Globally, owing to the COVID-19 induced lockdown, there has been a tendency on the part of households to increase precautionary savings or forced savings. In the USA, the personal saving rate rose to 33.6 per cent of disposable income in April 2020 from 12.9 per cent in March 2020, and in the UK, household savings ratio has increased to 29.1 per cent of disposable income in Q2CY20 from 9.6 per cent in Q1CY20.
Deposits with banks have picked up by 11 per cent on a y-o-y basis as of June 2020 versus the 7.9 per cent growth registered in 2019-20 and 10 per cent as at June-end 2019. In contrast, credit growth moderated on a y-o-y basis to 6.2 per cent in June 2020 from 12 per cent in June 2019.
The household savings in mutual funds has increased to 1.7 per cent of GDP in Q1FY21 from 0.2 per cent in Q1FY20. Household savings in insurance products is estimated to have increased to 3.3 per cent from 2.3 per cent, respectively, over the same period. Similarly, currency holding by households increased to 5.4 per cent from 1.3 per cent in Q1FY20.