India’s Silent Crisis: Why households are saving less than ever

Even the RBI Governor Sanjay Malhotra recently expressed concern.

India’s economy remains vibrant and resilient, even amid today’s global uncertainties and crises. It continues to brim with promise. Yet, beneath the surface of this strong and steady growth lies a quiet but worrying shift: the age-old habit of saving which was once deeply rooted in Indian households is steadily fading.

A sharp decline in household savings

Recent data paints a concerning picture. In the financial year 2023, India’s net household savings fell to just 5.3% of GDP—the lowest in nearly 50 years, according to the Reserve Bank of India. Compare that to a decade ago, when the gross domestic savings rate stood at 34.6%. In 2022–23, it dropped to 29.7%, the lowest in four decades.

These aren’t just numbers; they reflect a significant shift in people’s behaviour and mindset. Even the RBI Governor Sanjay Malhotra recently expressed concern, stating that it is “time to rethink rules as savings are increasingly moving away from traditional bank deposits. Over the past nine years, the share of households saving held in bank deposits has declined from 43% to 35%.”

What’s behind the change

A big part of the story is generational. Today’s youth are growing up in a new India—one filled with opportunity, fast-paced technology, and rising consumerism. With mobile apps and digital platforms, credit is more accessible than ever. “Buy Now, Pay Later” offers, zero-interest EMIs, and instant personal loans make spending easy—and tempting. Credit card usage and unsecured loans have soared.

In FY24, household liabilities rose to 6.4% of GDP, nearing the levels seen during the global credit bubble of 2007. And this shift isn’t just limited to big cities. In semi-urban and rural areas, access to smartphones, mobile internet, and e-commerce has ignited aspirations. Families are upgrading their lifestyles—buying the latest phones, taking holidays, hosting grand weddings—all increasingly funded through credit.

If we’re saving less, where’s the money going

Interestingly, Indians are still investing—just differently. Between FY21 and FY23, household investments in equities and mutual funds nearly doubled, from ₹1.02 trillion to ₹2.02 trillion. Gold savings touched ₹633.97 billion, the highest since 2011–12. Real estate, too, saw a boom after COVID, as people rushed to buy homes. But these investments come with trade-offs. Gold and real estate are illiquid—meaning it’s hard to access that money in a crisis. The stock market may offer high returns, but also carries risk, especially for new investors without a long-term plan. And here’s the real alarm: net financial savings fell from ₹23.3 lakh crore (₹2,330 billion) in 2020–21 to ₹14.2 lakh crore (₹1,420 billion) in 2022–23—a massive drop of over ₹910 billion in just two years.

Why this matters

Household savings don’t just help individuals—they form the bedrock of national investment. India has historically relied on its own domestic savings to fund infrastructure, startups, and industry. But as savings fall and consumption rises, we’re becoming more dependent on foreign capital. From 2007 to 2019, India’s investment rate dropped from 41.9% to 30.9%, mirroring the decline in household savings. Banks, facing fewer deposits, may struggle to offer affordable loans to businesses or build infrastructure. In FY24, household savings declined for the third consecutive year, down to 18.1% of GDP, while financial liabilities rose to 6.2%. This growing imbalance points to the risk of a debt-driven consumption bubble, making households more vulnerable in the future.

A 2025 study by Home Credit India, ‘The Great Indian Wallet’, found that while 57% of respondents saw their income rise, only half managed to save—down from 60% the year before. Incomes are rising, but so are expenses. Spending on education, healthcare, and travel is increasing. While some of this is productive, what’s missing is a safety net—emergency funds, retirement savings, and long-term planning. Many are living month to month, increasingly dependent on credit to meet basic needs. The situation is more serious in rural India. According to NABARD-NAFIS, over 80% of rural households have no retirement plans. If these trends continue, today’s youth could end up financially vulnerable, trapped in debt, and unprepared for the future.

Why traditional saving tools are losing appeal

There are many reasons why old-school saving methods no longer appeal. Fixed deposits—once the go-to option for most families—now barely beat inflation. That makes them unattractive, especially to younger people. While digital banking has expanded, trust remains an issue. A recent EY–CII survey found that 38% of Indians still prefer cash. Only 24% save through bank deposits, and a mere 8% invest in LICs.

Meanwhile, tech-savvy Gen Z is turning to mobile apps for stocks and mutual funds. The culture is also shifting. The “YOLO” (You Only Live Once) mindset encourages people to enjoy life now and worry about the future later. This mindset, while understandable, makes long-term saving even less appealing.

What needs to change

To revive the culture of saving, India needs both cultural and structural reforms. Here's what can help:

* Start with financial education: Teach personal finance in schools and colleges. In rural areas, run awareness campaigns led by trained local volunteers who can explain basic financial concepts.

* Reward long-term savers: Offer better tax incentives for pension plans, Systematic Investment Plans (SIPs), and sovereign gold bonds. Revamp traditional options like PPF to make them competitive.

* Protect borrowers: Regulate Buy Now, Pay Later apps, personal loan platforms, and digital lenders. Ensure transparency and ethical lending practices to prevent debt traps.

* Make saving simple and digital: Promote savings apps that encourage micro-saving—like rounding off purchases and saving the change. Make saving feel as easy and rewarding as spending.

* Strengthen safety nets: Expand access to affordable health insurance and pension plans. When people feel financially secure, they are more likely to save for the future.

* Transform banks into financial advisors: Banks should go beyond selling products—they must help customers plan. With technology like robo-advisors and AI-driven tips, even those in rural areas can receive personalized financial guidance.

India’s dream of becoming a developed nation by 2047 isn’t just about highways, skyscrapers, or foreign investment. It depends just as much on financially stable households. Savings aren’t old-fashioned—they are freedom. They give families the power to dream, to plan, and to withstand life’s uncertainties.

The current savings crisis is more than an economic issue—it reflects shifting values and behaviours. If we want to build a future that’s stable, self-reliant, and inclusive, we must help the next generation see saving not as a burden or sacrifice, but as a form of empowerment. Because every rupee saved today is an investment in a stronger India tomorrow.