PF, FDs, gold loans, mutual funds all point to Covid effect on financial health

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Nagpur: Covid continues to take its toll on the financial health of the middle income group. Talking to bankers, investment advisors, insurance agents and other professionals in finance sector shows that the struggle continues, though there are some indications of improvement.
There has been a major dip in contributions to the Employees Provident Fund Organization (EPFO) during the last financial year. EPFO contributions are directly related to the salary levels. At over Rs1,000 crore, the PF contribution for the financial year ending on March 20, was already down as compared to the year before. Against this, nearly Rs800 crore were withdrawn by EPFO subscribers from the Nagpur office, which covers eastern Vidarbha, during 2019-20.
For financial year 2020-21 the contribution is expected to go down further by 30%. More than 50% increase in withdrawals is also estimated, said a source. EPFO withdrawals happen on termination of job, retirement or else when funds are needed to tide over a crisis. EPFO covers private sector workers. As the salary levels for contribution is capped at Rs15,000, the scheme mainly covers low income workers.
An impact has been seen on the savings too. Bankers reported dip in fixed deposits and even savings accounts. This was attributed to requirements of funds due to dwindling incomes or Covid treatment. Private lenders said even if their shops are closed due to lockdown there have been a number of inquiries for pledging gold to get loans since last 20-25 days. The calls are from relatives of Covid patients in need of money.
“The fixed deposits as on March 2020 stood at Rs6,000 odd crore, it came down to Rs5,300 odd crore as on March 2021. In April, there is a growth of Rs60 odd crore,” said a senior official in one of the PSU banks having a regional office at Nagpur. Even as officials of other banks refused to share the details, there were reports of deposits having gone down in general. This can also be due to falling interest rates, said a source.
Mutual fund agent GV Iyer said, “There were mutual fund redemptions to meet urgent expenses earlier. The figures may not be much. At our end it is around 5% in terms of value and number of accounts.”
Parag Paranjpe of Think Consultants, an investment advisory firm, said there have been minor redemptions. Falling incomes levels did lead to stopping of further investment in systematic investment plans (SIPs). The remaining corpus remains largely intact, he said.
Insurance agent Bharat Parekh said March was beyond expectations both in the country as well as Nagpur office. There is a marked dip in April collections of first premium, especially in Nagpur. It may be nearly half of the collections last April.
Sukesh Zanwar, managing director of Buldhana Urban Cooperaitve Bank, said loan against gold touched Rs100 crore in the cooperative during the Covid period. No other lending except loans against gold is happening these days, he said.
Jewellers Vatsal Bangre and Pawan Rokde also confirmed calls from patients’ relatives to get loans against gold.

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