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Mumbai: Indian families are choosing to move their savings from bank deposits to equity instruments and investment funds to get higher returns on their savings. Slow account growth is also raising the question of liquidity. It has also been claimed that savings are being invested in speculative trading.
According to a Reserve Bank of India research report, bank deposits still remain the first choice of households, but interest in investing in instruments such as equity, insurance and pension funds is also growing.
The share of equity and investment funds in the total financial assets of households has increased by more than fifty per cent during the period 2011-12 to 2022-23.
Reserve Bank Governor Shaktikanta Das also said that due to this changing mindset of families, liquidity in banks is decreasing. Deposit growth in banks is consistently lower than loan growth.
According to the RBI report, household financial assets stood at Rs 363.80 trillion at the end of March 2023, which was 135 percent of GDP. While the outstanding liabilities of households were Rs 101.80 trillion which was 37.80 percent of GDP.
Meanwhile, Securities and Exchange Board of India (SEBI) chief Madhabi Puri said household savings are shifting to speculative trading such as futures and options instead of safe instruments. There are instances of many youngsters losing money by entering such markets. He also said that it is a matter of concern that household savings are being invested in risky businesses instead of capital formation.
An increase in financial assets was seen during the Corona period. The participation of retail investors in the country's equity market has increased rapidly during the Corona period.
According to another report, the share of retail investors in the market cap of the equity market was on an average 14.50 per cent during the period March 2010 to March 2023.
Household savings shifting towards speculation: Sebi
The increasing business in the futures market is becoming a matter of real concern for market regulators. One after the other, SEBI, RBI, Finance Ministry are talking about strict response in this matter. Once again SEBI Chairperson Madhuri Puri Buch has expressed concern over the increasing futures market business and the death of small investors in particular has become a matter of concern, forcing the capital market regulator SEBI to warn against speculative activities in the futures and options segment. This issue is becoming widespread day by day and now it is affecting the economy. SEBI Chairperson Madhabi Puri Buch said that large household savings are going into stock market speculation and the youth are losing their money in this shortcut. This is the reason why household savings are not used for capital formation.