Indian households' financial savings drop to a five-year low of Rs 14.1 lakh crore in FY23

Indian households saw a decline in net financial savings during the fiscal year 2022-23, dropping to a five-year low of Rs 14.16 lakh crore from Rs 17.12 lakh crore in the previous year, according to data from the statistics ministry. This reduction in net savings can be attributed to a significant increase in financial liabilities, which surged by 73.2% year-on-year to reach Rs 15.57 lakh crore, marking the highest level since 2011-12.

The primary driver of this rise in household liabilities was loans from banks, accounting for 76.3% of total liabilities at Rs 11.88 lakh crore in 2022-23. Additionally, borrowings from non-banking entities also increased during this period, with loans from financial corporations and non-banking companies rising by 73.6% to Rs 3.33 lakh crore, and advances from insurance companies growing by 95.0% to 88 billion rupees.

Bank deposits rise

Despite the increase in liabilities, households continued to prefer depositing their savings with banks, which rose by 29.2% year-on-year to reach Rs 9.93 lakh crore in 2022-23. Bank deposits constituted a significant portion (33.4%) of the total gross financial savings amounting to Rs 29.74 lakh crore.

Apart from bank deposits, households allocated their savings to provident and pension funds (21.1%), insurance funds (18.4%), and life insurance funds (18.2%).

However, as a percentage of GDP, net household savings declined to a record low of 5.3%.