Indians are thrifty but only half bank their savings – a survey
Max New York Life an insurance company which is now operating in India conducted a survey of over 63,000 Indian households along with the National Council of Applied Economic Research (NCAER). The study was undertaken in both rural and urban India.
These are some of the findings:
1) 96 percent of Indian households feel confident of surviving for more than a year on their current savings.
2) 81 percent of households do save, but do not invest wisely.
3) Only 51 percent of Indian households deposit their savings in banks and 36 percent keep their savings at home.
4) 41 percent urban Indians and 38 percent of rural Indians borrow money from friends and relatives.
5) 21 percent of rural Indians borrow from money lenders, as opposed to 7 percent of urbanites.
6) 78 percent are aware of insurance, but only one fourth of Indian households own a life insurance policy.
Well, the survey has concluded that people don’t think long term and there is also a lack an awareness of how to invest and where to invest.
But some people must be reluctant to invest in banks or other financial products because they want instant liquidity. As the survey shows a lot of people who do borrow money do so for basic expenses – even food. True, a lot of financial products do offer liquidity but certainly not as high as one gets by keeping the money at home!
What is even more disturbing is that when money is required as it invariably is, more than 40 per cent of urban Indians and 38 per cent of rural Indians go to relatives and friends to ask for funds to tide them over. But I wonder if the Life Insurance agency will be able to tap this segment? Generally in India there is a lot of money lending within the family structure as we have strong family ties. And the money is given without interest. In fact I know even of cousins lending to cousins, uncles to nephews, friends to friends. For reasons like marraige expenses, start-ups, and medical expenses. Banks are usually the last resort. Maybe we are heading towards a future where people will increasingly turn to banks rather than family, but I do not see this trend as yet. It is not just because one can get money from non-bank sources, but also because (the survey brought this point out) people generally do not anticipate needing money for emergency expenses.
However, the trend of going to money-lenders is alive and well, particularly in rural India. Indian money lenders are well known for their high lending rates and exploitation of the poor. Apparently, the financial institutions which carried out this survey expected a higher percentage of people going to money lenders in rural areas and less people borrowing in urban areas. They are a trifle surprised at the sales potential in urban areas. According to a Times of India report, “financial services have been targeted to tier II and tier III centres in a bid to build business there on the assumption that financial services have deep penetration in urban cities.”