Note Ban Lends a Hand to Con­sumer Lend­ing

The Economic Times - - Front Page -

Saloni Shukla, Shilpy Sinha & Wri­tankar Mukher­jee

Mum­bai | Kolkata: Con­sumer lend­ing was the sur­prise ben­e­fi­ciary of the Novem­ber 8 cur­rency swap as In­di­ans bor­rowed more to spend on high­value items and travel, up­end­ing con­ven­tional fi­nan­cial wis­dom that only ba­sic needs and sta­ples make up the typ­i­cal shop­ping list dur­ing pe­ri­ods of eco­nomic stress. Cen­tral bank data at the end of Novem­ber showed de­mand for white goods — such as re­frig­er­a­tors, au­to­matic wash­ing ma­chines — drove credit ex­pan­sion in In­dia. Con­sumer-durables loans at banks in­creased 18.2% and per­sonal loans 15.2% in the month while to­tal non-food credit rose 4.8%.

“De­mon­eti­sa­tion has played out dif­fer­ently for dif­fer­ent seg­ments,” said Ra­jiv Jain, MD, Ba­jaj Fi­nance. “It was a highly volatile quar­ter. Orig­i­nally, our ex­pec­ta­tion was it would be much worse. Our con­sumer bal­ance sheet was up 47% in the quar­ter.” The Cen­tre on Novem­ber 8 de­cided to de­mon­e­tise currencies of .₹ 500 and .₹ 1,000 de­nom­i­na­tions to help com­bat coun­ter­feit­ing and root out the source of par­al­lel econ­omy. The gov­ern­ment sought to re­place about 85% of the to­tal cur­rency cir­cu­la­tion by value at one go.

RBI data at the end of Novem­ber showed that de­mand for white goods drove credit ex­pan­sion

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