In 2010-11, bank deposits account for 42% of total household savings, the decline was 53% in 2008-09, data released by the Reserve Bank of India (RBI) last week in its latest annual report shown.

Effectively, on an average, of every Rs100 as household saved, it set aside Rs42 in bank fixed deposits and saving deposits compared to Rs53 three years ago.

Investment in life insurance products and government-backed savings instruments like National Savings Certificate (NSC) and post office savings, seems to have caught the fancy of households.

Quote of state-sponsored savings instruments for the saving of households has seen a high peak of 6.5% in 2010-11 1.4% three years ago.

These tools provide an annual return of 8% compared to 4% on savings bank accounts.

Likewise, investment in life insurance products increased significantly during the period, its share of the growing economies of 24.2% against 21.0% three years ago, involving nearly a quarter of an average household savings are is moving here.

Experts attributed the changing pattern of savings increases financial literacy, aggressive product sold to insurance companies and to seek better investment returns.

"The data clearly show a greater awareness of financial products," Ranjeet Mudholkar CEO of Financial Planning Standards Board India, told HT. "Ordinary bank deposits is not able to return from a series of other products. It is a positive trend, mirroring as India is slowly becoming a nation of investors, savers are pure."

Click here to apply for property loan

Taxation of bank deposits, a low yield and a longer process practices also seem to be deterrents.

"Postal savings deposits, unlike bank deposits, do not require much paperwork. You can not cash, to open multiple accounts and specify the PAN is not mandatory for small stores," said Delhi-based financial planner Surya Bhatia.

"And 'likely that people are increasingly preferring to invest the extra income disposable products of government savings, because a higher return on reserves, after a portion of the cash deposits in banks," said Lovaii Navlakhi, president and chief financial planner in Bangalore-based international money matters.

Source: [HT]