Every year, the RBI publishes a handbook of statistics on the Indian economy. One of the data points included in the handbook is the change in the financial Assets and Liabilities of the Household sector at current prices. Data indicates that the ratio of financial liabilities to assets of the household sector crossed 50% in 2022-23.
In the contemporary world where development and economic growth are given utmost priority by governments, household savings, assets, liabilities, and other related aspects are some of the most deliberated and discussed topics. In India, the most populous nation and considered a developing economy, these aspects relating to the household economy are all the more important.
As per the United Nations (UN) Poverty Index Report of 2022, despite the significant reduction in poverty, India is still home to the highest number of poor people (about 22.8 crores) as of 2022. The report further highlights that the total number of poor children in India (about 9.7 crores) is more than the combined number of poor children in all the other nations. Hence, the UN report notes that the target of ending poverty by 2030 in accordance with the Sustainable Development Goals (SDGs) remains daunting for India.
In this context, the regular evaluation of trends of growth in the household economy and the related aspects is extremely important since it helps in the formulation of policy and other measures with the goal of achieving economic security for all types of households in India.
Every year, the Reserve Bank of India (RBI) publishes a handbook of statistics on the Indian economy. One of the data points included in the handbook is the change in the financial Assets and Liabilities of the Household sector at current prices. In this story, we look at the trends in assets and liabilities of the Household sector, as per the data provided in this report.
Steady increase in Total Liabilities to Assets Ratio since 2000
The analysis of RBI data reveals a consistent annual increase in both household financial assets and liabilities when measured at current prices. In 2000-01, the total value of household assets stood at ₹2.3 lakh crore, while total liabilities were ₹0.3 lakh crore, approximately 13% of the total assets. By 2004-05, total assets had risen to ₹4.5 lakh crore, and liabilities to ₹1.2 lakh crore, with the liabilities-to-assets ratio increasing to about 26%. This ratio decreased to 20% by 2009-10 but climbed again to 29% by 2014-15, 33% by 2019-20, 34% by 2021-22, and reached 52% by 2022-23.
During 2000-01 and 2022-23, although the ratio of financial liabilities to assets decreased in certain years, the overall trend shows a consistent increase. By 2022-23, the ratio of liabilities to assets crossed 50% with the total asset value at ₹29.7 lakh crore in assets and ₹15.5 lakh crore in liabilities. This marks a 39% increase in the liabilities-to-assets ratio, which rose from 13% in 2000-01 to 52% by 2022-23.
Notably, the UN Poverty Index Report emphasized that recent estimates of poverty reduction in India were based on pre-COVID-19 data, meaning the pandemic’s impact on poverty has yet to be fully assessed. According to RBI data, household liabilities were 24% of total assets during the COVID-19 year 2020-21, which surged to 34% in 2021-22 and 52% in 2022-23. Whether this sharp rise in household liabilities is a direct consequence of the pandemic and its economic fallout remains to be further investigated.
Since 1981-82, over 75% of Loans taken were obtained from Banks; Loans from non-banking institutions increasing in the last decade
The RBI categorizes financial assets and liabilities in household sector data under the following groups.
| Category | Types |
| Assets | Household Currency, Bank Deposits, Non-bank deposits, life insurance funds, provident and pension funds, claims on government, shares & debentures, UTI Mutual Funds, and Trade Debts. |
| Liabilities | Bank advances, Loans & advances from other financial institutions. Loans & advances from the Government, and Loans & advances from co-operative non-credit societies. |
Though the RBI has published data under these groups since 1981-82, it notes that owing to the changes in the non-banking sector deposits since 1997-98, the data before and after this year cannot be directly compared.
The liabilities data shows that traditionally in India, loans are secured from Banks in the form of advances. The perusal of RBI data shows that since the years 1981-82 to 2022-23, over 75% of household liabilities were loans (advances) from banks. In each of the years of 2000-01, 2004-05 to 2012-13, over 90% of the household liabilities were loans from banks, with the highest being the year 2006-07 with 97%.
Conversely, since 2013-14, the percentage of household liabilities in the form of loans & advances from non-banking financial institutions has increased. In 2000-01, their share was 13%, which increased to 18% in 2003-04. But, since then, it has fallen to below 10% each year up to 2012-13. From 2013-14, the share of loans & advances from non-banking institutions in household liabilities was over 10% each year, with the highest and lowest being 34% and 13% in the years 2019-20 and 2020-21 (COVID-19 year), respectively.
Bulk of the Financial Assets are in the form of Banking Deposits, followed by Life Insurance Fund, and Provident and Pension Fund
There is no noticeable trend of increase or decrease in any particular type of financial assets in the household sector.
The Ministry of Statistics and Programme Implementation (MoSPI) defines household savings as a residual by deducting the amount of currency held by the private corporate sector and public sector enterprises from the total currency with the public. In the year 2000-01, the share of household currency in total financial assets was 10%. From 2001-02 to 2022-23, its share varied from 9 to 13%, except in the year 2017-18 where its share was 24% in the aftermath of demonetization. The average share of household currency in total financial assets between 2000-01 and 2022-23 was 10%.
The same trend is also visible for bank deposits with the average share across years being 44%. In 2000-01, its share was 40%. Its highest share was in 2016-17 with 58%, followed by 2008-09 with 57%, 2006-07 with 56%. Between 2000-01 and 2022-23, the share of bank deposits in total financial assets was between 30% and 39% in 7 years, between 40% and 49% in 6 years, and 50-58% in 8 years, while 1 year had 25% share.
Similarly, the average share of life insurance funds during the same period was 18%. In six years, their share was between 10-15%, between 16-20% in 10 years, and 20-26% in six years. For provident and pension funds, the average share is 15%. For non-banking deposits, the average share is about 1%. Thus, similar to currency and bank deposits, the data of life insurance, provident and pension, and non-banking deposits do not indicate any specific trend of consistent increase or decrease. It is the same for even the claims on government, shares and debentures, and trade debt.
However, taken together, the average share of Banking, Life Insurance, and Provident and Pension funds in total financial assets constitutes about 77% of the household sector, making them the preferred choice for households.
