Premonitions for banking sector

India’s banking sector is facing a significant shift in household savings patterns, with Reserve Bank of India (RBI) Governor Sanjay Malhotra acknowledging that the share of savings flowing into banks has fallen from 43% to 35% over the last nine years.

- Santosh Kumar Mohapatra

His predecessor Shakti-kanta Das on 19 July, 2024, had flagged concerns on the widening gap between credit and deposit growth with household savings increasingly moving away from traditional deposits.

For decades, India has been a nation of savers. They stash away a significant portion of their earnings for future security, especially for emergencies at the expense of current consumption. But something seems to be amiss now. India is no longer a great savings economy.

The gross domestic saving (GDS) rate as a percentage of GDP at current market prices has declined from record high of 37.8% of GDP in 2007-08 to 32.2% in 2014-15 and further to 30.7%.