A working paper by the Department of Economic and Policy Analysis, published in September 2024, examines the existing methodology for computing household savings through the Indian securities market. Currently, data on household savings in equities, debt, and mutual funds is partly based on estimates, with actual mutual fund investment data sourced from SEBI and AMFI. The methodology, particularly in equity and debt segments, uses imputed percentages for household contributions, which may not fully capture the scope of savings. Additionally, certain financial instruments and market segments are omitted. The paper proposes three major changes to the computation methodology: revising the categories of investors, the financial instruments considered, and including missing segments to enhance accuracy. It suggests providing SEBI’s granular data to RBI, which would then be shared with MoSPI to reflect actual household investments. These changes aim to better account for evolving saving patterns and structural changes in the securities market, leading to improved national accounts statistics for household savings.
Securities and Exchange Board of India
Working Paper on Household Savings through Indian Securities Market
Department of Economic and Policy Analysis
Mumbai, September 2024
Household Savings through Indian Securities Market
Background
The savings of households makes an important part of the financial assets in the national income accounting and is an indicator of the disposable income of households and the financial health.
The Reserve Bank of India (RBI) in its statement on Flow and Stock of Financial Assets and Liabilities of Households and the Ministry of Statistics and Programme Implementation (MoSPI) in its National Accounts Statistics publishes data on household savings generated through various segments. One of the constituents is the investments of households through the securities market.
On review of the data disseminated through Table 50A, i.e., Flow of Financial Assets and Liabilities of Households and Table 50B, i.e., Stocks of Financial Assets and Liabilities of Households of RBI Bulletin, it was noticed that the savings of households through the Indian securities market is not captured fully through the existing methodology of computation.
In the existing methodology, RBI is considering the actual data relating to mutual fund investments sourced from SEBI and AM FI, while the data relating to equity segment and debt segment are based on estimations or formulas which attempt to derive the extent of savings through such segments. Further, certain segments and products in the Indian securities market are not considered in the existing computation.
Indian Securities Market has undergone several structural changes over time and more so in the past decade. The saving pattern of Indian households has similarly changed over time. Accordingly, it was felt that the computation methodology may be reviewed and updated. Further, the actual granular data can be made available by SEBI to RBI and onwards by RBI to MoSPI, for the household savings through Indian securities market to be reckoned in an appropriate manner. The revision in methodology will improve the quality and accuracy of data by capturing the actual values and covering the currently non-included segments/financial instruments in securities market.
In the following pages, the existing methodology, the changes in methodology proposed (specifying the category of investors, segments and products) and the data sources as well as an annexure with the provisional data based on the proposed methodology have been specified.
A. Existing Methodology followed by RBI for compilation of household savings through securities markets
1. Resource Mobilization (Flow)
Segments considered by RBI for the flow computation are Equity, Debt and Mutual Funds.
Data on resource mobilized through Equity and Debt is sourced from the SEBI Monthly Bulletin. To arrive at the households’ investments, RBI imputes 35 per cent of the primary market issuance in equity, covering IPO (including OFS), FPO & Rights and 40 per cent of public issuance of debt, respectively as being mobilized from Individuals and HUFs.
Investment of households in actuals into the Mutual Funds are obtained from SEBI and are being used in the computation since FY 2018-1 9.
2. Holding Data (Stock):
For arriving at the asset value of the households, only the Assets Under Management (AUM) in mutual funds by High Networth Individuals and Retails are considered. The source for the data is category-wise AUM published by the Association of Mutual Funds of India.
B. Changes proposed to the computation methodology
Three sets of changes are proposed to the computation methodology: firstly, regarding the category of investors, secondly, regarding the instruments that such investor categories participate in, and thirdly, the components proposed for inclusion that are absent in the existing methodology.
