Skip to main content

Quick savings recovery after demonetisation jolt: Reserve Bank of India

Quick savings recovery after demonetisation jolt: Reserve Bank of India
 
According to the report, financial assets of the Indian households are predominantly in the form of bank deposits, followed by life insurance - a pattern that got disrupted after note ban
 
The Reserve Bank of India’s (RBI’s) first quarterly publication on households’ financial assets pattern shows that Indian households quickly overcame the jitters from demonetisation.
So far the study was published annually, but will now be available every quarter. The reason being an annual study often fails to capture the sharp
volatility witnessed in investments and savings pattern every quarter.Household savings is crucial to gauge macroeconomic and systemic risks and is taken into consideration while preparing the bi-annual financial stability report.
 
According to the report, financial assets of the Indian households are predominantly in the form of bank deposits, followed by life insurance — a pattern that got disrupted after note ban. It was back on track the next quarter as and when new currency notes were introduced in the system.“Indian households are net savers and suppliers of financial resources for the rest of the economy,” the study said. The net financial assets of the households turned negative (-7.3 per cent of gross domestic product, or GDP, in the third quarter of 2016-17) after cash wash, it added.
 
However, with subsequent introduction of new currency notes, households’ net financial assets turned around. In the fourth quarter, they amounted to 14.8 per cent of the quarterly GDP. In 2017-18, net financial assets are estimated at 8.3 per cent of GDP in the second quarter, up from 5.8 per cent of GDP in the first quarter.
 
Households hold its financial assets mainly in the form of currency, deposits, debt securities, equities, mutual fund units, insurance and pension funds, and small savings.Liabilities are mostly in the form of loans and borrowings from banks, housing finance companies and non-banking financial corporations, the study said
 
According to the study, borrowings from banks turned negative after note ban “as demonetised currency was used to pay back loans.”The study said deposits with banks and non-banks increased in the second quarter of 2016-17 to 8.6 per cent of GDP from 8.1 per cent in the previous quarter, reflecting the impact of salary and pension revision due to the implementation of the Seventh Pay Commission. The mobilisation of deposits under the income declaration scheme also had an impact.
 
There was a major shift in the asset classes of households.Currency with households contracted sharply in the third quarter of 2016-17. But the contraction “was not matched by a proportionate increase in deposits due to redemption of the foreign currency non-resident (FCNR-B) deposits and repayment of loans with specified bank notes”.In the fourth quarter of 2016-17, introduction of new currency notes led to a rise in currency holdings — up to 11.1 per cent of quarterly GDP from (-) 21.5 per cent in the quarter that witnessed demonetisation.
 
Aggregate deposits went down to 3.6 per cent in the fourth quarter of 2016-17 from 5.4 per cent in the third quarter.In the first two quarters of 2017-18, currency holdings moved towards normalcy. While currency with the public rose to 1 per cent of GDP in the second quarter of 2017-18, aggregate deposits were 5.9 per cent of GDP. Pension funds and mutual funds picked up in 2017-18 and their shares in GDP were 0.6 per cent and 1.4 per cent, respectively, in the second quarter, the study said.
 
The Business Standard, New Delhi, 12th March 2018

Comments

Popular posts from this blog

Budget: Startup sector gets new Fund of Funds, FM to allocate Rs 10K cr

  The Indian startup sector received a boost with Finance Minister Nirmala Sitharaman announcing the establishment of a new fund of funds (FoF) in the Budget 2025. The minister unveiled a fresh FoF with an expanded scope, allocating Rs 10,000 crore. The initial fund of funds announced by the government with an investment of Rs 10,000 crore successfully catalysed commitments worth Rs 91,000 crore, the minister said.   “The renewal of the Rs 10,000 crore commitment to the Fund of Funds for alternative investment funds (AIFs) is a significant step forward for the Indian startup and investment ecosystem. The initial Rs 10,000 crore commitment catalysed Rs 91,000 crore in investments, and I fully expect this fresh infusion to attract an additional Rs 1 lakh to Rs 1.5 lakh crore in capital,” said Anirudh Damani, managing partner, Artha Venture Funds.   Damani further added that this initiative will provide much-needed growth capital to early-stage startups, further strengthenin...

After RBI rate cut, check latest home loan interest rates of top banks for loans above Rs 75 lakh

  The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50% to 6.25% in its monetary policy review as announced on February 7, 2025. After the RBI repo rate cut, banks such as SBI, Canara Bank, PNB, and Union Bank among others have cut their repo linked lending rates. Most other banks are also expected to cut their lending rates in line with the RBI rate cut. After banks cut their lending rates, their home loan borrowers will have to pay less interest. Normally, when a lender cuts the lending rate, borrowers get two options: Either to go for a reduction in EMIs or reduce the tenure of the loan. The second option will help the borrowers clear their home loan outstanding faster. In case, the borrower goes for reduction in EMI then the lower lending rate of the lender would mean lower Equated Monthly Installment (EMI) for borrowers.   EMI is the amount you will pay on a specific date each month till the loan is repaid in full.A repo rate-linked home ...

GST collections rise 9.9% to exceed Rs 1.96 trillion in March 2025

  Gross GST collection in March grew 9.9 per cent to over Rs 1.96 lakh crore, government data showed on Tuesday. GST revenue from domestic transactions rose 8.8 per cent to Rs 1.49 lakh crore, while revenue from imported goods was higher 13.56 per cent to Rs 46,919 crore. Total refunds during March rose 41 per cent to Rs 19,615 crore. After adjusting refunds, net GST revenue stood at over Rs 1.76 lakh crore in March 2025, a 7.3 per cent growth over the year-ago period.       - Business Standard 02 th March, 2025