Household financial savings at 5-year high
Leading indicators show further pick-up in FY17
19 September 2016
The Economy Observer
Reserve Bank of India (RBI) data indicate that household gross financial savings (GFS) increased from 10.1% of GDP in
FY15 to 10.9% in FY16 – the first significant pick-up in six years. However, with financial liabilities also picking up, net
financial savings (NFS) – key element for the economy – moved only marginally from 7.6% to 7.8%.
Households’ exposure to shares & debentures in FY16 was the highest ever in absolute terms. Holding of currency as a
percentage of GFS was the highest since 1990. Notwithstanding lower interest rates on small savings schemes,
households increased their claims on government schemes.
Leading indicators show that the build-up of growth in bank deposits, currency and equities has been better in April-
August 2016, indicating further pick-up in household GFS in FY17. However, with faster growth in borrowings, the
improvement in NFS could remain subdued in FY17 also.
Household GFS increased for the first time in six years…:
Recently released RBI
data indicate that Indian households increased their gross financial savings (GFS)
from 10.1% of GDP in FY15 to 10.9% in FY16
(Exhibit 1).
While this is still much
lower than the average GFS rate of 14.4% in the decade to FY11, FY16 marked
the highest increase in GFS rate in six years
(Exhibit 2 on the next page).
…driven by higher exposure to capital markets, more currency holdings and
government deposits:
Households increased their exposure to capital markets,
as they bought shares & debentures worth INR918b in FY16 – the highest
absolute amount in a single year on record (since 1950s). Further, currency was
the most preferred method of savings, currency holdings increased to 13.5% of
GFS in FY16, the highest since 1990. Notwithstanding lower interest rates,
household savings in government schemes also increased considerably
On the other hand, unlike in FY15, savings in long-term safe assets
(insurance, provident & pension funds, IP&PFs) grew slowly. Finally, deposit
growth was also subdued despite low base (declined 6.5% in FY15).
The increase in NFS, however, was marginal:
While GFS increased significantly,
household financial liabilities also picked up from 2.6% of GDP in FY15 to 3.1% in
FY16. Consequently, household net financial savings (NFS), which is what
matters for the economy, inched up only marginally from 7.6% of GDP in FY15 to
7.8% in FY16 – broadly in line with our estimates. Though this is the highest NFS
rate in five years, it was much lower than the average rate of ~11% of GDP in the
decade to FY11
(Exhibit 4).
Leading indicators point to further pick-up in GFS in FY17:
A look at several
leading indicators to gauge household financial savings for FY17 points to
further pick-up in gross financial savings. The build-up growth in bank deposits
in the first five months of FY17 is 3.6%, as against 2.9% in the corresponding
period last year. Similarly, currency till August 2016 was up 4.7%, as against
2.7% in April-August 2015 and exposure to equity also seems to be stronger
(Exhibit 5).
While GFS is likely to increase further in FY17 – a definite positive
development – higher borrowings may keep improvement in NFS limited.
Nikhil Gupta
(Nikhil.Gupta@MotilalOswal.com); +91 22 3982 5405
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on
Bloomberg, Thomson Reuters, Factset and S&P Capital.

Exhibit 1: Household financial savings and liabilities
% of GDP
Gross financial savings
Insurance, provident & pension funds
Claims on government
Shares & debentures
Financial liabilities
Net financial savings
* Include bank deposits, non-bank deposits and (net) trade debt
Source: RBI, Central Statistics office (CSO), MOSL
Exhibit 2: Household financial savings witnessed first
meaningful pick-up in six years…
(% of GDP)
(% of GDP)
Change in GFS (RHS)
Exhibit 3: …driven by currency, government deposits and
capital markets
* Bank and non-bank deposits
#shares & debentures
FY00 FY02 FY04 FY06 FY08 FY10 FY12 FY14 FY16
Exhibit 4: NFS, however, was up only marginally
Gross financial savings
(% of GDP)
Net financial savings
Exhibit 5: Leading indicators point to further pick-up in FY17
Apr-Aug 2015
growth, %)
Apr-Aug 2016
Source: Reserve Bank of India (RBI), CEIC, MOSL
19 September 2016

19 September 2016

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