Quick Savings Recovery after Note Ban

BE/RBI NOTE/8/2018

The Reserve Bank of India, released the Publications on Households’ financial assets pattern every year, which is now made a quarterly release.  Housinghold savings which is an important measure, for finding macroeconomic and systemic risks, is taken into consideration for prepartion of bi-annual financial stability report. The first of such quarterly report was released which reveals the following:

1. Majority of the Indian Households are held in the form of Bank Deposits, followed by Life Insurance, which got disturbed after note ban.
2. However, this was back in the system after new currency notes were brought in to the system.
3. The net financial assets of the households was negative (-7.3 per cent of gress domestic product or GDP during third quarter of 2016-17) after cash was wiped off.
4. New currencies introduced brought a change. The fourth quarter it amounted to 14.8 per cent of the quarterly GDP.
5. In 2017-18, the net financial assets are expected to reach 8.3 per cent of GDP during second quarter, which would be an increase of 5.8 per cent of GDP in the first quarter.
6. Households hold their financial assets mainly in the form of Currency, Deposits, Debt Securtieis, Equitities, Mutual fund units, Insurance and Pension funds and Small Savings. Also the Liabilities are held in the form of Loans and Borrowings from Banks, Housing Finance companies and non-banking financial institutions.
7. The borrowings turned to negative bank since the demonetized currencies were used for paying back the loans. Also the deposits with banks and others, went up in second quarter of 2016-17 to 8.6 per cent of GDP which was 8.1 per cent in the previous quarter.  The reason was a revision in Salaries and Pension on account of 7^th pay commission implementation. Also Deposits under Income Declaration scheme had gone up contributing for the increase.