INVESTMENT / WEALTH Indian Households Embrace Equities as Savings Patterns Transform

SBI report highlights doubling of equity investments, MSME credit surge, and improved PSB performance amid India’s shifting financial landscape Source: PIB/DDNews

As household savings migrate from traditional instruments to more dynamic and diversified portfolios, and as banking reforms take firm root, India appears to be entering a new era of investment maturity and financial depth.

India’s household savings are undergoing a structural transformation, with more citizens turning to the equity markets, according to a new SBI Research Report released Monday. The share of equities in total household savings has doubled over four years—from 2.5% in FY20 to 5.1% in FY24—marking a notable shift in investment behaviour.

The report attributes this trend to the growing financialisation of household savings, even as broader shifts redefine India’s credit and banking environment. SBI analysts observed that headline credit growth figures may obscure deeper changes in the sources and patterns of credit origination, most of which stem from household bank deposits.

Public Sector Banks (PSBs) continue to play a critical role in this evolving landscape. While their credit growth is expected to stabilise at 12.2% in FY25—slightly down from 13.6% in FY24—PSBs’ share in incremental credit has surged to 56.9% in FY25, up from just 20% in FY18.

The report praises the success of the Government’s ‘4R’ strategy—Recognition, Resolution, Recapitalisation, and Reforms—which has dramatically improved asset quality in the banking sector. Gross NPAs have dropped to 2.6% in H1 FY25, down from 11.5% in FY18, marking a record low.

After over a decade of decline, PSBs have started regaining ground in overall credit deployment, with their share rising to 52.3% in FY25, up from 51.8% in FY24—though still lower than the 75.1% recorded in FY10.

On the lending side, sectoral credit growth has slowed, especially in services and agriculture. However, the industry’s share of incremental credit has risen from 11% in FY24 to 17% in FY25, while personal loan growth has moderated from 43% to 37% in the same period.

One standout trend is the strong credit expansion in the MSME sector, which has seen a 17.8% year-on-year growth. Dr. Soumya Kanti Ghosh, SBI’s Group Chief Economic Advisor, noted that MSMEs are closely integrated with large corporates via backward and forward linkages, making MSME activity a bellwether for overall corporate health.

Private credit activity is also gaining momentum. In FY24, private credit deals totalled ₹774 billion, a 7% increase over the previous year. This growth is being fuelled by tailor-made financing solutions through Alternative Investment Funds (AIFs) and continued use of Non-Convertible Debentures (NCDs).