Selloff or Market Correction? Either Way, Here's What to Do NextSee Overvalued Stocks

SBI refutes claims of plummeting Indian household savings, cites shift to physical assets

EditorPollock Mondal
Published 09/21/2023, 08:58 PM
© Reuters.
SBI
-

The State Bank of India (SBI) has dismissed allegations that Indian net household financial savings have reached a five-decade low, arguing that the assessment of household saving capacity should also encompass physical savings.

Recent SBI research has pointed to a trend towards physical savings over the past two years, which could be linked to a period of low interest rates. The bank's economists highlighted a correlation between housing loans and household savings in physical assets, noting that every 1 Rupee increase (1 Rupee = $0.012) in housing loans led to a 2.12 Rupee rise in household's savings in physical assets over the 14-year period ending FY22.

The Reserve Bank of India's (RBI) latest monthly bulletin showed a decline in household financial savings to 5.1% of GDP in FY23, down from 7.2% in the previous year and 7.6% post-pandemic. However, SBI argued that this decrease should be viewed alongside an increase in borrowing from commercial banks, with over half of the credit over the last two years being allocated towards housing, education, and vehicle loans.

The recovery in the real estate sector and rising property prices were also flagged as indicators of this shift towards physical savings. RBI data released last month indicated a year-on-year growth of 3.5% in the house price index for Q1:2022-23, up from 1.8% in the preceding quarter and 2.0% a year earlier.

Despite the drop in financial savings, SBI predicts an overall rise in total savings for FY23 compared to the prior year due to an expected growth in physical savings' share. The bank anticipates that by FY23, physical savings will constitute nearly 70% of total household savings, up from 48% in FY21 and a figure last seen in FY12.

SBI Ecowrap, the bank's research division, suggested that the significant increase in financial liabilities might indicate a reduction in precautionary saving during the pandemic. Of a 820 crore Rupee (Rs 1 crore = $120,289) increase, 710 crore Rupees were attributed to a rise in household borrowing from commercial banks, with the majority of loans being used for housing, education, and vehicle purchases.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.