New Delhi– The financialization of household savings in India is gaining strong momentum, with more individuals turning to equity investments, according to a new report from SBI Research. Equities now make up 5.1% of household savings in FY24, more than doubling from 2.5% in FY20.
The report highlights evolving trends in the Indian credit market, noting that headline credit growth may mask underlying structural shifts. SBI Research emphasized the need to closely monitor the origin of credit—particularly through household bank deposits, which remain a key funding source for banks.
Public Sector Banks (PSBs) continue to play a stabilizing role. In FY25, PSBs are projected to grow at a steady pace of 12.2%, slightly down from 13.6% in FY24. However, their share of incremental credit has surged to 56.9% in FY25, compared to just 20% in FY18.
The report attributes this turnaround to the government’s successful implementation of its “4Rs” strategy—Recognition, Resolution, Recapitalization, and Reforms—which has significantly improved asset quality. The gross non-performing asset (NPA) ratio in the banking sector has declined to a record low of 2.6% in the first half of FY25, down from 11.5% in FY18.
After years of decline, PSBs’ share in total outstanding credit has started to recover, reaching 52.3% in FY25 from 51.8% in FY24, reversing a long-term drop from 75.1% in FY10.
The report also notes a moderation in credit growth across sectors, particularly in services and agriculture. At the same time, the composition of incremental credit is shifting. The share of personal loans in incremental credit fell to 37% in FY25 from 43% in FY24, while the share of industry credit rose from 11% to 17% over the same period.
A key driver of this trend is the micro, small, and medium enterprise (MSME) sector, where credit grew by 17.8% year-on-year. Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI, highlighted that MSMEs are often integrated with large corporations through supply chains, making MSME activity a proxy for broader corporate health.
Private credit activity also saw robust growth. Total private credit deals reached ₹774 billion in FY24, a 7% increase over the previous calendar year. These deals, often structured through Alternative Investment Funds (AIFs), are addressing the evolving financing needs of Indian businesses. Issuance of Non-Convertible Debentures (NCDs) also remain active in the market.
The report suggests that as India’s economy matures and investor confidence deepens, household savings will continue to diversify, with equities and structured credit instruments playing a growing role in financial portfolios. (Source: IANS)
