After plunging to a half-century low in FY23 on account of the pandemic-induced income crunch, net financial assets of Indian households recovered smartly in the subsequent two years, data from the Reserve Bank of India showed on Monday. With stronger economic growth and improved incomes, households seemed to have pared their record high indebtedness rather swiftly, while also channelling more monies into the equity market, hoping for high returns.
The net financial assets of households went up to Rs 9.9 lakh crore or 6% of GDP in FY25, compared with Rs 15.94 lakh crore or 5.3% of GDP in the previous year, the data revealed. In FY23, net financial assets had fallen to a five-decade low of 4.9% or Rs 13.3 lakh crore. These were 11.4% of GDP in FY21.
Financial Liabilities
Financial liabilities of the country’s households dropped sharply to Rs 15.7 lakh crore in FY25 or 4.7% of GDP, compared with Rs 18.8 lakh crore or 6.2% of GDP in the previous year. Significantly, equities as a share of household financial assets rose to an all-time high of 15.1% in FY25 compared with 8.7% in FY24 and 7.3% in FY23, indicating the growing trend among households to put savings into asset-building investments. Correspondingly, the share of bank deposits in financial assets fell to 35.2% to Rs 12.54 lakh crore in FY25 from 39.7% or Rs 13.8 lakh crore in FY24.
Slowing pace of credit demand
The trend is also in sync with the slowing of the pace of credit demand to 12% in FY25 from 16% in FY24, owing in part to regulatory curbs on the retail segment and unsecured exposures. Loans against gold jewellery continued to rise in FY25, indicating a shift among borrowers to the non-banking financial companies (NBFCs). However, the gold loan segment has come under scrutiny over the past year, and the growth of these loans may also be moderating.