On June 23, 2021, the Reserve Bank of India has released the preliminary estimates of Household Financial Savings for Q3: 2020-21 and household Debt-GDP Ratio at end December 2020.
The RBI estimated an increase in debt of around 20 crore households, which contribute around 60% of gross savings in the economy and financial savings showed a decline of over 45% from June to December 2020.
According to RBI’s preliminary estimate, household financial savings were at 8.2% of GDP in Q3 FY21.
The financial savings were recorded at 10.4% in the second quarter (Q2) and 21% in the first quarter (Q1).
The ratio of household (bank) deposits to GDP declined to 3.0% in the December quarter (Q3) of 2020-21 from 7.7 percent in the previous quarter (Q2).
According to the RBI data, a households net financial saving to GDP ratio rose to at least a 20 year high of 12.5 percent during the first nine month (9m) of FY21.
The ratio was 8% in 2019-20 (FY 20) and at a two-decade low of 7.1 in 2018-19.
Household net savings were up 58.4% year on year in 9m FY 21 to Rs. 17.52 trillion – up from Rs. 11.06 trillion a year ago.
At the end of Q3, the currency with the public also grew sharply at 22.7 percent.
The household debt to GDP ratio, which is based on select financial instruments has been increasing steadily since end- March 2019.
It rose sharply to 37.9 at end- December 2020 from 37.1% at end-September 2020.
Important of Pandemic on Households savings
The pandemic has affected each and every sector of economy and people. Pandemic has disrupted investment, financial savings and business closure.
Pandemic has caused direct impacts on income due to premature deaths, workplace abrentecism and reduction in productivity.
Consumes typically changed their spending behavior, mainly due to decreased income & household finances.