Deposits Retain Their Place as India's Top Saving Choice, Says RBI

Deposits remain the most popular saving method in India, though market-based instruments are gaining traction, according to an article in the Reserve Bank's July Bulletin. The article estimates quarterly financial balance sheets of households and their net financial wealth from 2011-12 to 2022-23. It was authored by Anupam Prakash, Suraj S, Ishu Thakur, and Mousumi Priyadarshini from the RBI's Department of Economic and Policy Research.

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The article noted that financial asset accumulation and net financial wealth surged in 2020-21 due to pandemic-related restrictions on mobility and spending, coupled with slow liability growth. As normalcy returned, household consumption increased, leading to some normalisation of net financial wealth. By the end of March 2023, households' financial assets were 135.0 per cent of GDP, while their financial liabilities stood at 37.8 per cent of GDP. Consequently, their net financial wealth was recorded at 97.2 per cent of GDP.

Financial Wealth Trends

The spike in financial assets during the Covid-19 pandemic resulted in a 12.6 percentage point increase in net financial wealth between end-March 2020 and end-March 2023. The listed equity wealth of households peaked at 19.4 per cent of GDP by end-December 2021 but later moderated to 14.9 per cent of GDP by end-March 2023. The article clarified that this compilation is limited to listed equity holdings due to the lack of estimates on unlisted equity investments.

Although households have increased their leverage, their debt-to-financial assets ratio has remained stable over time. The authors also pointed out that a significant portion of wealth in India is held in non-financial assets such as housing, which were not covered in this article.

Authors' Perspective

The central bank emphasised that the views expressed in the article are those of the authors and do not represent the official stance of the RBI. The authors highlighted that while deposits are still preferred for savings, there is a noticeable shift towards market-based instruments.

This detailed analysis provides a comprehensive view of household financial trends over more than a decade, offering valuable insights into how economic conditions and events like the pandemic impact financial behaviour and wealth accumulation.

The data presented underscores the resilience and adaptability of Indian households in managing their finances amidst changing economic landscapes.