New Delhi: The savings pattern of Indian households has been undergoing a significant shift over the past three years, with funds increasingly moving from traditional bank deposits to mutual funds and life insurance, according to an SBI report.
The report highlighted that the share of household savings in bank deposits, which stood at 47.6 per cent in 2021, has dropped to 45.2 per cent in 2023.
Meanwhile, household investments in life insurance funds have seen an uptick, rising from 20.8 per cent in 2021 to 21.5 per cent in 2023. The share of mutual funds in household savings has also increased, climbing from 7.6 per cent in 2021 to 8.4 per cent during the same period.
It said "Among financial savings, the share of bank deposits/currency is declining as new avenues of investment are emerging (like mutual fund, etc.)"
The report also highlighted trends in net financial savings, noting a significant rise in their share of total household savings from 36 per cent in FY14 to around 52 per cent in FY21.
However, this share saw a slowdown in FY22 and FY23. Interestingly, FY24 trends suggest a decline in the share of physical savings, indicating a renewed focus on financial assets.
The report also added that India's overall savings rate remains robust, standing at 30.2 per cent, which is higher than the global average of 28.2 per cent. This reflects a strong culture of savings in the country, supported by an improving financial inclusion landscape.
It said "India's Savings Rate is higher than the global average"
Due to various policy measures, financial inclusion in India has significantly improved over the years. Currently, over 80 per cent of Indian adults have a formal financial account, compared to approximately 50 per cent in 2011.
The report stated that this has played a crucial role in enhancing the financialization of household savings, offering households more diverse and potentially rewarding investment opportunities.
The shift from traditional to modern savings avenues indicates a growing awareness among Indian households about optimizing their financial resources for better returns.
