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Notebandi pushes up Household Financial Savings
Sep 2, 2017


Notebandi may have been ineffective in stemming out black money so far but the exercise had a positive impact on household savings. The exercise that invalidated 86% of currency notes in November last year has resulted in more Indian households parking their savings in financial assets. The share of household financial savings in Gross National Domestic Income (GNDI), also known as household financial savings rate, rose from 7.8% in FY16 to 8.1% in FY17.

A majority of the savings were parked in deposits, mostly of banks. Among financial assets, the share of deposits in GNDI increased from 4.8% in FY16 to 7.3% in FY17 despite more than 1% fall in returns during the year. After insurance funds, stocks and debentures was the next preferred route to channelise household savings. The share of stocks and debentures in GNDI quadrupled to 1.2% in FY17 as many traditional investors in bank deposits shifted to equity and market linked instruments. Low inflation futher aided the shift towards formal channels of financial savings and this in turn will play a role in fueling growth once the economy recovers.

Data Source: Economic Times, RBI

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