Household Savings in India Shift from Bank Deposits to Capital Markets
New Delhi, Feb 18 (IANS) – According to a report by BofA Securities, Indian household financial savings have moved away from traditional bank deposits towards capital markets. In FY2001, bank deposits accounted for 39 per cent of total financial savings, while capital markets only garnered 4 per cent. However, in FY2023, the figures stand at 37 per cent and 7 per cent respectively.
The report states that with improved financial literacy, savings in life insurance, provident and pension funds have steadily increased from 34 per cent of total in FY2001 to 40 per cent in FY2023. Additionally, savings parked as currency have fallen from 12 per cent to 7 per cent of gross financial assets in FY23.
As of FY22, household savings in financial assets stand at Rs 28 trillion, twice the Rs 14 trillion seen in FY12. An average Indian household holds 77 per cent of its total assets in real estate, 7 per cent in other durable goods, and 11 per cent in gold.
The share of physical savings in total household savings has tapered from 69 per cent in FY2012 to 49 per cent in FY21, but rose to 61 per cent in FY22. The report expects total household savings in FY23 to surpass the level seen in FY22, mainly due to an increase in physical savings.
Household savings play a significant role in the Indian economy, contributing 70 per cent to total gross domestic savings. Real estate is the largest component of physical savings at 77 per cent share, and 11 per cent of total physical savings is in the form of gold.
Households are the mainstay of gross domestic savings, contributing 90 per cent of the total in FY2001. Physical savings account for 45 per cent of the total, and the share has been trending down steadily from 55 per cent in FY2001.
The report highlights the shifting landscape of household savings in India, showcasing a move towards capital markets and other financial instruments. With increased financial literacy and changing investment patterns, it is clear that Indian households are diversifying their savings and investment portfolios.
