No FDs please: Indian households' financial savings strategy changes

Synopsis Indian households are increasingly investing in equities and market-linked instruments. This shift marks a significant change from traditional bank deposits. The trend shows growing confidence in riskier assets. While equity participation is rising, the debt market remains underdeveloped. Developing the debt market is the next step for a robust financial system. The composition of household financial savings in India has undergone a structural change. Indian households have shifted their preferences from bank deposits toward equities and other market linked instruments, with the share of deposits in financial savings having dropped to 35.2% in FY25 from 57.9% in FY12, showing that households are not shy of taking higher risks. The share of deposits in household savings hit a low of 31.95 in FY22. Also Read: Gold and silver prices won’t lose their glitter just yet Live Events Meanwhile, the low use of debt products reflects that the corporate bond market remained shallow, while the largely unchanged share of pension and insurance assets shows that long term risk diversified savings is still evolving. "This fall in share of deposits suggested a portfolio diversification rather than displacement, with households adding equity exposure to their existing savings rather than substituting entirely away from traditional instruments," the Economic Survey observed. While the direct share of individuals in equity markets increased only gradually, to nearly 9.6% at the end of September 2025 from just under 8% in FY14, the indirect share nearly tripled over the same period, reaching 9.2%. In absolute terms, individual equity holdings expanded to around Rs 84 lakh crore by September 2025, from merely Rs 8 lakh crore in FY14. Also Read: A clever hack is rewriting India’s tax playbook According to Reserve Bank of India data, the share of equity and investment funds in total household financial assets increased to 23% as of March 2025 from 15.7% six years back. "Equity investments, which were once ancillary to household balance sheets, have increasingly become a significant component of financial wealth, supported by broader participation and more diversified channels of access," the survey said. The share of equity and mutual funds in annual household financial savings increased to over 15.2% in FY25 from about 2% in FY12. To be sure, retail engagement with corporate bonds and debt-oriented investment products remains limited, resulting in debt securities comprising a small portion of household financial assets. The Survey said that the limited participation of households in market-based debt instruments is mirrored in the overall shallow depth of India’s corporate bond market, which accounts for around 16-17% of GDP, compared with the equity market capitalisation of over 130% of GDP. The share of the corporate bond market in the US was 40% of the GDP in 2024 while that of China was 36%. A well-functioning debt market would reduce capital costs, mobilise savings efficiently, and offer households reliable income-generating products. "India's households have embraced equities; extending that confidence to debt markets is the next frontier for building truly resilient portfolios and a mature financial system," the Survey said. (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless (You can now subscribe to our Economic Times WhatsApp channel) (Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.) Subscribe to The Economic Times Prime and read the ET ePaper online. ...moreless