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Credit cards, Gold ETFs: How India spent and saved during Covid-19 lockdown

The Covid-19 pandemic triggered a two-month nation-wide shutdown in direction of the top of March 2020 and introduced all financial exercise to a close to standstill. Over these two months, whereas corporations went again to the drafting board to redefine and work below the ‘new regular’, staff throughout organisations suffered pay cuts and job losses.

Despite the federal government’s efforts to stem the financial fallout of the pandemic, the autumn in earnings ranges triggered a fall in consumption/spending as individuals spent totally on necessities and buy of big-ticket objects was placed on a backburner. Maruti Suzuki India, as an example, reported zero gross sales within the home market, (together with gross sales to OEM), in April 2020 as all manufacturing amenities had been closed in compliance with the federal government orders.

Following the Covid-19 led lockdown, the Reserve Bank of India (RBI) prolonged the moratorium on mortgage compensation until the top of August and banks provided the identical choice to the client. However, the variety of loans below moratorium different throughout banks.

According to a June 29 report by State Bank of India’s financial wing, card spending declined considerably during April, with the whole worth of credit score and debit card transactions slipping sharply from Rs 1.51 trillion in January 2020 to round Rs 50,000 crore in April 2020.

“Per card transaction also declined from as high as Rs 12,000 to Rs 3,600 in the case of credit cards and Rs 1,000 to Rs 350 in the case of debit cards. It could be also possible that consumer spending has shifted from luxury purchases to purchases of daily essentials and groceries,” wrote Dr. Soumya Kanti Ghosh, group chief financial adviser at State Bank of India within the June 29 observe.

Interestingly, whilst bank card spending has considerably declined during April 2020, SBI’s estimates of the short-term shopper leverage (sum of bank card, private loans, advances towards fastened deposits, shares, bonds excellent, and many others.) that had reached a peak within the monetary yr 2017-18 (FY18) at Rs 1.56 trillion declined considerably to Rs 1.29 trillion. However, during FY20, it has elevated marginally to Rs 1.35 trillion, reflecting presumably shopper stress.

“In April, short-term consumer leverage declined by a whopping Rs 50,076 crore as compared to March 2020. It may be noted that in April there is always a decline, but in the current fiscal because of exceptional circumstances this decline is 16 times more than what happened in April 2019. Consumers are also vigorously using gold holdings on their household balance sheet by taking gold loans,” Ghosh added.

Gold exchange-traded funds (ETFs), in keeping with the report, noticed a cumulative funding of Rs 1,546 crore in April and May 2020, which is equal to three.7-3.eight tonne of gold. Investment into gold ETFs picked up in January this yr, with buyers placing in Rs 202 crore – the very best in seven years. That was adopted by an all-time excessive funding of Rs 1,483 crore in February. Gold shopping for within the type of sovereign gold bonds within the June quarter has been 6.7 tonne, with funding as much as Rs 3,107 crore.

Credit cards, Gold ETFs: How India spent and saved during Covid-19 lockdown

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