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<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?

Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of microfinance and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, <keyword id="46717" type="General" weightage="20" keywordseo="IndusInd-bank" source="Orion">IndusInd Bank</keyword> set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e., an <keyword id="79363" type="General" weightage="20" keywordseo="npa" source="Orion">NPA</keyword>, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals, i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, <keyword id="30067" type="General" weightage="20" keywordseo="RBI" source="Orion">RBI</keyword>, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and Navi Finserv, from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending installments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honor any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its <keyword id="763994" type="General" weightage="20" keywordseo="Gross-NPA" source="Orion">gross NPA</keyword> for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. <keyword id="62152" type="General" weightage="20" keywordseo="IDFC-bank" source="Orion">IDFC Bank</keyword>’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in unsecured loans, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. Kotak Mahindra Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical Bollywood headmaster who runs his dominion with an iron fist and takes things (and ceiling rates) into their own hands. However, that's a story for another day.

Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

<div type="image" title="The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books." agency="ANI" msid="114778648" hostid="261" caption="&amp;lt;p&amp;gt;The RBI has cracked the regulatory whip on NBFCs and banks, who&amp;#39;ve been pushing microfinance and unsecured loans aggressively to grow their loan books.&amp;lt;/p&amp;gt;"></div> Imagine this. You have a younger sibling you’re mighty envious of. And why not? Unlike you, they seem to enjoy all the freedom and money in the world. They party like there’s no tomorrow, and here you are, stuck in a boring, ultra-disciplined but responsible routine that feels completely devoid of any independence, and mostly, funds. But of late, things are changing. This sibling is in massive trouble and just cannot escape the parent’s wrath anymore. Long story short, the party is over, and it is time to go back home. The rising defaults on this sibling’s part have now begun pulling the entire house down, thereby attracting the regulator’s ire. <h2>The Wild West of <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> and unsecured loans</h2>It's hard to ignore the issues with microfinance and unsecured loans in India. Many saw them as a small gamble and ignored the rising defaults much like the younger siblings’ tantrums, and now they find themselves in hot waters. The skyrocketing instances of non-payments aren't a micro-issue anymore and are threatening the stability of the entire banking system. In the quarter ended September 30, 2024, 5 of India’s 8 largest private sector <keyword id="19934118" type="General" weightage="20" keywordseo="banks" source="keywords">banks</keyword> reported a steep rise in their bad loan book, mostly thanks to microfinance loans. Some banks, in a bid to strengthen their fortress against these <keyword id="142154" type="General" weightage="100" keywordseo="bad-loans" source="Orion">bad loans</keyword>, have significantly upped their provisions. For instance, IndusInd Bank set aside Rs 525 crore during July and September 2024 to battle the menace of defaults on microfinance loans, which make up about 9% of its total loan book. See, banks rely heavily on their interest income, which they earn from advancing loans. Any loan where the borrower has not paid interest to the bank or defaulted for 90 days or more becomes bad, i.e. an NPA, or non-performing asset for the bank. And who likes things going bad? Simply put, there has been a steep rise in three areas, much to the dislike of banks and MFIs (micro-finance institutions). But hey, it's mostly their doing! <ol><li>GNPA ratio (gross net performing assets): The quantum of non-performing assets a bank has in proportion to its total assets.</li><li>Provision: The amount banks set aside to take care of such NPAs.</li><li>Slippage ratio: The rate at which good girls go bad, or the speed at which good loans turn into NPAs</li></ol>But how are these plaguing the Indian banking sector? And what does the road ahead look like? We decode it for you. <h2> Microfinance: A not-so-micro-menace</h2>Microfinance loans were initially brought forth for low-income households and individuals i.e. for those who might not generally have access to traditional ways of credit, like bank loans and more. They don’t require collateral or an asset to be pledged in lieu of the loan, making it a tad bit easier for borrowers. As of June 2024, the amount of outstanding loans in the microfinance industry stood at a staggering Rs 4,20,256 crore. Of this, NBFC-MFIs accounted for 40% and banks made for 33% of these. In 2022, RBI, in a bid to inspire some competition in this space, did something radical-they did away with the ceiling on how much interest MFIs could charge their customers. Previously, MFIs could add up to 12% to their cost of acquiring funds to determine the final interest rate chargeable to the consumer. So, assuming that Bank A incurs a 5% cost to acquire funds for further loaning, A could charge up to 17% interest from the end consumer. So, interest rates were in the hands of MFIs, and boy, did they have a gala time with it. Instead of spurring some healthy competition, as RBI expected, MFIs and banks went rogue and all guns blazing, competing for the title of “Who will charge the highest interest?” Recently, RBI banned 4 microfinance institutions (MFIs), namely Asirvad Micro Finance Limited, Arohan Financial Services Limited, DMI Finance Private Limited, and <keyword id="20117932" type="General" weightage="20" keywordseo="navi-finserv" source="keywords">Navi Finserv</keyword> from disbursing loans effective October 21, 2024. Why? Because they were charging 14% extra interest over their original cost of funds. To maintain their loan books (and pockets), banks and NBFCs resorted to shady practices like netting off loans, which RBI has now advised MFIs against. Here, lenders allow borrowers to settle a previous outstanding loan by issuing them a new loan! As crazy as it sounds, it helped banks to report less of their total assets as NPAs, since the new credit would cover pending instalments of the borrower’s previous loan. Then there was the issue of borrowers overleveraging, i.e. taking multiple loans using different IDs from various lenders and then failing to honour any of them. The consequence? Banks and NBFCs end up with massive NPAs. Data from credit bureaus suggests that over the last quarter, there was a 17.2% rise in the number of borrowers who had 5 or more active loans at the same time. <h2>Growth &gt; Caution</h2>It's an age-old tale unfolding yet again in India’s banking sector- Icarus flew too close to the sun and eventually, fell to its death. Between April and June 2024, NBFCs microfinance portfolio jumped by 2.7%. If you see this in terms of loan sources, microfinance loans issued by banks grew by 11.2% in Q1FY25. But the same portfolio in NBFCs swelled by almost double-23.9%. While most of these loans had an average ticket size between Rs 30,000-50,000, there was a sharp spike in the number of loans that had a ticket size of Rs 80,000 or more. Data suggests that as of March 2024, more than 12% of all microfinance borrowers had over 4 or more active loans. In dating parlance, this is a classic case of borrowers going polyamorous, minus the honesty and transparency. Not the best of situations, you'd agree! <h2>Will banks and NBFCs stand up to this stress?</h2>If their results for Q2FY25 are to be believed, NBFCs are not handling the pressure all that well. Or even slightly well. Only a few banks like Bank of Baroda (BoB), ICICI, and Indian Bank were up for the battle, even witnessing a decline in their loan delinquencies. Some others, like IndusInd Bank, saw their stock dip by a massive 16.2% over the last 5 days. Its slippages in the previous quarter burgeoned from Rs 15.3 billion in Q1FY25 to Rs 17.9 billion in Q2. As a result, the bank pushed a staggeringly high amount of money to create an NPA cushion for itself. While its management has highlighted its preference for secured lending, that was hardly reflected in its actions during the quarter, where growth in unsecured personal loans remained exceptionally high at over 7% on a QoQ basis. Turns out, only 44% of customers in IndusInd Banks’ microfinance loan portfolio were exclusive to it. The rest 47% were, you guessed it right-polyamorous! 27% had borrowed from another lender as well, apart from IndusInd Bank, while 20% were those who had outstanding loans with two other lenders, apart from IndusInd Bank. IndusInd Bank’s credit card segment did not miss the NPA bus and accounted for 7-8% of its GNPAs. Canara Bank’s total slippages during the previous quarter jumped to Rs 11.1 billion, up by 24.7% QoQ, and making up for 3.6% of its total loans. As for Bandhan Bank, its gross NPA for Q2FY25 inched up on a QoQ basis, up from 4.23% in Q1, to 4.68% in the second quarter. IDFC Bank’s heavy provisioning for its NPAs marred its profits significantly, causing its PAT (profit after tax) to dip by 73% on a YoY basis. Data from ICRA Analytics suggest that the AUM (asset under management) growth in microfinance loans and unsecured (personal and business) loans by the NBFCs will moderate to 10-12% and 19-21%, respectively, in FY2025 compared to 30% and 38%, in FY2024. Says A M Karthik, Senior Vice President &amp; Co-Group Head, Financial Sector Ratings, ICRA, “As bank funds constitute a larger share in the overall funding of NBFCs, a slower credit flow from banks to the NBFCs will compress their AUM growth. The NBFCs in unsecured and digital lending businesses shall face a higher squeeze in funding compared to others, and the unsecured lending space will continue to be a source of stress in the near term.” There has been uninhibited growth in <keyword id="6051027" type="General" weightage="20" keywordseo="Unsecured-loan" source="Orion">unsecured loan</keyword>s, apart from just the microfinance segment. For instance, Axis Bank’s gross slippages jumped by Rs 4,443 crore, largely thanks to its unsecured business. The same is the case with Yes Bank, which saw 35–40% of its retail slippages emerging from the unsecured loan portfolio. <keyword id="6376194" type="General" weightage="20" keywordseo="kotak-mahindra" source="Orion">Kotak Mahindra</keyword> Bank was also quick to follow Yes Bank’s suit, with around 35%-40% of its slippages coming from credit cards. <h2>How is the road ahead?</h2>While RBI has just cracked its whip and served a warning at the moment, experts at Morgan Stanley believe that more changes (read regulatory lashes) are underway. Moreover, with both festive and wedding seasons underway in our country, unsecured lending might pick up momentum, much to the disdain of the calibrated approach banks have been taking towards it so far. But if the situation doesn't improve, RBI will not waste any time in becoming the typical tyrannical <keyword id="19897820" type="General" weightage="20" keywordseo="bollywood" source="keywords">Bollywood</keyword> headmaster who runs his dominion with an iron fist. However, that's a story for another day. Do you have a topic in mind you'd want a simpler explanation for, or insights or personal experience to share on personal finance and more? Contact us at businessinsider@timesinternet.in.

Simply Put: Is the lending party over? The dangerous tango of Indian banks with microfinance and unsecured loans

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

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

Over the past few months, there’s been a lot of brouhaha about the lagging pace of bank deposits in India. Simply put, the rate at which Indians are depositing their hard-earned money in banks has been falling constantly, and some blame the increasing financialization of household savings in the country, or the rising preference of Indians towards mutual funds and shares. So, the hypothesis is that people are choosing to invest more in mutual funds and the Indian equity markets through direct investments, IPOs, or NFOs, the money flowing into Indian banks in the form of deposits is slowing down. But is that really the case? <h2>A crisis or a phase?</h2><keyword id="19899808" type="General" weightage="20" keywordseo="rbi" source="keywords">RBI</keyword> data suggested that for the quarter ended June 2024, bank deposits grew at 11.7%. On the other hand, credit growth has outpaced this at 15%. This means that the outflow from banks as loans is far greater than the inflow into them in the form of deposits in Q1 of FY 2024-25. The situation largely saw cut-copy-paste in the first week of September as well, with loans registering a 13.3% YoY growth during the period, while deposits rose only 11.1%. This gap has only been widening for the last 3 years. Since deposits are how banks gather assets to further lend and earn interest income as a consequence, even a slight dip could set the alarm bells ringing for banks, and rightfully so. And truth be told, mutual funds are indeed taking on bank deposits in a big way. Per a report by <keyword id="20250971" type="General" weightage="20" keywordseo="franklin-templeton" source="keywords">Franklin Templeton</keyword>, in August 2024, the AUM (assets under management) of Indian mutual funds, or the total funds managed by them, stood at 31.3% of total bank deposits in the country, up from 24.20% during the year-ago period. As of August 2024, the AUM of mutual funds stood at Rs 66.17 lakh crore, an all-time high. But all said and done, is this really the reason why the rate of bank deposits is falling behind? SBI has dismissed this to be a “statistical myth”, and experts point out that since equity and fund houses also keep the cash in their respective bank accounts, there’s no cause for concern. So, is financialization really to be blamed for the trailing tempo of deposits? Or is something else happening behind the scenes? We take a closer look: <h2>First, are <keyword id="4000333" type="General" weightage="100" keywordseo="household-deposits" source="Orion">household deposits</keyword> really slowing down? And is that a cause of concern?</h2>Data from Motilal Oswal suggests the contrary. Deposits grew by around 10.4% between March 2020 and August 2024. Data from RBI also highlights that as of August 9, 2024, bank deposits witnessed a YoY growth of 10.8%. The loan-to-deposit ratio for the retail segment, which indicates what percentage of its total deposits the banks lend out as loans, has stayed at 77.5%, above the 77% mark for the tenth straight month. Also, we can’t forego the fact that the share of Indian <keyword id="20319599" type="General" weightage="20" keywordseo="households" source="keywords">households</keyword> in bank deposits has indeed slowed down. However, data from Axis AMC shows that the dip is marginal—from 63% in 2022 to 62% in 2023 and 61% in 2024. What has slowed down even more considerably is the share of government deposits in the aggregate bank deposits, which has dipped from 14% in 2018 to 9% in 2024. So, it's not just household deposits, you see. Moreover, as of March 2024, the collective CASA ratio (current and savings account deposits) of all commercial banks in India stood at 41.00%, down from 43.1% in March 2023 and 45.2% in March 2022, marking a nearly 5% point decline over the past year, while still staying over the 10-year average of 39.2%. This implies that Indian banks are relying more on higher-cost funds (savings accounts), which can limit their profitability. <h2>What is this financialisation of savings we are talking about?</h2>Then again, there is no doubt about the growing affinity of Indians towards mutual funds and stock markets. Recent data from CBDT (<keyword id="19942037" type="General" weightage="20" keywordseo="central-board-of-direct-taxes" source="keywords">Central Board of Direct Taxes</keyword>) highlights that India’s net direct tax collection surged by around 22%, driven exclusively by the significant uptick in the collection of <keyword id="20930760" type="General" weightage="20" keywordseo="securities-transaction-tax" source="keywords">Securities Transaction Tax</keyword> (STT), which doubled to Rs 26,154 crore, from Rs 13,352 crore in the year-ago period. Why does this matter? STT is levied when you buy or sell equity shares on stock exchanges, sell equity mutual funds, and trade in futures and options in the equity segment. Such taxes, including the multiple other taxes in equity market investments, are considered as leakages as the money moves out of the economy into government coffers. Data from a ValueQuest report explains that over the last 20 years, the markets have handsomely rewarded the investors, generating over $900 billion in incremental value for them. This is the major driver behind the dramatic rise in investment flowing towards the equity markets. There’s further proof of this budding romance, if you check the demat pudding. The number of demat accounts, which are a primary requisite for participating in the stock markets, also burgeoned by 42.3 lakh in August 2024, taking India’s total tally of demat accounts beyond 17 crore. To put this in perspective, this is almost equivalent to the population of just 8 nations in the world, including China, the US, Brazil and more. Vivek Iyer, Partner, Grant Thornton Bharat thinks it's rather important, as well. “Financialisation of household savings in India is an indication of deepening capital markets in the market, especially from a retail investor standpoint. Bank deposits with a modest rate of return are no longer the only option for savings for investors. Investors today have more avenues for wealth creation in the form of public capital markets, which have democratized wealth creation and provided equality of opportunity to retail investors”, he says. Yes, Indians are investing more and more in the markets, and in mutual funds. But is it a sin to look out for inflation-beating returns, which the stock markets offer, and vanilla bank deposits don't? After all, the allure of 12-13% annual returns offered by equities can certainly pale the stability offered by good old deposits, which generally do not go beyond 9% when it comes to annual returns. But all of this is not what is behind the slowdown. India is still a toddler in the school of savings financialization, with less than 10% of the population holding a demat account, and less than 5% of us saving in equities. That's a drop in the ocean of deposits, far inadequate to trigger a tsunami. <h2>Tell me why lagging deposits have nothing to do with Indians investing more in mutual funds!</h2>Says Shweta Rajani, Head - Mutual Funds, Anand Rathi Wealth Limited, “Households' equity holdings composition grew from 11.1% in FY 23 to 14.7% in FY 24. This trend reflects a growing awareness of investment options, empowering individuals to take control of their financial futures. Despite this transition towards equities, banks still hold a significant share of household financial savings—33.5% in FY24 compared to 34.9% in FY23”. Also, household savings and their subsequent financialization do not have much to do with deposit creation, which is entirely made by banks. What actually drives increased deposits is credit growth or increased lending. When interest rates are eased, people tend to borrow more and spend more, which circulates more money in the economy. For the past 4 years, RBI has been tightening the screws on interest rates, which raises the cost of borrowings, and makes it more expensive to take loans, putting a dampener on credit growth, but effectively curbing inflationary pressures. The last time RBI cut the repo rate by 40 basis points was back in May 2020, 4 years ago. The lag in deposit growth we’re witnessing is almost 3 years old. Coincidence much, or just good old economics at work? But with the <keyword id="19900043" type="General" weightage="20" keywordseo="fed" source="keywords">Fed</keyword> recently setting a rate cut precedent by slashing 50 bps off its interest rate, RBI is expected to follow suit in the next <keyword id="19918491" type="General" weightage="20" keywordseo="mpc" source="keywords">MPC</keyword> (Monetary Policy Committee) meeting, scheduled for November 2024. A rate cut would ease the aforementioned high cost of borrowing, and increase loan-taking for corporates and institutional investors, thereby stoking consumption in the economy. And then, deposit creation in banks is likely to return to its former glory. If not, then that would be a curious case to unravel! But that worry is for another day.

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

<ul class="summary-list"><li>Dana Mayer moved back to the US after living in the UK for 25 years.</li><li>She used to get frustrated by the British tendency to accept mediocrity.</li></ul>I wasn't prepared for how much the US had changed when I moved back. I'd been <a target="_blank" href="https://www.businessinsider.com/things-american-misses-after-moving-back-from-uk-2022-11">living in the UK</a> for 25 years, but when the <keyword id="19913581" type="General" weightage="20" keywordseo="pandemic" source="keywords">pandemic</keyword> kicked off in March 2020, I decided it was time to go home. It wasn't until returning that I realized how British I'd become and that "home" was more difficult to define. Now, after having lived almost half my life in each country, I feel equally in love with both, although for very different reasons. I struggled with the lack of <a target="_blank" href="https://www.businessinsider.com/social-life-differences-living-in-uk-compared-to-us">personal space in the UK</a> — some of that stems from the UK's population density being almost eight times that of the US per square mile, per <a target="_blank" href="https://data.worldbank.org/indicator/EN.POP.DNST">World Bank Open Data</a>. This translated into <a target="_blank" href="https://www.businessinsider.com/london-dumpster-tiny-home-how-i-use-space-photos-2023-4">tiny homes</a> with common walls even in the countryside and jostling for sidewalk space in the cities. It also seemed to result in a populace adverse to talking to or making eye contact with strangers in order to protect their perceived sanity. <h2>Size and space struck me when I returned to the US</h2>Fresh out of COVID quarantine, I was visiting a friend in a New York City suburb, looking around their giant kitchen with its oversized fridge. I didn't even have to go outside to their huge lawn or the wooded roads surrounding the property to feel my energy expand into what was simply more space per person. This is also when I spotted an enormous orange pepper on the kitchen counter that looked like a mutant interloper. Was this actually food? Was it a pepper crossed with some kind of alien Godzilla? It was so big that I took a picture. I spent the rest of the day laughing at its size. In keeping with the <keyword id="20075613" type="General" weightage="20" keywordseo="American" source="keywords">American</keyword> freewheeling mentality, expansive personal space, and a business mindset that allows for growth and experimentation, the pepper, as well as other fruits, vegetables, and even portions, in the US are typically bigger. In the UK, the small peppers fit into small houses, and the food was closer to its natural form. Their relatively closed mindset of "we've always done it this way" actually kept their food closer to the source. However, we'll see how big their peppers get in the years ahead. The pandemic gave me time to reflect on a lot of things <a target="_blank" href="https://www.businessinsider.com/things-brit-in-new-york-city-misses-about-england-manchester-2024-1">I missed about the UK</a> — the <keyword id="20050314" type="General" weightage="20" keywordseo="National-Health-Service" source="keywords">National Health Service</keyword>, the intelligent level of public discourse, and the newscasters without plastic hair. There was also the quiet dignity of the seemingly closed people who would keep you out of their inner circle until, finally, they let you in in a grounded, loyal way. In contrast, folks in the US often unravel their whole life story to me while standing in the Target checkout line. <h2>But I never quite fit in while living in the UK</h2>In the UK, I always felt like an outsider in some ways, especially when doing things like playing Trivial Pursuit. No matter how long I lived there, I never got most of the cultural references, because it's not where I'd grown up. I'm glad now that in the US I don't have to explain to anyone of my generation what <a target="_blank" href="https://www.businessinsider.com/best-kind-of-candy-corn-to-buy-reviewed-photos-2021-10">candy corn</a> is or who <a target="_blank" href="https://www.youtube.com/watch?v=tvAtG3T2NDY">Magilla Gorilla</a>, a 1960s cartoon, is. Still, I'm torn between the American expectation of excellence which can be over-the-top and relentless, and the British tendency to accept mediocrity, brush problems under the carpet, and sometimes have a more peaceful life as a result. When <a target="_blank" href="https://www.businessinsider.com/american-gen-zer-moved-to-london-wouldnt-recommend-to-everyone-2024-5">I first came to the UK</a>, I waited tables at a tourist-trap restaurant where the food was overpriced and microwaved rubbish. When I went to the table and asked about the meal, almost every British customer replied, "It was lovely," in a shy, sheepish way. Years later, my British ex-boyfriend, who held a high-level management position and told people what to do all day at work, used to get embarrassed when I asked restaurant staff to please wipe the table because it was dirty. As an American I'd grown up feeling entitled to a clean table when paying for service in a restaurant. Now, I cringe when I see Americans in restaurants demanding a free meal because their drinks arrive five minutes late. Four years after <a target="_blank" href="https://www.businessinsider.com/mistakes-moving-to-america-from-uk-2023-11">moving back to the US</a>, I'm grateful for the personal space, the "yes!" mentality, and the abundance of nature. But I do miss the cultivated hedgerows of the UK and the quiet, more reserved style of its people. And no matter how much affinity I felt with the land there, there is also some knowing and grounding with the land here, which feels like it cannot be replicated anywhere else. Perhaps because this is where I was originally rooted. July 4, 2024 — This story has been updated to remove mention of peppers in the US being massive due to the genetic engineering of crops. Got a <keyword id="22368221" type="General" weightage="100" keywordseo="personal-essay" source="keywords">personal essay</keyword> about <keyword id="21389910" type="General" weightage="20" keywordseo="relocating" source="keywords">relocating</keyword> that you want to share? Get in touch with the editor: <a target="_blank" href="mailto:akarplus@businessinsider.com">akarplus@businessinsider.com</a>.

I moved back to the US after 25 years in the UK. People abroad were more polite than Americans, but I never quite fit in there.

<ul class="summary-list"><li>Declining workforce participation among younger men could weigh on the US economy for years.</li><li>The trend could be a drag on economic growth, housing, and Social Security funds, experts say.</li></ul>America's job market is <a target="_blank" href="https://www.businessinsider.com/employment-young-men-labor-force-jobs-unemployment-insurance-hiring-2024-5#:~:text=America's%20young%20men%20aren't,was%20often%20closer%20to%2095%25.">mysteriously short of young men</a>.It's a trend experts say will drag on the economy and could take years to fix, mainly because men have already been dropping out of the workforce for decades.According to Carol Graham, a senior fellow of economic studies at the Brookings Institute, the labor force participation rate of prime working-age men has been <a target="_blank" href="https://www.businessinsider.com/us-men-working-less-recessions-employment-productivity-2024-4">declining over the last twenty years</a>. Today, 11% of men aged 25-54 <a target="_blank" href="https://www.businessinsider.com/young-men-working-less-no-college-degree-student-loan-debt-2024-5">don't have a job and aren't looking for one</a>, more than triple the percentage recorded in 1955, when just 3% were out of the workforce, according to data from the Bureau of Labor Statistics.That amounts to around 7.2 million prime working-age <a target="_blank" href="https://www.businessinsider.com/employment-young-men-labor-force-jobs-unemployment-insurance-hiring-2024-5">men who aren't working</a>. That's introduced a host of problems for the economy, leaving key industries understaffed, and adding to the strain on government services and social safety nets, Graham and other experts told Business Insider."Some of them drop out [of college] and are just sort of forlorn and have no purpose or meaning in life. They're not very likely to be married. They're very likely to be living in their parent's basement," Graham said. "They're lonely, they're isolated."The economic burden can also compound through generations, she added, given that men who have exited the workforce tend to be lower-income and are more likely to report <a target="_blank" href="https://www.businessinsider.com/disconnected-youth-a-tale-of-2-gen-zs-in-america-2024-4">mental and physical health problems</a>, which impact their children's ability to build wealth.Zack Mabel, a research professor at Georgetown University, theorizes that falling labor force participation among young men could impact the economy for at least several decades."At this point, it's a long trend over the course of multiple decades that does not appear to be improving, and could have real long-term consequences," he said.<h3 id="21b7ceb6-5c10-4411-8bf5-94b94fe51a82">Straining the economy</h3>The economy appears to already be feeling the <a target="_blank" href="https://www.businessinsider.com/young-men-work-less-financially-independent-salary-marriageability-2023-6">decline in male workforce participation</a>. Despite a small post-pandemic rebound, US GDP per employee fell 1% in 2022, the first decline seen since the <a target="_blank" href="https://data.worldbank.org/indicator/SL.GDP.PCAP.EM.KD?locations=US">World Bank</a> began recording productivity data over 30 years ago.The overall labor force participation rate, meanwhile, has slumped to 62%. Besides the years following the pandemic, US workforce participation rate hasn't been that low since the 70s, <a target="_blank" href="https://data.worldbank.org/indicator/SL.TLF.CACT.NE.ZS?locations=US">World Bank data</a> shows.The trend could weigh on key industries, like infrastructure and <a target="_blank" href="https://www.businessinsider.com/us-is-experiencing-factory-boom-but-finding-workers-is-difficult-2023-7">manufacturing</a>, where women are often less likely to seek work due to social stigma, Mabel said. That means it could be hard for those industries to find workers, which is a big problem considering the need for labor in growing areas like <a target="_blank" href="https://www.businessinsider.com/semiconductor-chips-jobs-hiring-arizona-tech-phoenix-tsmc-intel-china-2024-1">semiconductors</a>, he added."In a situation where you have millions of men … foregoing college, and as a result are less productive and less able to hold onto a stable job, yes, that certainly would raise concerns our national productivity would suffer as a result," Mabel said.And while the housing market may be booming now, it is also possible that men leaving the labor force will weigh on that market as well. Meredith Whitney, a longtime Wall Street forecaster, predicts home prices could drop as much as 30% over a period of years thanks to men working less, being less interested in starting families, and being more likely to live with their parents.Those trends all weigh on household formation, which is the most important factor in determining home prices over the long term, Whitney said.42% of men who have exited the workforce <a target="_blank" href="https://www.brookings.edu/wp-content/uploads/2017/08/es_81717who_is_out_of_the_labor_force_analysis.pdf">live with at least one parent</a>, a 2017 Brookings study found."This is such a seismic shift in the social structure," she told BI. "It's hard to say how long it lasts."Government benefits are also hugely taxed by men who are not in the workforce.Men who have dropped out of the workforce, for one, are significantly more likely to suffer from opioid addiction, Graham said. 44% of men who were out of the workforce said <a target="_blank" href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6364990/">they needed to take pain medication</a> — more than double the portion recorded in employed men, where just 20% took pain meds, a separate Brookings study found.57% of men not looking for work said they had a physical, mental, or behavioral reason, according to a survey conducted by <a target="_blank" href="https://bipartisanpolicy.org/report/bpc-artemis-survey/">BPC-Artemis</a>.11% of men who have exited the labor force rely entirely on government welfare programs for income, according to Brookings data."They cost the health system. They go to the emergency room and they're sick, they're not going to be able to pay the bills," Graham said. "That's coming out of somewhere."The welfare burden is exacerbated by the fact that unemployed men aren't contributing to benefit programs such as through Social Security taxes."Potentially, more and more people would benefit and depend on resources that we don't actually have the means to provide ... And that then would really present itself as a huge societal conundrum," Mabel warned.There's no clear answer for how to get young men back into the workforce. The causes appear to be <a target="_blank" href="https://www.businessinsider.com/employment-young-men-labor-force-jobs-unemployment-insurance-hiring-2024-5#:~:text=And%2052%25%20of%20men%2016,enough%20to%20draw%20them%20in.">multifold</a> — disabilities, incarceration, and wages not being enticing enough, to name a few —but possible solutions could lie in helping train men for the jobs that are available, according to Graham, or finding ways to give young men role models, such as by hiring more male teachers, Mabel said."There's clearly an economic cost for more than one generation if the trends continue," Graham told BI. "There are lots of ways it costs society in addition to their individual human lives."

A shortage of young men in the workforce could weigh on housing, Social Security, and growth for years to come 

<ul class="summary-list"><li>TikTok is irking business partners and users as it pushes its priorities in music and e-commerce.</li><li>It's won past fights by spending billions of dollars and making savvy business moves.</li></ul>TikTok scored a victory this week, as President Joe Biden finally caved and joined its app.The move was an about-face for the president, whose administration had spent years calling it a national security risk. The White House had <a target="_blank" href="https://www.businessinsider.com/us-officials-tiktok-sale-potential-buyers-oracle-microsoft-private-equity-2023-3">pushed for a sale</a> of TikTok’s US assets. Now, Biden is posting "<a target="_blank" href="https://www.businessinsider.com/biden-white-house-dark-brandon-meme-far-right-dark-maga-2022-8">Dark Brandon</a>" memes on the app like other TikTokers.The president's arrival on TikTok is the latest win for the company, which has used the <a target="_blank" href="https://www.npr.org/2023/11/30/1205735647/montana-tiktok-ban-blocked-state">courts</a>, <a target="_blank" href="https://www.businessinsider.com/tiktok-bytedance-spent-millions-federal-lobbying-ban-congress-tech-2023-1">political lobbying</a>, and its <a target="_blank" href="https://www.businessinsider.com/tiktok-ceo-shou-zi-chew-thirsty-edits-hype-montage-congress-2023-3">CEO’s charm</a> to ward off political attacks.Amid its recent triumphs, TikTok isn’t shying away from conflict elsewhere. And it's been pissing off a lot of people.It’s been deep in a public spat over <a target="_blank" href="https://www.businessinsider.com/how-tiktok-music-influence-is-put-to-the-test-in-umg-fight-2024-1">music licensing</a> with one of its most important partners, Universal Music Group. Music by artists like Taylor Swift and Olivia Rodrigo is now gone from the app. The fight has turned nasty, with UMG accusing TikTok of allowing a “tidal wave of hate speech, bigotry, bullying, and harassment,” and TikTok responding with the claim that UMG was putting its “own greed above the interests of their artists and songwriters.”TikTok has also been irking some of its users and <a target="_blank" href="https://www.businessinsider.com/tiktok-shop-users-complain-its-making-the-app-dystopian-2023-11">creators</a> in recent months as it’s aggressively pushed its e-commerce feature, Shop. The company flooded the app’s “For You” page in December with promotions around <a target="_blank" href="https://www.businessinsider.com/leaked-brief-shows-tiktok-hosting-black-friday-contests-for-sellers-2023-10">Black Friday</a> and Cyber Monday as it sought to <a target="_blank" href="https://www.businessinsider.com/mixed-results-tiktok-shop-first-us-black-friday-cyber-monday-2023-12">deliver holiday sales</a> for merchants. It's also <a target="_blank" href="https://www.businessinsider.com/tiktok-tests-using-ai-detect-products-in-videos-drive-sales-2023-10">scanning TikToks</a> to identify products it can try to sell you, pushing commerce into every corner of the app.<a target="_blank" href="https://www.businessinsider.com/tiktok-is-bad-boring-fyp-2024-2">Some users</a> <a target="_blank" href="https://www.vox.com/technology/2023/9/14/23872449/tiktok-shop-for-you-page-ads">have</a> <a target="_blank" href="https://slate.com/podcasts/icymi/2023/09/will-tiktok-shop-make-the-app-unusable">said</a> it’s ruining the app by promoting shopping over the funny skits and dancing videos that first made TikTok popular.TikTok thinks it's special and unique because, so far, it has been. That won't last if it stops listening to its core audience of users and partners.TikTok’s ability to survive the next phase of the social-media wars could be threatened if it destroys its goodwill with music partners, creators, and users. Short-video feeds from competitors can easily service users and advertisers. Taking its access to music for granted or force-feeding shopping content onto users at the expense of creator videos could <a target="_blank" href="https://www.nytimes.com/2024/02/01/arts/music/tiktok-over.html">spell the end of TikTok's winning streak</a>.A TikTok spokesperson declined to comment for this story.<h2>Why TikTok thinks it can throw its weight around</h2>TikTok is puffing up its chest and fighting for its business priorities, even if that means <a target="_blank" href="https://gizmodo.com/tiktok-is-destroying-itself-from-the-inside-out-1851227491">angering</a> partners, creators, and users. Its confidence is, in some ways, earned.The company pulled off what many thought was impossible by introducing a social-media app in 2017 into a marketplace dominated by startup killers or acquirers like Facebook and Google. With 170 million monthly US users and more than a billion users globally, per the company, it’s no longer an upstart challenger but a Big Tech player.TikTok's growth did not happen by chance.Yes, its app has been successful due to its uniquely personalized algorithm and savvy approach to working with creators. But ByteDance also spent hundreds of millions of dollars on <a target="_blank" href="https://fortune.com/2017/11/10/toutiao-buys-app-musically-800-million/">acquisitions</a> and <a target="_blank" href="https://www.wsj.com/articles/tiktoks-videos-are-goofy-its-strategy-to-dominate-social-media-is-serious-11561780861">marketing</a> to introduce TikTok to international audiences, helping the app become a <a target="_blank" href="https://variety.com/2018/digital/news/tiktok-jimmy-fallon-musically-app-downloads-1203032629/">household name</a> in the US and abroad.The company took a similar approach when trying to solve its problems with Washington, <a target="_blank" href="https://www.businessinsider.com/tiktok-us-user-data-storage-project-texas-privacy-security-2023-3">throwing $1.5 billion</a> at a new division focused on guarding US user data and <a target="_blank" href="https://www.bloomberg.com/news/articles/2024-01-31/tiktok-ceo-pledges-2-billion-to-protect-170-million-us-users">pledging to spend</a> $2 billion on trust and safety work in 2024. It’s also breaking the bank in its e-commerce push, as the company prepared in 2023 to lose hundreds of millions of dollars on TikTok Shop in the US, <a target="_blank" href="https://affiliate.insider.com?h=679b69fa00add8b912fc460e5ce3fa89bbd36c48b164691fabb60f3a22cd7230&amp;postID=65ce252de315c04c5d9d33bf&amp;postSlug=why-tiktok-is-pissing-everyone-off-right-now-2024-2&amp;site=bi&amp;u=https%3A%2F%2Fwww.theinformation.com%2Farticles%2Ftiktok-shop-on-track-to-lose-more-than-500-million-in-u-s-this-year%3F">The Information</a> reported in August. “They’re putting their money where their mouth is,” Meghana Dhar, <a target="_blank" href="https://www.businessinsider.com/ex-instagram-staffer-breaks-down-struggles-meta-social-live-shopping-2023-2">a former Instagram and Snap staffer</a>, told BI. “That’s how you win.”On the shopping front, TikTok is betting it can replicate some of the success of its sister app, Douyin, which is an e-commerce powerhouse in China generating hundreds of billions in annual sales. For leaders at ByteDance, who often have the <a target="_blank" href="https://www.businessinsider.com/tiktok-employees-say-staff-in-china-make-many-product-decisions-2021-12">final say over product decisions</a> at TikTok, <a target="_blank" href="https://www.businessinsider.com/whats-next-for-tiktok-look-at-china-douyin-2022-1">copying ideas</a> from Douyin to TikTok is part of their playbook.But, it may ultimately doom them, as the <a target="_blank" href="https://www.businessinsider.com/how-superordinary-is-bringing-live-shopping-to-us-from-china-2024-1">differences in shopping habits</a> between the apps' user bases could prove impossible to reconcile. Influencers play a bigger role as shopping guides in China — driving billions in sales — than they do in the US.The company's boldness is also showing in its relationship with the music industry.TikTok is definitely an important marketing tool for artists and record labels, which the company <a target="_blank" href="https://www.businessinsider.com/how-tiktok-music-influence-is-put-to-the-test-in-umg-fight-2024-1">pointed out</a> when UMG pulled its catalog from the app.But music marketers told BI TikTok isn't the only game in town, with some immediately <a target="_blank" href="https://www.businessinsider.com/how-tiktok-music-influence-is-put-to-the-test-in-umg-fight-2024-1">switching over UMG song campaigns to Instagram reels</a> and YouTube shorts after the catalog left TikTok.<h2>Pissing off users and creators could be TikTok's biggest mistake</h2>TikTok isn't the first tech giant to draw the ire of business partners as it's gotten too big for its britches — and it may ultimately back down from these fights.YouTube tried to take on the major labels <a target="_blank" href="https://www.billboard.com/music/music-news/warner-music-group-pulls-music-from-youtube-266068/">over royalty sharing</a> more than a decade ago and then opted to kiss the ring, so to speak.“YouTube was in the crosshairs of the entire industry,” Michael Huppe, president and CEO of SoundExchange, a nonprofit tech platform that collects and distributes digital royalties, including to UMG, told BI. “There were fights and battles and litigation. Fast forward to today, YouTube is now an active and accepted player in the industry.”But TikTok's greatest risk as it barrels forward on business strategies like e-commerce is pissing off its users. If TikTok no longer offers a stream of fun, serendipitous videos and instead becomes a social-media version of the Home Shopping Network, users may jump ship for Instagram reels, YouTube shorts, or Snapchat spotlight. As <a target="_blank" href="https://www.businessinsider.com/tiktok-is-bad-boring-fyp-2024-2">BI reporter Katie Notopoulos wrote</a>, "The For You used to seem uncanny in how it would serve up content perfectly tailored to me. Now it feels like the algorithm is less a diagnostic tool of my soul and instead is assessing me as a potential consumer."“There’s a real risk of the shopping product cannibalizing the core product,” Dhar said.

TikTok's aggressive growth tactics are upsetting partners, creators, and everyday users

<ul><li><keyword id="45660" type="CITY" weightage="20" keywordseo="Yes-Bank">YES Bank</keyword> has reported its highest quarterly net <keyword id="6362247" type="UNKNOWN" weightage="20" keywordseo="Profit">profit</keyword> ever since December 2018 at ₹207 crore.</li><li>Shares of YES Bank surged 5% as investors are cheering the company’s highest profit mark in recent times.</li><li>However, analysts remain disappointed with the company on high stress loans and recommend a ‘sell’ rating on the stock.</li></ul>Shares of YES Bank surged 5% on July 26 as the private bank reported a four-fold jump in its net profit to ₹207 crore in June quarter compared to a profit of ₹45 crore the same time last year. This is the highest profit for the private bank since December 2018. While investors cheered YES Bank’s good profit growth in recent years, some analysts remain disappointed with the company on high stress loans and recommend a sell rating on the stock. At 11:36 a.m., on July 26, shares of YES bank were trading 4.98% higher at 13.70 rupees. <div type="image" title="yes banks shares" height="900" width="1200" msid="84751111" hostid="261"></div> The sudden jump in the lender’s profit is because of the lower provisions made for bad loans held with the bank. It has lowered provisions by 88% to ₹644 crore in June. The bank also expects the provision requirement to go down going ahead. However, analysts studying the bank’s fundamentals and financials do not feel the same. “While there is a significant improvement in <keyword id="6357061" type="SPONSORED" weightage="20" keywordseo="earnings">earnings</keyword> in Q1, profitability remains low with return on assets of 0.3%, and stress loans remain uncomfortably high at 29%... We expect credit cost to rise to 2.1% in FY23E [expected] as ageing provisions catch up,” said a report by Elara Capital while recommending a ‘sell’ rating on the stock. Meanwhile, analysts at Kotak Institutional Equities believe that earnings are far too volatile given the impact slippages have on interest income (NII) and provisions. The bank’s capital position is above regulatory requirements, but the flexibility to make higher provisions is quite limited, said the report while maintaining a ‘sell’ rating on the stock. SEE ALSO: <a href="https://www.businessinsider.in/finance/banks/news/yes-bank-has-reported-its-highest-net-profit-since-december-2018-at-207-crore/articleshow/84678691.cms">YES Bank’s net profit grows four fold as provision for bad loans shrink </a> <a href="https://www.businessinsider.in/science/health/news/healthcare-startup-veera-raises-3-million-to-reach-more-pcos-patients/articleshow/84749847.cms">A Wharton MBA grad and a former GSK exec’s healthcare startup raises $3 million to reach more PCOS patients </a>

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