Over the last three months since India announced a lockdown on March 24, sections of households witnessed a rise in savings — including those working in the formal sector and some parts of the informal segment — as reflected in a modest pick-up in Jan Dhan account deposits, bank deposits and small saving schemes.
According to Swiss banking group UBS, while forced savings could be going up in the formal sector on income continuity, a large chunk of labour employed in the informal sector would have increased precautionary savings despite stagnant/reduced income by lowering consumption.
During lockdown, when income for the poor was likely more impacted, the balance in their Jan-Dhan deposit accounts rose by around Rs 400 per account cumulatively in the June quarter. “A part of the increase is also on account of the central government transferring money into such accounts to help beneficiaries deal with the difficulties during the lockdown,” UBS said in a report.
In India, households contribute nearly 53 per cent to bank deposit outstanding. Deposits with banks have picked up to 11 per cent on year-on-year base as of June 2020 (versus the 7.9 per cent average registered in FY20). This is despite the nominal interest rates on term deposit by banks falling further by 100 bps over last three-months (from March 2020).
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