Household Savings Shift from Banks to Alternative Assets
Tanvee Gupta Jain, Chief India Economist at UBS Securities India, highlights a significant change in Indian households' savings behavior, moving from traditional fixed deposits to alternative assets like property, equities, and provident funds.
SavingsBank DepositsAlternative AssetsMonetary PolicyFinancial LandscapeReal Estate NewsOct 18, 2024
Jain attributes this shift to several factors, including easier access to retail loans and a younger, more digitally savvy population. These changes have led to a decline in bank deposit growth. As more households explore alternative investment avenues, bank credit growth has outpaced deposits, particularly due to an increased reliance on short-term non-retail deposits. This imbalance is creating challenges for the banking sector.
The impact of this shift on monetary policy is becoming increasingly evident. The report suggests that while the Reserve Bank of India (RBI) is expected to cut interest rates by 75 basis points, asymmetric monetary transmission remains a significant challenge. This means that while banks may find it easier to increase lending, they struggle to lower deposit rates due to the widening gap between credit demand and deposit supply.
Additionally, around 25% of market borrowings are funded through small savings schemes, a dynamic that Jain emphasizes as crucial to understand. The government's measures to improve cash management have reduced the liquidity available to banks, further exacerbating the challenge. As India navigates these complexities, the focus will be on fostering sustainable growth while addressing the evolving needs of consumers in a changing economic landscape.
UBS Securities India is a leading investment bank and financial services firm with a strong presence in India. The company provides a wide range of services, including equity and debt capital markets, mergers and acquisitions, and asset management. UBS is committed to delivering innovative solutions and insights to help clients navigate the ever-changing financial landscape.
Frequently Asked Questions
What is the main finding of the UBS report on household savings in India?
The main finding is a significant shift in Indian households' savings behavior, moving from traditional fixed deposits to alternative assets like property, equities, and provident funds.
Why is this shift happening?
This shift is attributed to easier access to retail loans and a younger, more digitally savvy population, which is driving the trend towards diversification in savings.
How is this affecting bank deposit growth?
The shift has led to a decline in bank deposit growth, with bank credit growth outpacing deposits, particularly due to an increased reliance on short-term non-retail deposits.
What challenges does this pose for monetary policy?
The shift poses challenges for monetary policy, especially with asymmetric monetary transmission, making it difficult for banks to lower deposit rates due to the widening gap between credit demand and deposit supply.
What percentage of market borrowings are funded through small savings schemes?
Around 25% of market borrowings are funded through small savings schemes, which is a crucial dynamic to understand in the current economic context.
Related News Articles
Mumbai Urja Marg Transmission System Project Set for Inauguration
Real Estate Tech Economy Equipment Building Materials Project Updates
Noida's Luxury Housing Boom: Why ₹5 Crore-Plus Apartments Are the New Normal
Noida's real estate market is on the rise, with luxury housing projects launching ₹5 crore-plus apartments, driven by infrastructure development, improved law and order, and increasing demand from buyers and investors.
CLSA Revamps India Strategy, Boosts Allocation to 20% Overweight Amid China’s Economic Challenges
CLSA, a prominent investment firm, has reversed its stance on India, now allocating a 20% overweight to the country. This shift comes as China continues to grapple with economic woes, including property market weakness and subdued real estate investment.
Maharashtra: ED Seizes Properties in Jalgaon and Nashik Valued at Rs 1.69 Crore
The Enforcement Directorate (ED) has seized multiple properties in Jalgaon and Nashik, Maharashtra, worth Rs 1.69 crore. The properties were found to be involved in a complex fraud scheme, including collusion with company auditors and the fraudulent sale
Pune Design Firm Accountant Falls Victim to 'CEO Fraud' Scam, Owner Loses Rs 1.9 Crore
In a shocking incident, an accountant from a Pune-based design firm fell prey to a sophisticated 'CEO fraud' scam, leading to a significant financial loss of Rs 1.9 crore for the company's owner. The scam highlights the growing threat of cybercrime and th
Top Real Estate Events and Conferences in India to Watch in 2025
As India's real estate sector continues to evolve, key events and conferences provide vital platforms for professionals to network, gain insights, and shape the future. From Mumbai to Hyderabad, here’s a look at the must-attend forums in 2025.