Indian households’ borrowings from banks increased, in investments, deposits

The Indian households’ indebtedness to banks increased by over 55 per cent in the year ended March 31, 2007. The increased retail lending and softer interest rates in the first half of 2006-07, were the main driver for the increased borrowings by households from banks.

Indian households’ borrowings from banks increased to Rs 2,72,136 crore in 2006-07 from Rs 1,75,010 crore a year earlier, according to the Reserve Bank of India’s (RBI) handbook of statistics on the Indian economy, said reports in the media.

Loans and advances availed from financial institutions grew by 39 per cent to Rs 9,017 crore from Rs 6,472 crore. Household savings are being parked in bank deposits and shares.

The RBI data shows an increase in households’ investments in shares, debentures, public sector bonds and mutual funds. Investments in shares and debentures by individuals increased by 62 per cent at Rs 48,228 crore in 2006-07.

Household assets in bank deposits have risen by 53 per cent to Rs 4,22,039 crore as compared with Rs 2,74,693 crore in 2005-06. The rise in bank deposits is mainly on account of increase in interest rates in the second half of 2006-07 to over 9 per cent.

The increase in life insurance assets and pension funds has been around 36 per cent and around 10 per cent respectively.