WHAT ARE NET FINANCIAL ASSETS?

Net financial asset is-
The difference between gross financial assets (deposits and investments) less financial liabilities (borrowings).

NET FINANCIAL ASSETS OF INDIAN HOUSEHOLDS?

Reserve Bank of India reports appear that in the financial year ended March 2020, the net financial assets jumped from
Rs 13.73 lakh crore (0.01373 Billion) in FY’19-FY20 (7.2 % of India GDP) to Rs 15.62 lakh crore (0.01662 Billion) (7.7% of the GDP) last year.

REASON FOR THE INCREASE?

Gross financial assets (GFA) rose marginally Rs 21.23 lakh crore in FY’19 to Rs 21.63 lakh crore last year.
The financial liabilities (FL) witnessed a sharp decline from Rs 7.5 lakh crore to 6.oi lakh crore.
Hence the rise in net financial assets.

WHAT DOES DECLINE IN FINANCIAL LIABILITIES MEAN?

According to RBI,
It reflected the economic slowdown and risk aversion of banks. Economists say that, Since there is an economic slowdown and income levels of individuals are either going down or not increasing,
The financial sector will practice higher caution in extending loan.

ARE HOUSEHOLDS SAVING INCREASING?

Although in value terms GFA has increased marginally Rs 21.23 lakh crore in FY’19 to Rs 21.63 lakh crore last year.
But in terms of percentage of GDP the GFA declined from 11.1% to 10.6%.

SHIFT IN PREFERENCE OF DEPOSIT INSTRUMENTS

Household savings in bank deposits as a per cent of GDP stood at 3.8% in year ended March 2019.
It decline to 3.4% in March 2020 as banks reduced their interest rates following sharp cut in repo rate by RBI.

Small saving implement that continued to offer higher rates than bank fixed deposits
Witnessed a higher deployment of household savings as their share as per cent of GDP increased from 1.1% to 1.3% in the same period.
Households tend to save more money at home during a slowdown and income uncertainty.

Household Savings Increase in India Household Savings Increase in India