Demonetisation has led to a structural shift in the behaviour of Indian households when it comes to savings.
According to a Reserve Bank of India paper, it has positively impacted the mutual fund and insurance segment as there has been an increase in the flow of savings into these instruments.
Surge in growthPost demonetisation, the aggregate balance sheet of the NBFC sector grew 14.5 per cent in the November 2016-June 2017 period, compared to the corresponding period of the previous year.
The paper, titled ‘Financialisation of savings into non-banking financial intermediaries’, further said the reduction in interest rates on bank deposits after demonetisation, and the decline in gold prices made debt and equity MFs more attractive, while total assets under management (AUMs) touched an all-time high of more than ₹17.5 trillion by the end of March 2017, and rose further to ₹20 trillion by July 2017.
According to data from the Securities and Exchange Board of India, net flows into mutual funds stood at ₹1,69,500 crore in the post-demonetisation period compared to the ₹9,100 crore recorded in the previous year.
The overall premium collected by all the life insurance companies also rose 46 per cent post demonetisation, as per data provided by the market regulator.
While these instruments had witnessed excessive growth in terms of deposits and collections, going forward it would be a challenge to channelise these funds into productive segments of the economy, the officials added.
Change in saving patternIn July, RBI Deputy Governor Viral Acharya had acknowledged that in the period before demonetisation, people would buy more gold and real estate — which were more cash driven — and that post-demonetisation the pattern of savings has changed.
According to Acharya, people intended to invest black money in real estate and gold.