Deutsche Bank CEO calls on central banks to fight inflation, BFSI News, ET BFSI

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Central bankers must change course to fight accelerating inflation, Deutsche Bank Chief Executive Officer Christian Sewing said on Monday.

Sewing, speaking at a banking conference, said he didn’t share the opinion of central bankers that inflation increases were temporary.

“I think monetary policy must take countermeasures here – and sooner rather than later,” Sewing said.

“The supposed panacea of recent years – low interest rates with seemingly stable prices – has lost its effect, and now we are struggling with the side effects,” he said.

(Reporting by Tom Sims and Frank Siebelt Editing by Paul Carrel)

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Economy set to recover on low interest rates, softening inflation: RBI bulletin

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The Indian economy is poised to regain the ground lost to the pandemic and re-emerge as among the fastest growing countries in the world, supported by the decadal low interest rates, softening inflation and a modest current account surplus, according to a article in the Reserve Bank of India’s latest monthly bulletin.

The Indian economy is clearly differentiating itself from the global situation, which is marred by supply disruptions, stubborn inflation and surges of infections in various parts of the world, per article ‘State of the Economy’, put together by 21 RBI officials.

The authors, however, underscored that the global economic outlook remains shrouded in uncertainty, with headwinds from multiple fronts corralling together at a time when many economies are still struggling and are at nascent stage of their recovery.

They cautioned that growing likelihood of policy normalisation by major central banks to quell fast rising inflation may tighten financial conditions and stutter the ongoing growth impulses.

Vaccination drive

The authors noted that domestically, there have been several positives on the Covid-19 front, in terms of reduced infections and faster vaccinations.

Mobility is rapidly improving; the job market is recouping and overall economic activity is on the cusp of a strengthening revival. Overall monetary and credit conditions stay conducive for a durable economic recovery to take root.

The authors assessed that in India, the recovery gained strength, though the speed and pace of improvement remains uneven across different sectors of the economy.

“Indicators of aggregate demand posit a brighter near-term outlook than before. On the supply side, the Rabi season has set in early on a positive note on the back of a record Kharif harvest and manufacturing is showing improvement in overall operating conditions, while services are in strong expansion mode. “Overall monetary and credit conditions stay conducive for a durable economic recovery to take root,” the article said.

The authors opined that the economy is gradually healing amidst an uncertain and volatile global environment, battered by supply chain and logistics disruptions, inflation shocks and geopolitical tensions.

“Incoming high frequency indicators show that the recovery is taking hold in several spheres, though some others are still lagging behind.

“With the gradual uptick in confidence, mobility indicators have edged up,” the article said.

Job market

The job market is exhibiting signs of ebullience on the back of uptick in business optimism and faster pace of vaccination, it added.

India’s merchandise exports have staged a smart turnaround, with surging double-digit growth for the eighth consecutive month in a row

Collections under the Goods and Services Tax (GST) have marked their second highest level in October since its introduction on the back of better tax administration and ongoing economic recovery.

Referring to the issuance of e-way bills being the highest in their history, the authors felt that this bodes well for GST collections going forward.

After exhibiting moderation in the month of September 2021, power consumption has registered an uptick despite supply side constraints.

“The headline manufacturing purchasing managers’ index (PMI) recorded expansion for the fourth consecutive month in October with anticipation of an improvement in demand conditions.

“The services sector is convalescing with the headline PMI rising to a decadal high in the same month,” the authors said.

Festival boost

With attractive offers by developers amidst the festival season, property registrations have also surged.

Overall, the growth momentum in digital transactions over the past few months indicates that the economy is gradually shaking off the shackles of the second wave of the pandemic, the authors said.

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Why HDFC deposits are a safe option for senior citizens

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The prevailing low interest rates on deposits have been pinching senior citizens the most. Seniors who are more keen on capital conservation than higher interest rates can consider the deposits from HDFC. Currently, HDFC offers seniors 6.1 per cent interest for 24-month deposits

Depositors who wish to get regular payouts can opt for the non-cumulative option, with monthly/quarterly/half yearly or annual payouts. Those who don’t need regular payouts, can instead opt for the cumulative option which offers annual compounding.

The minimum amount that can be deposited with HDFC for a fixed deposit is ₹20,000.

While the deposits of HDFC, an NBFC, are not covered by deposit insurance (bank deposits of up to ₹5 lakh are covered by DICGC), its 40-year plus stable business provides significant confidence. Besides, the company has been maintaining a AAA rating on its deposits for more than 26 years.

How they fare

As interest rates have almost bottomed out, they are likely to inch up in the next two to three years. Hence, at the current juncture, it is wise to lock into deposits with a tenure of one or two years.

For such tenures, HDFC offers seniors better interest rates than those offered by prominent banks such as SBI (up to 5.6 per cent), HDFC Bank (up to 5.4 per cent), ICICI Bank (up to 5.5 per cent) and Axis Bank (up to 6.05 per cent), which are considered safest options among banks.

Other private sector banks and small finance banks, however, offer even higher rates (up to 7.5 per cent) for one to two year deposits. The recent debacles at YES Bank and other co-operative banks have stoked fear in the minds of depositors. Given that, seniors may prefer safety of capital over the lure of higher rates.

HDFC also offers better rates compared to corporate FDs with similar ratings from other NBFCs such as LIC Housing Finance, that offers up to 5.9 per cent for a tenure of up to 2 years.

About HDFC

Incorporated in 1977, HDFC, a housing finance company currently offers loans to individuals (comprising 76 per cent of the loan book) and corporates (6 per cent). HDFC also lends for construction finance (11 per cent) and lease rental discounting (7 per cent).

With an outstanding loan book of ₹,52,167 crore as of December 2020, HDFC is India’s largest housing finance company. HDFC’s non-performing assets (proforma) are contained at less than 2 per cent. In addition to that, the company’s provisions (cumulative including those related to covid) cover up to 2.56 per cent of the loan book exposure.

As at the end of December 31, 2020, HDFC’s capital adequacy ratio stood at 20.9 per cent, well above the regulatory requirement of just 14 per cent.

HDFC also has several financial subsidiaries –prominent ones among them are HDFC Bank, HDFC Asset Management Company, HDFC Life Insurance, HDFC Credila and HDFC Ergo. Its consolidated profits at the end of the first nine months of FY21 stood at ₹1,33,900 crore.

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