CiC to GDP ratio remains high at 14.5% for FY21: Currency-in-circulation growth falls

The growth in CiC has fallen to 7.9 per cent (Rs 2.14 lakh crore) in November 2021 as against 22.2 per cent (over Rs 5 lakh crore) growth in the same month a year ago.

A year after the Covid-19 pandemic led to a surge in demand for cash, the growth in currency in circulation (CiC) has declined as of November this year if the latest data from the Reserve Bank of India and the Finance Ministry is any indication.

The growth in CiC has fallen to 7.9 per cent (Rs 2.14 lakh crore) in November 2021 as against 22.2 per cent (over Rs 5 lakh crore) growth in the same month a year ago. However, more than five years after demonetisation, CiC has risen steadily every year, with the CiC to GDP ratio having now surged to 14.5 per cent in 2020-21 from 8.7 per cent in 2016-17, as per data presented by the Finance Ministry in Parliament. CiC to GDP ratio is now ever higher than that in the pre-demonetisation period.

Precautionary demand for currency during the pandemic times has been a key reason for rising currency with public, according to the Finance Ministry.

Cash in the system has been steadily rising, even though the government and the RBI have pushed for a “less cash society”, digitisation of payments and imposed restrictions on the use of cash in various transactions. CiC rose to Rs 29.56 lakh crore as December 3, 2021 from Rs 27.58 lakh crore a year ago. The government had argued that demonetisation would lead to lesser cash with public, however, cash usage has only risen since then.

Demand for currency depends upon several macro-economic factors including economic growth and level of interest rate. Precautionary demand generated by public during financial year 2020-21 due to Covid-19 pandemic induced uncertainties is also an important factor in currency demand,” Minister of State for Finance Pankaj Chaudhary said in reply to a query on Rajya Sabha on Tuesday, “Combination of greater public demand for cash and a contraction in GDP has led to an increase in CiC as a percentage of GDP to 12 per cent and 14.5 per cent in FY 2019-20 and FY 2020-21, respectively,” he added.

However, year on year growth in CiC has decelerated sharply to 7.9 per cent as on November 2021 from pandemic influenced surge to 22.2 per cent a year ago, he said.

As per the RBI’s definition, currency with public is arrived at after deducting cash with banks from total CiC. CIC refers to cash or currency within a country that is physically used to conduct transactions between consumers and businesses. After Rs 500 and Rs 1,000 notes were withdrawn in November 2016, currency with the public — which stood at Rs 17.97 lakh crore on November 4, 2016 — declined to Rs 7.8 lakh crore in January 2017.

The jump in currency with public last year was primarily driven by a rush for cash by the public, as the Centre announced stringent lockdown to tackle the spread of the Covid pandemic. The sudden withdrawal of notes in November 2016 had roiled the economy, with demand falling, businesses facing a crisis and gross domestic product growth declining nearly 1.5 per cent. Many small units were hit hard and shut shutters after the note ban. It also created a liquidity shortage.
Although digital payments have been growing, both in value and volume terms across countries, data suggests that during the same time CiC to GDP ratio has increased in consonance with the overall economic growth, as per an RBI study on digital payments.

FEAR BIAS: What is the science behind fear?

 Fear is an adaptive behavior that we have to help identify threats. It is an ability that has allowed us as humans to survive predators and natural disasters.

Innate fears

We are born with only two innate fears: the fear of falling and the fear of loud sounds.

A 1960 study evaluated depth perception among 6- to14-month-old infants, as well as young animals. Researchers placed the subjects on a platform that had plexiglass just beyond its edge to it to see how many of the subjects would actually step over the "visual cliff." Most of the subjects -- both children and animals -- didn't go "over" and step out on to the plexiglass. The fear of falling is an instinct necessary for the survival of many species.

When you hear loud sounds, you most likely will react with a fight or flight type response. It's called "your acoustic startle reflex," said Seth Norrholm, a translational neuroscientist at Emory University. Norrholm explained that if a sound is loud enough "you're going to duck down your head. Loud noises typically means startling. That circuitry is innate." It's a response we have, that signals something dangerous may be around the corner.

Learned fears

Most fear is learned. Spiders, snakes, the dark -- these are called natural fears, developed at a young age, influenced by our environment and culture. So a young child isn't automatically scared of spiders, but builds on cues from his parents. "You get evidence from your parents and your environment that you need to be scared of these things," said Norrholm.

While the fear itself is learned, though, humans seem to be predisposed to fear certain things like spiders and snakes because of evolution. "Back in our ancestral age ... young children learned not to pick up snakes and spiders because they're venomous," said Norrholm.

In fact, studies have found that when asked to pick out spiders and snakes from a collection of pictures, both preschoolers and adults react more quickly than when asked to pick out non-threatening items -- like flowers -- from the same collection. That's believed to happen because of the bias we have carried toward them throughout time.

As we get older, fears are developed because of association. Norrholm compares it to a combat veteran who survives an encounter with an IED that was hidden in a shopping bag. If that vet is redeployed and sees another shopping bag, "he has a fight or flight response. Here, an association has been made between the cue and the fear outcome."

It's the same exact response a child has to scary Halloween decorations. "It's about context," said Norrholm. A young child may not know that a skeleton is a scary, until his parents say over and over how skeleton decorations are spooky.

How does the brain process fear?

When presented with something that scares you, your brain reacts with its fight or flight response. For example, if you see a snake while hiking, there are two roadways for your brain, said Norrholm.

First is the low road that represents your brains sensory systems in the brain's amygdala. It's "what you see, smell, hear," and signals to the brain that this is something to fear. It's the adrenaline response that tells your heart to beat faster and your body to sweat.

Almost simultaneously, there's a high road reaction. "That goes through your higher cortical center in you brain. The high road says 'I've seen this kind of snake before, and I don't have to worry'," said Norrholm. Think of it as the reasoning response that overrides the low road.

"There is some evidence to suggest that thrill-seeking is like anything pleasurable -- gambling, eating, -- it releases dopamine," said Norrholm. Dopamine is a neurotransmitter that helps control our brain's reward and pleasure centers. "We know that the more you reward something, the more that they do it," said Norrholm.

And the more that thrill-seekers seek out the dangerous behavior, the better they are able to engage the cortical high road, and provide the rational context that the thrill-seeking behavior isn't dangerous. Extreme sports athletes are a great example of this: They continue their dangerous behavior because each time they do it, they survive, Norrholm said.

There are some people who genuinely seem to enjoy being scared. "We know there are some basic individual differences in how people are wired," said Glenn Sparks, a communications professor at Purdue University. Sparks specializes in the cognitive and emotional impact of the media, particularly horror movies.

"Some people are wired to seek out highly sensational experiences." When they are exposed to that kind of experience "they get the adrenaline rush," said Sparks. He likens those who enjoy watching horror movies to people who like riding roller coasters.

And Sparks says thrill seeking seems to have a gender bias. "Men have been socialized not to show signs of distress, but to conquer it. For females it is much more acceptable to show signs of distress."

Studies show we can overcome some of our fears by continued exposure to them. By constantly exposing ourselves to our fears, whether it extreme sports, horror movies, or snake and spiders, our tolerance for them will grow, said Sparks.

But, remember, that being frightened isn't always a bad thing. In fact, it's been a survival mechanism for humans for millions of years.

FY22 credit growth turns positive first-time ever

 Credit growth turned positive year-to-date (YTD) at 0.1 per cent in September for the first time in 2021-22 (FY22), reflecting gradual pick-up in demand.

According to the Reserve Bank of India (RBI) data, bank lending rose Rs 7,283 crore till September 24, against a contraction of 1 per cent (or Rs 99,280 crore) on a YTD basis in the same period last fiscal year (2020-21). Outstanding bank credit stood at Rs 109.56 trillion as on September 24.

What stands out this time around is that positive growth happened despite a more debilitating impact of the second wave of the Covid-19 pandemic. In a normal year, YTD growth in bank credit turns positive in August-September, ahead of the busy season in the second half which starts in October. In 2019, YTD growth had moved into positive territory in early October.

YTD growth in 2020 had turned positive only in November, according to the RBI data. Economic activity had almost come to a standstill during the first wave of the pandemic in 2020 due to a nationwide lockdown.

During the second wave this year, manufacturing and services activity continued in a calibrated manner, given that curbs were more localised.

Saurabh Bhalerao, associate director and head–BFSI Research, CARE Ratings, said the overall non-food credit growth continues to be driven by retail and agriculture and allied activities segments in August. However, slower growth in the industry and services segment continues to crimp overall credit growth.

With the onset of the festival season, bank credit is expected to improve further, led by growth in the retail segment covering housing, automobiles, and consumer durables. This rise is expected to be buttressed by bank rate cuts to push retail credit. Many banks are offering loans at record-low interest rates ahead of the festival season.

Year-on-year credit growth has also shown momentum at 6.7 per cent in September, up from 5.1 per cent last September.

CARE Ratings has pegged bank credit growth to be in the range of 7.5-8 per cent for FY22. What could support this growth is a low-base effect, economic expansion, extended emergency credit line, and retail credit push.

The medium-term prospects look promising with diminished corporate stress and increased provisioning levels across banks. Retail loan segment is expected to do well, compared with industry and services segments, said Bhalerao.

While bank deposits have continued to grow at a rate higher than credit, the pace of deposit mobilisation has moderated in 2021. YTD growth in deposits was 3.2 per cent till September 24, down from 5.1 per cent a year ago.

Robinhood sued by family of 20-year-old trader who killed himself after believing he racked up huge losses

 

• Robinhood was sued Monday for wrongful death by the family of Alex Kearns, a 20-year-old customer who took his life last summer.
• Kearns committed suicide in June after thinking he had a negative $730,165 cash balance on Robinhood.
• Robinhood’s “reckless conduct directly and proximately caused the death of one of its victims,” the complaint said.
• The suit says that Kearns made three attempts to contact Robinhood customer service regarding the massive underwater balance. However, his messages were met with automated replies, according to the complaint.

• Robinhood was sued Monday for wrongful death by the family of Alex Kearns, a 20-year-old customer who took his life last summer after believing he had racked up big losses on the millennial-favored stock trading app.

  “This case centers on Robinhood’s aggressive tactics and strategy to lure inexperienced and unsophisticated investors, including Alex, to take big risks with the lure of tantalizing profits,” said the complaint filed by his parents Dan and Dorothy Kearns, and his sister Sydney Kearns in a California state court in Santa Clara. The family is based in Naperville, Illinois.

• The Securities and Exchange Commission charged the brokerage in December with misleading customers about how the stock-trading app makes money and failing to deliver the promised best execution of trades.

  The Kearns’ family complaint says, “Not only did Robinhood permit Alex to open the account, but when Alex was a freshman in college later that year, it permitted him to trade options.”

  “Worse, Robinhood provided almost no investment guidance, and its customer ‘service’ was virtually non-existent, consisting of automated e-mail replies devoid of any human contact or interaction,” the family alleged in the suit.

Smoking may kill you in 20 years, but trading in stock futures can kill you the next day

 By Vijay Kedia

From the days of open outcry trading under a banyan tree to high-speed trading in the iconic PJ Tower, the Indian stock market has surely come a long way.

From being nowhere in 1990 to the world-class infrastructure for securities trading that we have today and Sebi putting up a robust regulatory mechanism, it has been an impressive journey.

What is not impressive is the fact that the advantage of all this modern infrastructure and systems has mainly gone to four intermediaries, the regulators and exchanges themselves besides, of course, the tax department and brokers. The traders at large were poor back then and have still remained poor. Only a handful of them have become successful in this journey, that also in investing, not trading. Success percentage in trading is hardly 1 per cent.

Why? Because, it’s not in our DNA. We learn things three ways: by birth when it comes in our DNA; in our childhood through school curriculum or as a culture at home; and by observing the world, reading books and watching others in our youth.

But, as they say, you cannot run 100 metres in 8 seconds by coaching. That’s why the Kenyan always comes first in marathons.

Our ancestors lost their fortunes in stock market; that is why in many old industrial houses even investment is is banned, forget trading. They look down upon the stock market. How do you expect them to teach their children? So we did not have it in our DNA nor were taught at home or school or colleges.

When I was watching the movie Udta Punjab, I was really moved to know how the youth of one of our bravest communities is being ruined. After some time in the movie , I realised this is what exactly is happening even in our stock market in the name of trading.

Trading is the biggest addiction. No less than drug. You will sell your house to buy drugs and trade to recover your losses.

During a speech I delivered at IIM Ahmedabad, a student told me he wanted to use his father’s pension to trade in stock market. I held his hand and asked him to promise me he would not do that. My wife’s English teacher, now in her 60s, is asking me whether she should allow her son to use her savings in the stock market. I was shocked!

It is something like giving a gun in the hand of an innocent person.

Sebi should not allow stock trading, unless one has done a course etc. Hard training is a must before one starts trading. Else, all the intermediaries and their employees will keep on becoming arabpatis and crorepatis and 99 per cent of traders will keep on struggling even for their livelihood.

For a starter, the best way to become a millionaire through trading is to trade with a billion. Trading is a different ball game. It cannot be learnt without experiencing losses. And to sustain till you have learnt it fully, it requires big discipline which again needs to be learnt systematically. It’s a process. It is impossible for a new person to learn it by reading books.

Trading is injurious to your wealth.

You can lose 50 years’ of savings in one trade. Today, majority of broker ads, TV channels and technical analysts are encouraging and luring youth into trading. It is a recipe for disaster. Buy at Rs 65, stop loss Rs 60, target Rs 70. Even god can’t predict that. They are fooling people to generate their business and income in the name of the liquidity.

I remember an old movie where Raj Kapoor runs a scheme and assures to sell houses for Rs 100 each on a future date. When asked how can can he give a house at Rs 100, he says I can’t. I am not selling house I am selling dreams. In other words, I am making them fool. I think the name of the movie was also Shri 420.

In the name of seed capital, people indulge in trading. Instead of that, they should use ordinary mobile phones, ordinary unbranded cloths, avoid eating at fancy restaurants and travel by public transport to build that seed capital over a few years. Otherwise, forget capital, you may not be left with the seed MONEY

Wanting to be crorepati in the shortest time is the biggest reason for failure in the stock market.

People often confuse between investing and trading.

In investing always remember Rome was not built in a day and in trading always remember Hiroshima and Nagasaki were destroyed in a day.

Market rewards you as per your perception. If you treat it as a gambling den, then it will prove a gamble for you, and the best place to go would be Goa, not stock market.

Before punching any trade, remember you have four above-mentioned dependents to feed before you feed yourselves. So, protection of your capital should be top priority and it is the biggest gain of your capital.

Being fully dependent on futures trading will make you inactive in life and cripple your other businesses. Plus, you are most likely to turn a blood pressure patient at an early age. So chose your life carefully. The purpose of our life is to be happy.

TRADING IS THE ROAD TO SUICIDE AND DEATH FOR 100%

RBI Monetary policy highlights: Lending rates unchanged amid Omicron scare.......

  The Reserve Bank of India's (RBI's) six-member monetary policy committee (MPC), headed by Governor Shaktikanta Das, decided to maintain key interest rates for a ninth straight meeting, retaining an accommodative stance amid the threat surrounding Omicron coronavirus variant.

Repo and reverse repo rates currently stand at 4 per cent and 3.35 per cent, respectively.