Household savings inch up — but is the recovery for real?

After two consecutive years of decline, India’s net household financial savings have edged up slightly — a glimmer of hope for a macroeconomic engine that was beginning to sputter. According to the Reserve Bank of India’s Annual Report for FY25, net financial savings of households rose to 5.1% of Gross National Disposable Income (GNDI) in FY24, up from 4.9% in FY23.

The headline figure is supported by a modest rebound in gross financial savings, which increased to 11.2% of GNDI from 10.7% the year before. But the rise in savings was partially offset by a continued increase in household financial liabilities, which climbed further to 6.1%, up from 5.8% in FY23 — indicating that households are still relying on borrowings, especially for consumption and housing.

The composition of household savings reveals subtle but important structural shifts, with deposits — the traditional backbone of Indian financial savings — recovering from 4.1% of GNDI in FY23 to 4.5% in FY24, while contributions to provident and pension funds inched up to 2.4%, signalling steady long-term saving preferences; however, this was offset by a decline in currency holdings to a decade-low of 0.4% and a slight dip in insurance contributions to 2.0%, suggesting a cautious reallocation away from cash and low-liquidity instruments amidst evolving financial conditions.

This suggests a recalibration: households are moving away from low-yielding cash and redirecting flows into formal financial instruments, even amid tighter liquidity and inflationary stress. However, the overall level of net savings remains well below the 11.6% peak seen in FY21, reflecting persistent pressure on real incomes and household balance sheets.

The RBI report highlights that gross domestic saving held steady at 30.3% of GNDI, thanks largely to a reduction in general government dissaving. Additionally, the saving-investment gap narrowed, reflecting subdued investment appetite across households and corporates, and some moderation in financial sector savings.

So, is this the beginning of a turnaround in household financial resilience?

Possibly — but it’s too early to call it a trend. The modest recovery in net financial savings must be seen against a backdrop of rising leverage. The sustained increase in household debt — from 3.7% of GNDI in FY21 to 6.1% in FY24 — could constrain future savings growth if income growth doesn’t keep pace.

For policymakers, this poses a dual challenge: boosting financial inclusion and returns to attract household flows, while also ensuring credit growth does not outpace repayment capacity. For households, it’s a signal to rebalance — from debt-fuelled consumption toward more resilient saving behaviour.