Indian households are warming up to financial products again by putting a larger part of their financial savings into shares and bonds, shows data from the Reserve Bank of India (RBI).
Gross financial savings of households in fiscal year 2016 increased to 10.8% of gross national disposable income (GNDI) from 10% in the previous year.
Within financial products, households are picking up more shares and bonds than before as savings into these rose to 0.7% of GNDI in FY16 from 0.4% in the previous year.
Although retail inflation may have eased, enabling depositors to finally earn a real return, banks continued to be sore losers for the third straight year.
Savings into bank deposits fell to 4.7% of GNDI in FY16 from 4.9% in the previous year and 6% in FY13. Part of this could be due to banks paring deposit rates at a faster pace than lending rates.
Households have been borrowing more during FY16 and household liabilities increased to 3% of GNDI from 2.5% in the previous year.
This is already reflecting in the retail loans of banks, which have been surging at around 15% every year for the last three years. Due to the rise in liabilities, the increase in net financial savings (gross financial savings less liabilities) was less than the rise in gross financial savings. Nevertheless, as the chart shows, household net financial savings too, as a proportion of GNDI, have been steadily rising.