Savers shift to investors in household financial asset rebalance, says Uday Kotak
With bank deposits moving from 53% to 42% between 2020 and 2024, savers have turned investors in a rebalance of household financial assets, said Uday Kotak, Non-Executive Director, Kotak Mahindra Bank.
Referring to the aforementioned trend on his “X” handle, Kotak said: “Future is a holistic approach to financial services. Time for mindset change.”
These observations come against the backdrop of bank deposit growth lagging credit growth, which is pushing banks to raise deposit rates to attract resources.
In a report on “Trends in household savings and debt after the pandemic”, CRISIL Market Intelligence & Analytics noted that households have been borrowing faster than they have been saving since the Covid-19 pandemic.
As a result, ‘net’ household financial savings (gross financial savings adjusted for liabilities) have fallen, according to government data from fiscal 2023. Overall, the household savings rate (net household savings/GDP) fell to a six-year low of 18.4 per cent in fiscal 2023, per the report.
Households have been borrowing at a faster pace than they have been saving since the Covid-19 pandemic. As a result, ‘net’ household financial savings (gross financial savings adjusted for liabilities) have fallen, government data up to fiscal 2023 shows.
“The rising proclivity for debt among households is fanned by a clutch of tailwinds — a retail credit push by lenders, greater appetite for borrowings, especially among the young, and improved access to lenders owing to advances in technology.
“For households, among financial instruments, there is a gravitation from savings in deposits to equities, mutual funds and small savings. Household savings in physical assets have also risen post pandemic,” said Dharmakirti Joshi, Chief Economist; Dipti Deshpande, Principal Economist; and Pankhuri Tandon, Senior Economist, in the report.