Household savings fall to decades low, borrowing rises: RBI data

Annual financial liabilities of households increases by 5.8% of GDP

Net financial savings of households is at the lowest in decades, reaching 5.1 per cent of gross domestic product (GDP) in Financial Year 2023 (FY23) compared to 7.2 per cent in FY22, according to data from the Reserve Bank of India (RBI).

Annual financial liabilities of households rose by 5.8 per cent of GDP in FY23, compared with 3.8 per cent in FY22.

Net assets of households were valued at Rs 22.8 trillion in FY21, but the figure dropped to Rs 16.96 trillion in FY22 and further declined to Rs 13.76 trillion in FY23.

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The RBI's monthly bulletin said on Monday that household debt, as measured by financial liabilities, remained notably high at 37.6 per cent of GDP in FY23 compared to 36.9 per cent in FY22.

RBI’s data said the rate of increase in financial liabilities in FY22 was the second highest since Independence. The only time the flow was sharper was in Financial Year 2006-07 when it was 6.7 per cent.

The primary cause of decreasing savings and increased borrowing is likely the combination of stagnant or declining household incomes in the face of rising inflation.