For decades, the typical Indian household kept its wealth parked safely in fixed deposits, gold, or real estate. But new data reveals a dramatic pivot: Indian families are increasingly turning to equities as a core part of their savings strategy. According to a new report by SBI Research, the share of equities in household financial savings has doubled over the past four years—from 2.5% in FY20 to 5.1% in FY24. While that may sound modest at first glance, it represents a seismic shift for a nation historically wary of the stock market.
This evolution signals a profound transformation in how Indians perceive wealth creation, risk, and financial security. In a country where memories of market crashes once haunted retail investors, millions are now embracing the equity culture, fueled by technology, greater financial literacy, and an appetite for higher returns.
Why Indians Are Betting on Equities?
Several intertwined forces are driving this trend:
1. Digital Democratization of Investing
Smartphones, slick apps, and user-friendly interfaces have put equity investing at people’s fingertips. Brokerage accounts can now be opened in minutes. Even those in smaller towns—once cut off from sophisticated markets—can trade stocks as easily as ordering groceries.
Platforms like Zerodha, Groww, and Upstox have attracted millions of new investors, many of whom are young first-timers willing to explore equities over conservative bank deposits.
2. Diminishing Real Returns from Traditional Assets
Low interest rates and inflation have eroded the real returns from traditional saving instruments like fixed deposits. A senior SBI economist noted, “When inflation runs at 6%, a fixed deposit yielding 5.5% is effectively shrinking your purchasing power.”
Equities, on the other hand, offer a chance not just to preserve wealth but to grow it significantly over the long term.
3. Surge in Financial Awareness
Over the past five years, SEBI and mutual fund houses have aggressively pushed financial literacy campaigns, emphasizing that “Mutual Funds Sahi Hai.” This has helped demystify market investing, making equities feel less like a gamble and more like a legitimate path to financial freedom.
4. Pandemic-Era Savings Boost
The pandemic was an unlikely catalyst for equity investing. Lockdowns curtailed expenses on travel and leisure, resulting in surplus household savings. Many Indians, stuck at home and consuming financial news, discovered the stock market as both a source of income and a new hobby.
Indian Banking System in Transition: Credit Growth Tells a Complex Story
While households are shifting toward equities, the Indian banking sector is undergoing its own quiet transformation. The SBI report highlights that headline bank credit growth numbers may be misleading, often masking deeper shifts beneath the surface.
Let’s decode the details:
- Public Sector Banks (PSBs) are expected to post a stable credit growth of 12.2% in FY25, slightly lower than 13.6% in FY24.
- Remarkably, PSBs’ share in incremental credit has jumped to 56.9% in FY25, a significant leap from just 20% in FY18.
- After more than a decade of declining influence, PSBs’ share in outstanding credit has ticked up to 52.3% in FY25, signaling a partial revival of their dominance.
The Government’s 4R Strategy: A Turnaround Tale
The resurgence of PSBs isn’t accidental. The SBI report credits the government’s 4R strategy—Recognition, Resolution, Recapitalisation, and Reforms—for cleaning up the sector.
Consider these figures:
- In FY18, banks were grappling with an alarming 11.5% gross NPA ratio (non-performing assets).
- Fast forward to the first half of FY25, and that figure has plunged to a historic low of 2.6%.
This dramatic improvement means banks are now stronger, better capitalized, and more capable of lending, fueling broader economic growth.
“It’s one of India’s most significant financial clean-ups,” said Dr. Soumya Kanti Ghosh, Group Chief Economic Advisor at SBI. “It has allowed banks to focus on real lending instead of firefighting NPAs.”
Sectoral Lending: A Shift in Priorities
While the overall credit numbers look robust, there’s been a noticeable shift in how banks allocate loans.
- Personal loans, which dominated incremental credit in recent years, have seen their share fall from 43% in FY24 to 37% in FY25.
- Lending to the industry sector has grown from 11% in FY24 to 17% in FY25, signaling renewed corporate investment appetite.
- Loans to services and agriculture have moderated, reflecting mixed economic conditions in these sectors.
These shifts highlight India’s evolving growth dynamics. Banks are once again backing industries, betting on the Make in India push, infrastructure spending, and manufacturing revival.
MSMEs: The Unsung Heroes of India’s Economic Story
If there’s an X-factor in India’s credit narrative, it’s the Micro, Small, and Medium Enterprises (MSME) sector. The SBI report reveals that credit to MSMEs grew 17.8% year-on-year—a robust pace that outstrips overall banking credit growth.
Why this surge?
- MSMEs are increasingly seen as the bedrock of India’s manufacturing ecosystem.
- Many MSMEs are intricately linked to large corporations via backward and forward integration.
- Government schemes like Emergency Credit Line Guarantee Scheme (ECLGS) have boosted lending to small businesses, especially post-pandemic.
“MSME activity levels can often serve as a barometer of broader corporate health,” Dr. Ghosh observed. “They’re the first to feel both booms and busts.”
Yet challenges persist. Many small firms struggle with:
- Limited access to formal credit.
- Dependence on larger corporate clients.
- Vulnerability to economic shocks.
Despite these hurdles, the sector’s resilience is crucial for India’s goal of becoming a $5 trillion economy.
Private Credit Markets: Filling the Financing Gaps
Beyond traditional bank loans, private credit markets are booming in India. The SBI report shows that private credit deals touched ₹774 billion in FY24, marking a 7% growth over the previous year.
These deals are driven largely by:
- Alternative Investment Funds (AIFs), which craft bespoke financing for businesses.
- A rising appetite among investors to diversify into non-bank lending, seeking higher returns than traditional bonds.
The popularity of Non-Convertible Debentures (NCDs) also persists. Many companies prefer NCDs for:
- Faster capital raising.
- Avoiding bank restrictions.
- Flexible structuring options.
This private credit surge helps India Inc. meet diverse funding needs, from working capital to growth capital, without relying solely on bank loans.
The Road Ahead: What This Means for Indian Investors and Economy
The trends outlined by SBI signal profound changes in India’s economic architecture:
- Households are more investment-savvy. With equities gaining ground, India is inching closer to an investment culture akin to mature markets.
- Banks are healthier and better capitalized. The clean-up of bad loans means credit can now flow where it’s most productive.
- MSMEs remain critical. Their growth will determine how deeply economic prosperity reaches every corner of India.
- Private credit is on the rise. Alternative channels will play a pivotal role in financing India’s ambitions.
While the outlook is largely positive, some risks loom:
- Market volatility could shake the confidence of new retail investors in equities.
- Global economic headwinds may impact export-driven industries, influencing credit demand.
- Credit quality monitoring remains crucial, especially as banks expand lending to sectors previously avoided due to risk.
Voices from the Ground: Retail Investors Speak Out
To understand the human side of this transformation, we spoke with several investors across India.
Ravi Shukla, a 29-year-old software engineer in Pune, said:
“I used to put all my savings in FDs. Now, I invest 30% of my monthly salary into mutual funds and stocks. Yes, markets go up and down, but over the last three years, my wealth has grown faster than ever.”
Minal Sharma, a homemaker in Jaipur, shared:
“Earlier, I thought the stock market was only for big businessmen. But my son helped me open an account on my phone. Now, I invest small amounts every month. It feels good to be part of India’s growth story.”
These stories reflect how financialisation is no longer just an urban elite phenomenon. It’s becoming mainstream—across ages, professions, and cities. The narrative emerging from SBI’s research is clear: India is experiencing a financial metamorphosis. From households shifting toward equities to MSMEs powering credit growth, the building blocks of the nation’s economy are being reimagined. As India aspires to stand among the world’s top economies, this trend of financialisation of savings could prove a critical pillar. It will fuel investments, support businesses, and gradually transform the average Indian from a cautious saver into a confident investor.
Yet, this journey will demand vigilance—from policymakers, regulators, and citizens alike. Equities promise growth but carry risks. Banks are healthier, but credit quality must stay strong. MSMEs are thriving, but they remain fragile. One thing is certain: India’s financial story is still being written—and it’s never been more exciting to watch.
