Indian households witnessed a decline in savings in the third quarter for the financial year 2021 (three months ending 2020) as the country was trying to recover from the first phase of the pandemic.
There has also been an increase in the bank debt burden during the period, reported The Times of India.
According to RBI (Reserve Bank of India), household financial savings dropped to 8.2 per cent of India's GDP in the third quarter of the financial year 2020-21, declining from 21 per cent and 10.4 per cent of the first and second quarters, respectively.
The unprecedented rise of savings rates up to 21 per cent in the first quarter was reportedly due to less spending by Indians during strict lockdown all over the country.
Household Bank Deposits To GDP
In the second quarter of the FY 2021, the ratio of household bank deposits to GDP was 7.7 per cent of GDP. It dropped to a mere 3 per cent in the next quarter.
Additionally, savings in life insurance and provident & pension funds also declined to 2.9 per cent and 2.2 per cent respectively in the third quarter from 3 per cent and 2.6 per cent in the preceding quarter.
Household Currency Holding To GDP
Indians withdrew cash from banks leading to a rise in household currency holding as a percentage of GDP rising to 1.7 per cent in the third quarter from 0.4 per cent in the second quarter.
Household investment in mutual funds surged to 1.2 per cent of GDP in December 2020, compared to the 0.3 per cent in the second quarter due to falling interest rates.
Increase In Debt
According to BloombergQuint, the debt to GDP ratio of households has been rising since March of 2019. In the third quarter of FY 21, household liabilities from commercial banks rose to 27 per cent from 26.3 per cent of the GDP in the previous quarter.
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