Indians saving more in physical assets than financial: FinMin, SBI
As per data from the Finance Ministry, home loans have consistently registered double digit growths since May 2021. Even vehicle loans have been growing at a solid 20% since September 2022
Despite net Indian household savings falling to a 47-year low, investments in financial instruments like mutual funds (MFs) remained strong. Household investments in MFs touched a staggering Rs 1.8 trillion in 2022-23, fueled by investor belief in SIPs, or systematic investment plans (SIPs). Notably, the share of financial assets in Indian households dipped to 5.1% in FY23. This stood at 7.2% in FY22, and 11.5% in FY21.
According to data from Association of Mutual Funds of India (AMFI), August saw mutual fund folios touch an all-time high of 15,42,41,577. The same was true for SIP accounts, which stood at a historic high of 6,96,85,946 last month. Contributions via SIPs also reached Rs 15,813.54 crores in August.
Physical assets
However, trends suggest that people are reposing far more trust in physical assets like real estate as compared to their financial assets. As per an SBI report, about 55% of all retail loans availed by Indian households over the last two years have been either for educational purposes, or for buying a house or vehicle.
As per data from the Finance Ministry, home loans have consistently registered double digit growths since May 2021. Even vehicle loans have been growing at a solid 20% since September 2022. Even borrowings from NBFCs significantly soared to Rs 2.4 lakh crore in 2022-23 from Rs 21,432 crores in 2021-22.
This implies that while monetarily, household savings might have hit a decadal low, families continued to amass assets, with physical ones gaining more prominence than financial ones. In fact, the share of such physical assets amidst household savings in India is set to touch about 70% by the end of FY23.
And it’s not like there has been no growth in the net financial assets held by Indian households. However, their rate of growth has not been high, unlike previous years. As per data from FinMin, Indian households added Rs 13.8 lakh crore worth of financial assets. This is certainly a dip from Rs 17 lakh crore they added in FY22 and Rs 22.8 lakh crore in FY21.
Equities losing favour
Indian households poured Rs 10.27 lakh crore in bank deposits in FY23. This was followed by small savings instruments, including PPF, which saw inflows worth Rs 8.64 lakh crore. While life insurance funds saw an influx of Rs 5.35 lakh crore in FY23, direct equities clearly fell out of investor favour, witnessing inflows worth Rs 0.23 trillion.