The Reserve Bank of India, in its 29th Financial Stability Report, said that the household debt levels have significantly risen after the Covid period along with financial liabilities. It noted that the central bank is closing monitoring the situation after the household savings slumped from average levels in over a decade before.
It noted that overall household savings have declined to 18.4% of GDP in FY23, down from the average of 20% of GDP seen between 2013-22. The share of net financial savings declined to 28.5% in FY23 from an average of 39.8% in 2013-22.
Besides, net financial savings declined to 5.3% of GDP in FY23, down from an average of 8% in 2013-22.
“With overall household savings declining, coupled with an increasing trend in financial liabilities, household debt warrants close monitoring from a financial stability perspective,” the RBI said in its Financial Stability Report, June 2024 edition.
The significant increase in financial stability among households following the pandemic is clearly reflected in the notable rise in retail loan growth. This growth encompasses both consumption-based loans and investment financing.
It observed: “Financial liabilities of households have risen in the post-pandemic period, as reflected in the surge in retail loan growth for financing both consumption and investment. Alongside, agricultural and business loans have also grown. Notably, more than two-thirds of borrowers are of prime and above credit quality.”