Indian household financial savings surge 16.5% in FY24 after two years of decline

After two years of steep decline, financial savings by Indian households have bounced back strongly in FY24, growing by 16.5%. This is a significant turnaround from the sharp contraction of 26.5% in FY22 and 22.2% in FY23, suggesting a return of confidence in financial instruments.

The recovery in financial savings coincides with a marked slowdown in savings into physical assets. Growth in physical asset savings, which include investments in real estate and big-ticket purchases like vehicles, dropped from a massive 39% in FY22 to just 6.3% in FY24.

Savings in gold and silver ornaments have also lost their shine. After a 51% jump in FY22, the growth rate for FY24 has nearly flatlined at just 0.93%, likely due to high prices of precious metals.

Part of the rebound in financial savings is being attributed to a surge in gross bank deposits. However, on a net basis, the rise in household loans has actually outpaced deposit growth, reflecting increased borrowing activity. While banks have benefited, non-banking financial companies (NBFCs) have taken a hit, with both deposit mobilisation and loan disbursements turning negative.

At the same time, small savings schemes have seen a sharp 54% rise in FY24, signalling growing interest in safe, government-backed investment avenues. Market-linked instruments such as mutual funds, insurance, and pension funds have also witnessed healthy growth of 16.44%.

The latest data suggests a shift in household savings patterns, with financial instruments regaining favour after a brief lull. The Ministry of Statistics is expected to release data for FY25 around the same time next year.