Ad Here  
Monetary policy continues to adopt dis-inflationary path Two banks: their jubilees and performances Targets continue to be ad hoc Managing NPAs... Greet Lakshmi the banking robot Big bank merger, bigger expectations Ferrying digital banking to Lakshadweep All that glitters is not gold... Mega merger is on The paradox: clamour for the Goliath and David What is the priority – mergers or NPA reduction? Financial inclusion vs unclaimed deposits From lazy banking to easy banking How okay are new banks? Bottomlines shrink, bad loans rise... Cradle of banks to a smart city... Emerging crisis Another route for achieving financial inclusion Why any time money? Thirty more cities seek to become SMART Cautious and considerate Who is the real beneficiary? Fund healthcare clinics in villages... Too big to fail and too small to sail How ‘secure’ are the secured loans? Good, bad and ugly Rationalised Small finance payment banks... Smart banking in smart cities Banking on Risk Bank deposits account for 46.3 per cent of household savings Reaching out: is it slowing down? Merger mania haunts banks Anytime banking to anywhere banking Small finance banks offer high interest rates Grows Bigger Lacklustre credit expansion Payment banks have arrived Why priority status? Ernakulam excels... Governance in Reverse Gear? The collaboration suite of cyber criminals Growing volume of stressed assets… LVB- A supermarket of financial services Banking overhauling or reorganisation? New bank licences, at last... Small is ‘more’ beautiful One down in private sector Reaching the Unreached… A bank for women, by women Indian customers are tech savvy Drastic decline in asset quality Insatiable appetite for credit It’s a war on black money, support it. Hesitancy in announcing year-end results A development bank for BRICS Well-lived... New capitals of Migrant banks A new development bank rising in the east… Aadhaar, niraadhaar and banking Needed a Banking Atlas Cut in repo rate – lower than expected Just 660 days! Target over-ambitious... Growing gainfully Capital base of regional rural banks raised Holy or unholy? Banking in Telangana Drop in SLR- sparing lendable resources Perhaps small is more beautiful than big! Nothing much can happen…. United India Insurance - Rs 110 crore losses have been claimed till now due to floods in Tamil Nadu Stage set for Indian ‘avatar’ of foreign banks
Bank deposits account for 46.3 per cent of household savings
The Human Development reports of various districts prepared by the state governments provide data relating to Indian households. According to the 2011 census, there are 246.69 million households in India.

A macro-level estimate of the pattern of household finance is now in the offing thanks to the initiatives of the Reserve Bank of India.

Recently, the Reserve Bank set up a committee on household finance. The terms of reference included:

•    To benchmark the current depth of household financial markets in India vis-a-vis those in other major world markets and to identify areas of priority for growth and change.

•    To characterise and evaluate Indian households' demands in formal financial markets (for assets such as pensions, as well as liabilities such as home loans) over the coming decade.

•    To consider whether, how and why the financial allocations of Indian households deviate from desirable financial allocation and behaviour (e.g, the large household allocation to gold).

•    To evaluate the design of new systems and to redesign the existing systems of incentives and regulations to encourage and enable better participation by Indian households in formal financial markets.

Consisting of eminent persons including representatives from the financial sector regulators, the committee is expected to submit its report by July next year.


Inherent inadequacies…


The relationship of Indian households with the financial sector has quite a few peculiarities. There are wide differences in the nature of relationships of rural and urban households with the financial sector. Indigenous financial outfits continue to have a hold on the savings pattern of rural households. Yet, bank deposits constitute the major source of household investments. According to an estimation made by the Reserve Bank of India, bank deposits constitute 46.3 per cent of a household’s financial assets in 2015.

In traditional households, the love for yellow metal continues to be very strong, resulting in huge investments in the non-financial asset. The huge expansion of the jewelry trade all over the country in recent years facilitates this type of household investment. Surprisingly, banks, which are expected to facilitate investments in financial assets, have been selling gold coins to their customers!

Life insurance is yet to become an important destination for household savings. Insurance premia now constitute 18.9 per cent of household savings. Though the number of insurance policies is 360 million - one of the highest in the world - data pertaining to the actual number of persons insured is not readily available. It is quite likely that the percentage of insured households may be disproportionately more in urban areas than in the rural sector.

Indian households have very little dealings with the stock exchanges. Hardly 4.6 per cent of their savings is invested in company shares. Of late, the emergence of mutual funds is slowly improving the flow of household savings into the share market indirectly.


Unorganised household borrowings


As far as household borrowings are concerned, they are largely diversified having very little reliance on the banking sector and other institutional financial agencies. While the data relating to household borrowings from banks is not available, a rough estimation is attempted as follows: total number of borrowing accounts (non-food credit accounts) of the banking sector is only 14.42 crore as on March 2015, of which only 4.99 crore are in rural areas accounting for only 8.1 per cent of the total credit lent by the banking sector. Inferentially, only a small number of households, particularly rural households borrow from banks. According to NSSO, Situation Assessment Survey, 2014, farm households’ borrowing from banks is 42.9 per cent of their total borrowings.

According to the recently released Reserve Bank of India’s Annual Report for 2015-16, financial liabilities of all households have increased to 3 per cent of the gross disposable national income in FY 2016. However, banks’ penetration in rural households is only inching, while urban households are found to be having more housing loans from housing finance companies than from commercial banks. The committee is expected to provide a comprehensive estimate of household finance in India, identifying areas of priority for growth and change. The Report is expected to indicate the necessity of redesigning the existing systems of incentives and regulations to encourage and enable better participation by households in formal financial markets. It would also facilitate the comparison of the Indian situation with that of advanced economies.



Author :
Reported On :
Sector :
Shoulder :
IE, the business magazine from south was launched in 1968 and pioneered business journalism in south. Through the 45 years IE has been focusing on well-presented and well-researched articles. When giants in the industry stumbled to keep pace with the digital revolution, IE stayed affixed embracing technology.
Read more
Economist Communications Ltd is committed to ensuring that your privacy is protected.
Read more
You agree that your use of this Website and the purchase of the magazine will be governed by these terms and conditions.
Read more
S-15, Industrial Estate,
Chennai - 600 032.
PHONE: +91 44 22501236