Investments and savings (personal): India
This is a collection of articles archived for the excellence of their content. |
Districts/ regions that invest the most
2021
Aseem Gujar, Sep 25, 2021: The Times of India
From: Aseem Gujar, Sep 25, 2021: The Times of India
Barpeta, a district in Assam that was among the worst affected by last year’s floods, has been one of the largest sources of new stock market investors this year. Since March, Barpeta has been among the top 10 districts, making up about 0.8% of new investors in August, according to NSE data. Telangana’s Ranga Reddy district (former Hyderabad rural) is among the other toppers, also contributing about 0.8% of new investors in August.
Though Delhi and Mumbai contribute the highest share of new investors (5.9% and 5.8%, respectively in August), smaller cities like Surat and Ahmedabad are registering a significant number of investors.
Paperless KYC and fully digital onboarding by stockbrokers are among the key factors that are blurring the divide between metros and tier-2 and-3 cities. “For the last 8-9 quarters, we have been seeing a rising trend of people coming from tier-2 and -3, it got accelerated during Covid. Before digitisation, we were serving only about 30% of India. So, the surge is from the new population that is getting access to the market,” said Dinesh Thakkar, CMD of Angel Broking, which added about 24 lakh new investors in FY21, a 4x jump over the previous year.
Household wealth
India and the world, 2021
From: Dec 1, 2022: The Times of India
See graphic:
Household wealth in India and the world, presumably in 2021
India’s investable, personal wealth
2017: India was no.11 in the world
India’s personal wealth may grow at 13%: Report, October 9, 2018: The Times of India
The US leads the chart in terms of total personal wealth with $80 trillion in 2017, which is projected to touch $100 trillion by 2022. China is ranked second, with a total personal wealth of $21 trillion, which is expected to more than double to $43 trillion by 2022.
The report noted that India constitutes the second largest pool of wealth from emerging markets in the coming years, with $2.2 billion. It is the fifth largest Asian market in number of affluent, high net worth, and ultra high net worth individuals. There were 322,000 affluents, 87,000 high net worth individuals and 4,000 ultra high net worth individuals in the country in 2017, according to the report. It observed that nearly 70% of the country’s personal financial wealth would be accessible to wealth managers in 2022.
The 70% investable wealth in the country includes listed equity, bonds, investment funds, currency and deposits, and other smaller asset classes, while 30% non-investable wealth includes life insurance and pensions, unlisted equity and other equity.
Investment in stock markets, banks, mutual funds, gold
1995-2015
The Times of India, Nov 02 2015
Uma Shashikant
Much has changed in the way India invests since 1995, and mostly for the better
Everyone is celebrating 20-year milestones these days. The nice thing about history is that we can attempt to explain the present by looking at the past, with the benefit of hindsight. What then seemed tough, foolish and difficult, seems pathbreaking today. Then there are things that do not change, ever. It's my turn to do the 20-year flashback this week. Stock markets
In June 1994, a new wholesale market for debt was set up. Funded by institutions, it used the best satellite technologies and tried to create a market where institutions would buy and sell debt securities.But the debt markets in India were not ready for it. The leaders changed course and deployed the systems to create a new equity market. It wasn't easy .
Equity markets were already being served by 20+ stock exchanges, the oldest and largest in the same city as the new one. The new market went ahead nevertheless, permitting trades in equity shares listed on other exchanges on its satellite-linked electronic system.
In 1995, the experiment succeeded.The new market overtook the old in business. The National Stock Exchange (NSE) is an example of how a new entity can bring about positive change. How it can create a new system with higher efficiency , lower costs, wider participation, better technology and higher integrity .NSE modified how investors trade in India, creating a trading, clearing and settlement system on par with the best.
Banks
In January 1995, HDFC Bank opened its first branch in Mumbai. In March 1995, it offered shares to the public in an IPO priced at `10 per share, to mobilise `50 crore. The issue was oversubscribed 55 times and opened to trade at `40. The popular opinion was that the bank would soon merge with its illustrious parent.
All through the 1990s, public sector banks hogged the limelight for their equity offerings. No one gave private sector banks much of a bright prospect.
The PSU banks were well entrenched.They were bankers to the government and public entities. The cost of funds for the public sector banks was low, and the regulatory requirements was uniformly applicable to the new private banks too.If the new banks tried to bring in sophistication and technology , they had to face competition from foreign banks, that held a monopoly over the NRI and remittance businesses, apart from working with the large private corporate treasuries. Where was the room for new private banks? Twenty years on, private banks have built a new retail lending market that is large and growing. They have captured a large share of the institutional business. They offer superior technologies and service, and have managed to do so at a lower cost compared to their public sector counterparts, and have stronger, better and bigger balance sheets.
Mutual Funds
If one looked at mutual funds in 1995, UTI dominated with over 90% market share.While the other players were trying to find their feet, UTI was launching a slew of monthly income plans (MIPs) which promised double digit returns. The other public sector mutual funds were suffering the consequences of faulty product launches in 1991-92. They had sold 7-year closed end equity funds, with the promise of doubling and tripling the returns, and the NAVs were nowhere near target.
The new private sector funds did their best to market their products, but did not mobilise much money from investors who were worried about the lack of liquidity . Mutual funds had to list on the market and it was common for prices to be lower than the NAV . Approvals were tough to get. Banks and institutions were not selling funds, yet.
It was in 1995 the first wave of process innovation hit the mutual fund industry with open-ended funds with account statements and no certificates. Dividend and growth options were offered and banking distribution was tied up. But the struggle was with the idea of assured returns that investors clamoured after.
In 1995, when global investors were asking for depository and T+3 rolling settlement, what we had then seemed rudimentary . Today, the NSE has helped set up several stock markets across the world and is a model for risk management and settlement guarantees. In 1995, it seemed banking belonged to the public sector.Today , the success of private banks has established that PSU banks will have to restructure or fade away .
As for mutual funds, there is enough evidence to establish that a diversified portfolio over the long run beats all other investment options. But investors seem busy trading stocks and investing in bank deposits, and not engaging enough with funds. The plague of new schemes sold with inflated promises and performing schemes staying in the background has not changed. Not in 20 years.
2007-16
The Times of India, Feb 02 2017
No one asset outperforms others consistently over time. In the past one year, equity mutual funds and government securities gave higher returns than other assets. Over 10 years, it's gold that beats all other asset classes. For consistent long-term gains, put your eggs in several baskets. Of course, returns is only one of the three criteria to look for before investing--safety and liquidity are the other two. Government securities, the safest investment option, matched returns from equity funds last year. But this is a rare occurence
2008, 2014-19
From: February 2, 2020: The Times of India
See graphic:
2008, 2014-19: household savings in India
2011-18: household savings
India’s household financial savings at a new high, November 30, 2018: The Times of India
From: India’s household financial savings at a new high, November 30, 2018: The Times of India
The share of financial savings by Indian households has touched a high of 11.1% of gross national disposable income (GNDI). However, the share of deposits, which rose to a high of 6.3% on the back of demonetisation in 2016-17, has shrunk to 2.9% of GNDI. But households are borrowing much more, as reflected in the financial liabilities, which has grown to a high of 4%.
2011> 19
Indians are saving less and it's going to hurt, February 20, 2020: The Times of India
From: Indians are saving less and it's going to hurt, February 20, 2020: The Times of India
NEW DELHI: The slowdown in the economy has taken a toll on our savings and that has resulted in the country's savings rate falling to a 15-year low. India's gross savings fell to 30.1% of the gross domestic product (GDP) in 2018-19 from 34.6% in 2011-12, and 36% in 2007-08. The previous low was 29% in 2003-2004.
Your savings: Indian households contribute to about 60% of the country's savings but household savings, as a per cent of GDP, have fallen from 23% in 2012, to 18% last year. That could be either because we are buying more things (but slowdown in consumption is one of the reasons for the economic slowdown) or paying more for services like health and education, which have become costlier.
Why it matters: While saving for a rainy day or retirement is important for individuals, savings are important for the economy too as the pool of domestic savings equals low cost funds available for investment. For the economy to grow at a higher rate, it needs more investments and investment needs funding.
Domestic savings reduce the cost of borrowing for public and private investments. A falling savings rate could lead to Indian companies borrowing more from overseas markets, raising India's external debt (which rose to $543 billion in 2018-19 from $475 billion in 2014-15).
Bottomline: Indian economy's growth critically depends on your savings. Now, will your savings help India get out of the slowdown mode (economists also attribute the current slowdown partly to the fall in the savings rate) or will a growing economy get you to save more?
2016: FDs top
FDs most preferred saving option: Survey, April 6, 2017: The Times of India
More than 95% households prefer to park their money in bank deposits, while less than 10% opt to invest in mutual funds or stocks. Life insurance was the second most preferred investment vehicle, followed by precious metals, post office savings instruments and real estate, a survey by Sebi showed. It also showed that mutual funds came in at the sixth place (9.7%), followed by stocks (8.1%), pension schemes, company deposits, debentures, derivatives and commodity futures (1%) as investment vehicles for the urban households. Respondents were allowed to select multiple options.
The survey , conducted across urban and rural areas of the country , showed that among rural households, not even 1% of the survey respondents were investors, while even the awareness about mutual funds and equities was dismal at just 1.4%.
However, 95% of rural survey respondents had bank accounts, 47% life insurance, 29% post office deposits and 11% saved in precious metals. On a positive note, the survey found the investor base in India increasing, as nearly 75% of the respondents said they had participated in securities markets for the first time in the last five years. The survey had a sample size of 50,453 households and using a bootstrapping methodology , it was estimated there were a total of 3.37 crore investor households in India. Of these, 70% reside in urban areas.
2017: 8 lakh crore equities and mutual funds
Indians invested more in stocks than in FDs in FY17, December 13, 2017: The Times of India
From: Indians invested more in stocks than in FDs in FY17, December 13, 2017: The Times of India
Indian investors are finally moving from bank fixed deposits (FDs), real estate and gold, the traditional investment products, to equities and mutual funds. In fiscal 2017, Indians invested Rs 8 lakh crore in stocks compared to Rs 3.4 lakh crore in FDs.
At the end of FY17, total investments by Indians in equities at Rs 37.6 lakh crore was just Rs 2.5 lakh crore short of total FDs, pegged at Rs 40.1 lakh crore. This is the closest that the total equity wealth of Indian investors have ever come to bank FDs, a report by Karvy Private Wealth showed. At the end of FY16, the difference was over Rs 7 lakh crore with Rs 36.8 lakh crore in FDs compared to Rs 29.6 lakh crore in stocks, the report showed.
The firm believes total investments by Indians in equities will surpass wealth in bank FDs by the end of the current fiscal. “After losing a bit of traction, financial assets have regained their pole position in FY17. Wealth creation through equities has not been restricted to big institutional investors as individual participation, too, saw a huge jump via the direct as well as mutual funds route,” said Abhijit Bhave, CEO, Karvy Private Wealth.
2018-19: Realty, gold top picks for HNIs
Rupali Mukherjee, August 30, 2019: The Times of India
From: Rupali Mukherjee, August 30, 2019: The Times of India
Real estate is the most preferred investment asset class for high net-worth individuals (HNIs) in next 3 years, followed by stock markets, according to the Hurun Indian Luxury Consumer Survey. This is despite the slowdown in real estate witnessed over the last three years, and turbulence in stock markets over the past 18 months. This is the first year of an India survey by Hurun Research Institute, which aims to track changes and preferences of lifestyle, consumption habits and brand cognition of HNIs.
Around 31% respondents believe that their investment allocation towards real estate sector will grow in the next two years. In line with IMF’s prediction of economic growth, equity markets followed by fixed income is the second and third choice, respectively. Interestingly, 21% respondents want to reduce allocation to real estate in the short term, and around 20% want to reduce exposure to gold. While 9.5% said investments into real estate will be at a status quo, the remainder believed that it would decline.
The UK is the most popular investment destination for HNIs. Singapore takes second place, and Canada along with the US, which is forecast to grow 2-4% (at constant exchange rates this year), rank third. Nearly a fourth (24%) are “very confident” about the Indian economy over the next three years, 40% “confident”, while around 36% are pessimistic. As many as 36% of HNIs said their investment philosophy for this year would be “avoiding risk”, while only 14% will make “active investments”.
Among collectibles, HNIs prefer to spend the most on art and jewellery. Nearly half the respondents have two to three cars, 37% have only one car and 6% have more than five cars. Up to 46% of them renew their car every three to four years.
2018-21
Sidhartha, Dec 14, 2021: The Times of India
From: Sidhartha, Dec 14, 2021: The Times of India
It may be an early trend, but it points to changing investment behaviour in the country.
The government presented two sets of numbers in Parliament, which showed that the growth of small savings accounts had slowed down over the last three years. This included almost every scheme, barring Sukanya Samriddhi for the girl child.
In contrast, there has been a spurt in the number of demat accounts opened during this period, indicating that more investors were opting to park their funds in equities by investing directly in the stock markets.
So much so that between April and November 2021, 2.3 crore new small savings accounts were added, translating into a monthly average of around 29 lakh.
During April-October 2021, a little less than 1.9 crore demat accounts were opened, translating into an average of 26.7 lakh every month. The number of accounts opened during seven months for the current financial year is over 30% higher than the number for the previous full financial year.
If one were to look at the total stock of demat accounts, their number has jumped over two times from under 3.6 crore in 2018-19 to 7.4 crore at the end of November 2021.
Most investment advisers would tell you about the swelling number of retail investors seeking to take advantage of the stock market rally, which has resulted in more and more flocking to invest in equities, either directly or through mutual fund route.
No wonder that compared to March-end, the number of mutual fund folios had shot up by 1.9 crore when AMFI released the data last week. And, again, the number of folios added during this period is twice the number increased during the last financial year.
“Demat account reflects the capital market, while small savings are like fixed deposits. There is a secular switch from investment going from FDs to the capital markets. With the IPO boom, InvIT, passive ETF and other instruments, more and more people are coming towards capital markets,” said Rashesh Shah, who heads Edelweiss, a financial services group with a brokerage and a fund house. He suggested that the number of demat accounts may swell further as the government readies the mega Life Insurance Corporation IPO with a portion reserved for policyholders.
2019
From: Oct 27, 2019: The Times of India
See graphic, ‘Wealth held by individual Indians in physical form, 2019 '
2020-21: savings exceed investments
May 28, 2022: The Times of India
New Delhi/Hyderabad: DMK, which is in office in Tamil Nadu, topped both the income and expenditure lists of 31 regional parties for the financial year 2020-21, according to a report by the Association for Democratic Reforms (ADR).
The Stalin-led party’s income was Rs 150 crore while its expenditure was Rs218 crore. DMK also reported the highest increase in its income at Rs 85 crore followed by JD(U) and YSRC in FY21 from FY20.
The total income of the 31 regional parties for FY21 was Rs 529 crore. DMK bagged the highest’s share at 28% of the total income of all the parties analysed, followed by YSRC (Rs 108 crore or 20%) and BJD (Rs 73 crore or 13%).
Five regional parties also declared that they have received donations of Rs 250. 60 crore through electoral bonds in 2020-21, according to ADR. The five parties that incurred the highest expenditures that year are DMK (Rs 218. 49 crore), TDP (Rs 54. 769 crore), AIADMK (Rs 42. 37 crore), JDU (Rs 24. 35 crore) and TRS (Rs 22. 35 crore), it said. The total income of the top five parties amounted to Rs 434. 255 crore, which was 82% of the total income of the parties analysed, collectively, the report said.
YSRC leads the list in maximum amount unspent (99%) of its total income, followed by BJD (90%) and AIMIM (88%). TDP has declared spending Rs 51 crore while TRS spent Rs 22 cr. As per the data shared by SBI in response to ADR’s RTI application, electoral bonds worth Rs 1,019 cr were redeemed by parties in FY 2020-21. Under voluntary contributions, the parties collected Rs 250. 60 crore or 47% of their income from donations through electoral bonds, while other donations and contributions amounted to Rs 126. 265 crore or 23. 85 per cent for FY 2020-21, it said.
As in 2021 Jan
See graphic:
Investment in stock markets, banks, mutual funds, gold, in the period ending 2021 Jan
2022 Mar
March 25, 2022: The Times of India
From: March 25, 2022: The Times of India
Mumbai: Indians are investing in stocks like never before. The share of stocks in total savings by Indians is now at an all-time high of 4. 8%, up from 4. 3% in March 2021, a report by Jefferies said. Barring 2021 and 2022, the closest it had come in the last two decades was in 2008 when it was at 4. 2%. The preferred mode of savings, however, is still real estate, which stands at 49% of the total household savings, while gold is at 15% share. Among financial savings, bank deposits is at 15. 1%, the report pointed out. The report also pointed out that over the last eight years, financial assets as a percentage of total assets has gained eight percentage points. “Our proprietary analysis of Indian household asset holdings (since fiscal 2006) suggests that equities as a percentage of households’ net worth has risen to an alltime-high, though it is still below 5%,” analysts at Jefferies noted. Financial savings are about 36% of about $11 trillion balance sheet. The preferred mode of investments within financials remains bank deposits (15. 1%). Physical assets, that is property and gold, are still dominant, though physical assets have lost about eight percentage points share to financial savings since the trend began in 2014, they wrote. The report also noted that although Indians don’t earn much, it has a legacy of high savings rate. “A look at national accounts data for FY21 and savings trends for FY22 show that total household savings are trending above Rs 50 trillion/$700 billion for the past two years. While there was a three percentage points jump in savings versus trend, we estimate total household savings as a percentage of GDP in FY22 go back to the pre-Covid level of 23-24%. ” Analysts at Jefferies said that Indians invest in stocks through multiple means, of which the mutual funds are the primary vehicle.
Net savings of households
2018-23
May 8, 2024: The Times of India
From: May 8, 2024: The Times of India
New Delhi:There has been a significant fall in net financial savings of households by over Rs 9 lakh crore between 2020-21 and 2022-23, latest data released by the ministry of statistics and programme implementation (Mospi) showed.
Net financial savings of households were down to fiveyear low of Rs 14.2 lakh crore in 2022-23 from Rs 17.1 lakh crore in 2021-22. These had reached a high of Rs 23.3 lakh crore in 2020-21 but since then have been displaying a falling trend. The previous low was at Rs 13.1 lakh crore in 2017-18.
The gross financial savings of households were at Rs 29.7 lakh crore, while financial liabilities were estimated at Rs 15.6 lakh crore in 2022-23, according to the latest data. Financial liabilities were at their highest level in 2022-23 since 2011-12 when these were at Rs 2.9 lakh crore.
Household savings, which account for over 60% of total savings, are split between financial and physical savings and net financial savings are estimated as the difference between gross savings and household borrowings/liabilities.
Savings in physical assets were at Rs 34.8 lakh crore in 2022-23, while in gold and silver ornaments these were at Rs 63,397 crore — highest since 2011-12 when these were at Rs 33,635 crore. Bank advances to households nearly doubled to Rs 11.9 lakh crore in 2022-23 from Rs 6.1 lakh crore in 2020-21, the data showed. These were at Rs 7.7 lakh crore in 2021-22. The investment in mutual funds by households grew 20.6 times to Rs 1.8 lakh crore in 2022-23 from Rs 8,694 crore in 2011-12.
Experts said the data shows that access to credit due to various initiatives by govt has risen in recent years, prompting households to borrow and invest in housing and other physical assets.
“The NSO data also shows that while net financial savings fell, physical savings rose. Households have clearly used borrowings to acquire physical assets such as homes, which pushed up physical savings. This was also reflected in strong housing demand,” said D K Joshi, chief economist at ratings agency Crisil.
He said that over the years, savings in physical assets have always been higher than in financial assets. But with financial inclusion gathering pace in the past decade or so, financial savings accelerated and the gap with physical savings narrowed. During the Covid-19 pandemic, there was asharp jump in the financial savings rate, while the physical savings rate fell.
“In fiscal 2021, net financial savings rose temporarily above physical savings. Some of this was corrected after the strong rebound from the pandemic began. Not surprisingly, household savings in physical assets have exceeded their net financial savings,” said Joshi.
Returns
2006-15
See graphic:
Returns from stocks, gold and fixed income in India, 2006-15
2007-2017
Safe investments vs. riskier ones
See graphic:
Returns on equity funds, gilt funds, gold ETFs and liquid funds, 2007-2017
From: NARENDRA NATHAN, December 18, 2017: The Times of India
Saving habits
2011-16: Indians invest more in equity, debt
Allirajan M, Indians invest more in equity, debt, Sep 29 2016 : The Times of India
Indian households are increasingly putting more money in equities and debentures. Investments by households in shares and debentures jumped 72.2% year-on-year (yo-y) or by `38,491crore to `91,763 crore in 2015-16, Reserve Bank of India (RBI) data showed.
In contrast, their investments in bank deposits advanced by a mere 3.8% y-o-y or by `22,594 crore to around `6.16 lakh crore.
Household investments in shares and debentures have surged more than five times between 2012-13 and 2015-16. But their savings in bank deposits have moved up by a measly 7.1% during the timeframe, RBI data showed. Incidentally, households held a record `6.48 lakh crore in bank deposits in 2013-14. Household investments in life insurance products, another favourite, increased 9.8% y-o-y to around `2.72 lakh crore.
The interest in equities and debentures has been growing at a robust pace over the last three years. The steady decline in interest offered by banks for deposits following a series of rate cuts by the RBI has acted as a dampener for those looking to invest in traditional instruments such as FDs. Though there have been corrections, equity markets have risen steadily in last three years with benchmark indices hitting new highs.
2011-18
August 31, 2018: The Times of India
From: August 31, 2018: The Times of India
Indian families held a record share of their income in the form of cash in 2017-18. Preference for cash is usually a sign of risk aversion. But in the same year, share of savings in stocks grew over 4 times, reflecting higher risk acceptance. Since Indians are also investing more in pensions and keeping much less of their incomes in deposits than before it’s safe to assume that spike in cash is a temporary effect of the cash drought caused by demonetisation in 2016-17. Overall, Indians are saving more, and better, than before
2013-15: Saving habits
See graphic:
Some facts about investment patterns in India
2014-18, state-wise
September 4, 2018: The Times of India
From: September 4, 2018: The Times of India
See graphic:
The saving habits of Indians, 2014-18, state-wise
Investors in Gujarat are biggest risk-takers with 42% of their mutual fund money going into equities. Investors in Bengal, with 38% of their money in equities, are not far behind and do better than Delhi (36%), Karnataka (36%) & Maharashtra (32%)
2017: even the poor and young want real estate, gold
Indian families borrow and invest in very different ways than families in the US, UK or Germany , and even those in China. The depth of these differences, across all ages and economic levels, is revealed in a recent report on household finances prepared by the RBI.
It shows that a major proportion of household wealth in Indian families is kept as real estate or gold, even among younger families, and even by the poorest 40% of population.
This is not the case in other countries. Institutional borrowings by Indian families are low in early life and go on increasing leaving many retired persons with a debt overhang, unlike advanced countries where mortgages reduce after retirement.And, pensions are virtually absent in India while in most Western countries they are a major asset in old age.
More than three quarters of family wealth is invested in real estate (land and dwelling units) by an average Indian family compared to just 44% in the US, and 37% in UK and Germany . In China, about 62% of wealth goes into real estate. Even among the poorest 20% of the population, 59% have some land or dwelling unit in India, while in China, the similar proportion is 61%.
But in the rich countries a minuscule share of the poorest quintile has real estate -4% in US, and less than 1% in UK and Germany .
This may sound bizarre considering India's poverty but here is the thing: average value of the main residence in the poorest Indian households is Rs 22,000, while it is Rs 15 lakh in Germany and Rs 3.7 lakh in the US.
The RBI report is talking of proportion of different types of family wealth. Their absolute values are obviously very different.
Besides real estate, the other main target of investment in India is gold. About 11% of family wealth goes into buying gold. Families in other countries spend virtually nothing on this, with the Chinese spending a mere 0.4% of their wealth on gold. Indian families also have gold loans amounting to about 8% of their total liabilities, again a feature not found anywhere else.
“Most households use debt to cope with emergency expenses, such as hospitalisation, or property damage due to a natural disaster. The interest rates on unsecured debt are very high. Therefore, households prefer to put their savings in real estate and gold, which can also be used as collateral,“ RBI's Household Finance Committee chairman Tarun Ramadorai of Imperial College, London, told TOI. Detailed data on countries drawn from various surveys is available in a paper by Ramadorai and coauthors published in 2017.
Although 73% of families in India have financial assets like cash, bank accounts and pension accounts, they hold very small amounts adding up to just 5% of their total wealth, he added.
Medical emergencies, especially among the elderly , are one of the main reasons why families in India seek loans at usurious rates from money lenders. Such unsecured loans make up nearly 56% of all liabilities for Indian families, much higher than China at 26%, US (13%) and Germany (24%). The RBI report notes that “some of these risks could be mitigated through strengthening the public provision of health and social welfare services.“
Indian families are also exceptional in that housing loans are low in early life and rise beyond retirement ages.In other countries such loans rise in middle age but fall off at retirement. This happens because Indian families borrow later in life and it is customary to bequeath property to future generations who in turn look after the elderly.
These traditional structures are increasingly under pressure from shifting demographic patterns, social norms, and changing economic conditions, introducing risks to economic well-being especially as households age, the report says.
Small savings
Small savings rates/ April 2015- August 2016
See graphic, 'Small savings rates, April 2015- August 2016'
2017-18
From: April 2, 2021: The Times of India
See graphic:
Small savings in India, state-wise, 2017-18
Post offices vs banks/ 2018
From: April 20, 2021: The Times of India
See graphic:
Savings in Post offices vs banks, state-wise/ 2018
2018-22
Sidhartha & Surojit Gupta, February 5, 2022: The Times of India
From: Sidhartha & Surojit Gupta, February 5, 2022: The Times of India
New Delhi: There has been a sharp increase in inflows to small savings schemes such as public provident fund (PPF) in the current fiscal year as savers flocked to such safe haven instruments for better returns, against the backdrop of devastating impact of Covid, Budget data showed.
Falling interest rates on traditional savings products such as fixed deposits and the need to create safety nets due to the pandemic, triggered a shift to small savings products, which have remained attractive because of higher returns they offer and the impact of compounding.
For example, in 2021-22, savings de posits are estimated to increase by 21. 8% from 8. 8% growth in the previous year, while certificates (like NSCs) are also set to rise by 21. 2% in the current fiscal from 11. 8% in the previous year, according to data in the Budget documents (see graphic).
Experts attributed the increase in investment in these schemes to the search for better returns. “Investors flocking to fixed income products are primarily on account of low yields on market-linked debt mainly mutual funds. The volatility only increases with mark-to-market (MTM) impact on account of increase in interest rates. However, if you are true to your holding period then run-down maturities product offer you yields, which you will be able to earn, provided you hold till maturity. Investors may consider these products in a staggered manner spread over the next six-eight months,” said financial planner Surya Bhatia.
Government officials said inflows to small savings schemes are estimated to be on the higher side this year and are expected to moderate next year as FD rates rise. The RBI has pointed to the high rates as an obstacle to its ability to lower overall rates and has backed rationalisation of returns on these schemes.
“This year, we expect around Rs 6 lakh crore of inflows. But in a typical year it is of the order of Rs 3-4 lakh crore and in 2022-23 we expect around Rs 4. 25 lakh crore of inflows on a perspective that people will find other investment avenues to be equally attractive. But if it does not happen, then market borrowings will go down,” Ajay Seth, secretary department of economic affairs, told TOI in an interview. The Centre has kept the interest rate unchanged for these schemes for seven quarters. The 5-year post office scheme offers a 6. 7% rate, while PPF yields 7. 1% return.
“A surge in small savings collections in this fiscal has ensured that net borrowing of the government stayed within reasonable limits and even fall short of Budget estimates. In the current fiscal, the government has scaled down significantly the budgeted small savings collections. The jury is still out whether small saving collections will continue to be attractive,” said Soumya Kanti Ghosh, group chief economic adviser at SBI.
Gold Bonds
2019: benefits of different types of bonds
July 2, 2019: The Times of India
From: July 2, 2019: The Times of India
You can now hold gold in either its physical form or on paper — through gold bonds or through mutual funds that trade in gold. What should you do? The answer depends on what you are looking for. If you want liquidity, and are planning to take a loan against your stock of gold, then physical gold is your best bet. But, remember, you will need to pay a capital gains tax when you sell physical gold. But if you are looking at gold as a long-term investment, then a gold bond is what you might want to go for. Not only are you spared capital gains tax when you redeem these, you also earn a small interest. A look at the different options that are now available
Systematic investment plans
2016>18: a 53% increase in inflows
Allirajan M, MF SIP kitty crosses $10bn mark in FY18, April 18, 2018: The Times of India
From: Allirajan M, MF SIP kitty crosses $10bn mark in FY18, April 18, 2018: The Times of India
Sees 53% Jump From FY17, Mobilises Record $1Bn In Mar
There is no stopping the mutual fund SIP juggernaut. Investors have committed about $10.3 billion (Rs 67,190 crore) through SIPs (systematic investment plans), the bedrock of inflows into equity MFs, in 2017-18, a massive 53% increase over the previous financial year. This is the highest ever mobilisation in a financial year.
Inflows into SIPs stood at around $1.1 billion (Rs 7,119 crore) in March alone, the highest ever for a month. MF SIP accounts stood at 2.11 crore at the end of March, data with the Association of Mutual Funds in India (AMFI) showed. Incidentally, the total number of SIP accounts crossed the 1 crore mark only in August 2016.
SIP is an investment option offered by fund houses where one could invest a fixed amount in an MF scheme periodically at fixed intervals—say once a month instead of making a lump-sum investment. The SIP instalment amount could be as small as Rs 500 per month. SIP is similar to a recurring deposit where you deposit a small /fixed amount every month.
The MF industry added 9.70 lakh SIP accounts on average each month during 2017-18 against an average of 6.27 lakh SIP accounts added each month during 2016-17. AMFI data showed. The average SIP size was about Rs 3375 per SIP account.
SIPs are done almost entirely in equity schemes. The fixed income segment contributes only about 5% in volume terms and about 2% in value terms to overall SIPs. SIP is a convenient method of investing through standing instructions to debit the investor’s bank account every month, without the hassle of having to write out cheques.
“SIPs account for 50% of new MF accounts. They have become a brand of their own,” says Raghav Iyengar, executive vice president, ICICI Prudential MF. “SIPs have been getting traction as investors are not trying to time the market,” says Srikanth Meenakshi, co-founder and COO, Fundsindia.com, an investment platform for MFs.
“The fast pace of growth (in SIPs) is due to the network effect. People are buying MFs through SIPs as most others are doing so,” he explains. “This is the one of the easiest ways to start a new investment,” Raghav says.
Upgrades, downgrades
2016> 2018
Nearly ₹3L-cr bonds downgraded in FY18, April 3, 2018: The Times of India
From: Nearly ₹3L-cr bonds downgraded in FY18, April 3, 2018: The Times of India
Default Rate May Go Up In Current Financial Year On Higher Interest Cost, Says ICRA
The quality of Indian debt soured considerably in FY18 with Rs 3 lakh crore worth of bonds being downgraded compared to Rs 1.7 lakh crore in FY17. Over half the downgrades were of papers issued by lenders, of which 70% pertained to bonds issued by public sector banks (PSBs).
Going by the number of entities upgraded versus the number of downgrades, FY18 presents a positive image with 646 upgrades by rating agency ICRA versus 418 downgrades. But the volume reveals the overall quality of total outstanding debt in the country.
As against the Rs 3 lakh crore of downgrades, the volume of debt upgraded in FY18 was only Rs 1.8 lakh crore — up 17% from Rs 1.5 lakh crore in the previous year. The largest proportion of debt rated by ICRA (65%) continues to remain concentrated in the sub-investment grade category. A bulk of the ratings have an ‘ICRA B’ rating, while the median rating category is ‘ICRA BB’. Fund managers consider BBB and above as an investment-grade rating, while those with lower ratings are considered speculative.
PSBs, which were hit by bad debt provisions as the RBI tightened income-recognition norms, accounted for a third of downgrade volumes. According to ICRA, the overall quality of Indian debt could worsen in FY19. ICRA head of credit policy Jitin Makkar said in a webinar, “The default rate could go up in fiscal year 2019 on higher interest cost, deteriorating business conditions and likely difficulty in getting bank funding, given the challenges in the banking system.” ICRA said, looking ahead, credit quality pressures will “take longer to dissipate” as hardening interest rates and banking sector woes will create hindrances for businesses.
According to ICRA, telecom, chemicals and healthcare saw weakening performance along with greater number of downgrades than upgrades.
Periods for which investment is held
As in 2019
From: August 5, 2019: The Times of India
'See graphic’:
MF industry’s holdings over different periods, presumably as in 2019
PART C: LEGAL ISSUES
Depositors’ interests
Inter-corporate deposits do not come under MPID Act/ HC
Swati Deshpande, Sep 16, 2019: The Times of India
From: Swati Deshpande, Sep 16, 2019: The Times of India
The Bombay high court has held that inter-corporate deposits do not come under the ambit of the Maharashtra Protection of Interest of Depositors (MPID) Act, a stringent law meant to protect the interests of small depositors.
The judgment by a bench of Justices Ranjit More and N J Jamadar was on a petition filed by Ashish Mahendrakar, director of a Yash Birla-promoted company, Birla Power Solutions. The company and its directors are accused under MPID Act of cheating depositors after raising funds for its businesses. The state Economic Offences Wing (EOW) had registered a case in December 2013 on a complaint by the Hajarimal Somani Memorial Trust, which placed a deposit of Rs 1 crore with Birla Power Solutions in 2012 to be repaid with interest. Birla Power Solutions had defaulted.
Yash Birla Group has Rs 89 crore of unpaid inter-corporate loans in all. The case argued by Kevic Setalvad and counsel Sunny Punamiya was that such loans or deposits do not fall under MPID Act as they are given by one corporate to another. The company’s assets, including Birla House at Walkeshwar, have been attached. These properties were valued at Rs 525 crore in 2016, said the petition, arguing that it far exceeded the amounts due to investors.
Special public prosecutor for the EOW of Mumbai police, Prakash Salsingekar, opposed the petition, arguing that the MPID Act — enacted to protect investors — itself enumerates amounts that don’t fall within the term ‘deposits’ and that the “court cannot supplant the exclusion clause by adding an item”, which was not in the law. He argued that a distinction cannot be carved out between depositors as it would defeat the purpose of the Act. The court held that loan advanced or deposit made by a company with another company registered under the Companies Act would not amount to a “deposit” under the meaning of the MPID Act.
The HC analysed provisions of MPID Act, the Companies Act as well as a Tamil Nadu law meant to protect depositors. The Supreme Court, it noted, had said the three Acts were meant to “protect the interests of small depositors from fraud...”.
