The Reserve Bank of India (RBI) recently reported that net household financial savings slightly increased to 5.3% of GDP in FY24, up from a 47-year low of 5% in FY23. This follows a sharp decline from the peak of 51.7% during the Covid pandemic to 36.1% in FY22 and 28.5% in FY23.
The increase in savings is partly due to a drop in household liabilities, like personal loans, which fell to 4.7% of GDP in the first half of FY25 from 6.9% during the same period in FY24. RBI’s stricter lending rules for personal loans, gold loans, and loans to non-banking financial companies (NBFCs) contributed to this decline.
While gross financial savings (total savings before subtracting liabilities) increased to 11.6% of GDP in FY24, rising liabilities limited the overall net savings growth. Household liabilities hit a 17-year high of 6.4% of GDP in FY24, just below the 6.6% record in FY07. Increased savings in insurance, reduced cash holdings, and higher capital market investments helped boost gross savings.
Despite the savings improvement, household debt continues to rise. It increased to 41% of GDP in FY24 from 37.9% in FY23 and is estimated to have reached 43.5% in the first half of FY25. Housing loans make up about 30% of this debt, but non-housing debt has grown substantially, reaching 32.3% of GDP by the second quarter of FY25.
(with ToI inputs)
