India’s Savings Rate Exceeds Global Average: SBI Report

India’s savings rate has exceeded the global average according to a report released by the State Bank of India. India's savings rate is 30.2 per cent, while the global average savings rate is 28.2 per cent.

As of 2024 more than 80 per cent of adults in India have a formal financial account, according to the report. This indicates a stark increase in the number of formal financial accounts in the country as only 50 per cent of Indian adults had formal accounts in 2011.

The report said that the contribution of net financial savings in total household savings increased to 52 per cent in FY21 from 14 per cent in FY14. However, the share has declined in the financial years following FY21 as net financial savings made up 36.1 per cent and 28.5 per cent of total household savings in FY22 and FY23. The report mentioned that the decline seen in FY22 and FY23 has continued in FY24.

SBI said in its report that the share of bank deposits and currency in total financial savings has also witnessed a decline as investors are approaching new avenues of investment such as mutual funds. In FY 23 bank deposits made up 45.2 per cent of financial savings followed by life insurance funds which made up 21.5 per cent of financial savings. On the other hand investments in PPF, PF, Small Savings Schemes and mutual funds made up 13.7 per cent and 8.4 per cent of total financial savings respectively.

SBI said in the report that the increasing share of mutual funds in financial savings makes them the most preferred instrument for financialisation of savings. The contribution of mutual funds in total financial savings has increased up to 8.5 per cent from 7.6 per cent between FY 21 and FY 23.

Another factor which shows the rising popularity of mutual funds is the fourfold increase in the number of Systematic Investment Plans (SIPs) registered since FY18. In FY 24 the number of SIPs registered stood at 4.8 crore leading to a total SIP contribution of around Rs 2 lakh crore.

The report also found that the savings of households in ‘Shares and debentures’ has increased to 1 per cent of GDP in FY 24 growing by 80 basis points from 0.2 per cent in FY14. On the other hand, the contribution of shares and debentures in household financial savings has increased from 1 per cent to 5 per cent.