persistent concerns about <keyword id="19895000" type="General" weightage="20" keywordseo="inflation" source="keywords">inflation</keyword>, which remains above the RBI's target range. The central bank's commitment to bringing inflation down to its 4 per cent target continues to face challenges due to ongoing food inflation and other economic factors. Noting a likely uptick in core inflation, the report added that factors such as international freight costs, geopolitical risks to crude oil prices, and hikes in domestic telecom tariffs could affect this indicator. Anticipating the growth, it added, "The pace of growth of the economy is expected to ease this year, with lower fiscal support as the government pursues <keyword id="20101140" type="General" weightage="20" keywordseo="fiscal-consolidation" source="keywords">fiscal consolidation</keyword>." Announcing the MPC's decision on August 8, RBI Governor Shaktikanta Das expected the real Gross Domestic Product (GDP) growth of 7.2 per cent for the fiscal year 2024-25. Governor Das emphasized that the RBI remains vigilant regarding inflationary pressures and will take necessary actions to maintain price stability while supporting the country's economic recovery. The MPC's decision reflects a balanced approach, aiming to control inflation without stifling growth. The adjustments in repo rate have a direct effect on <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword> and job creation. The lower interest rates tend to stimulate economic growth by making borrowing cheaper for businesses.

You Searched For "rbi s balance" and got 12 results

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RBI's monetary policy committee meeting begins today, announcement on October 9

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Can investing in gold this festive season add the much-touted Midas touch to your investments?

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RBI leaves repo rate unchanged. What does this mean for you?

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Loan sanctioning has gone digital, but recovery still needs a 'feet on the street' approach, says RBI Deputy Governor

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RBI keeps repo rate unchanged at 6.5%: What is repo rate and how it affects you

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Credit growth in banks continues to exceed deposits, says new SBI report

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Lower money creation by RBI, substantial rise in banks profits behind decline in loan-to-deposits ratios in banks: Nomura

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India's balance of payments shows improvement in Q1 FY24

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RBI expected to begin rate cuts in October, with two reductions this fiscal: Crisil

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