Swelling savings open opportunity

Indian households’ physical savings by 2016, including real estate and gold, are expected to touch Rs 1,850,000 crore. The additional financial savings would be Rs 1.2 lakh crore.

According to a McKinsey & Company report titled ‘Financial Service Practice Gateway’, released at Bancon 2011, organised by Indian Banks Association and Indian Overseas Bank, Indian households invest half their savings in physical assets, 80 per cent of which is in real estate and gold. It has estimated these figures and says this would encourage consumers to also invest in more financial investment products and create large additional revenue pools of Rs 30,000 crore and profit pools of Rs15,000 crore, given the additional assets under management of Rs1,000,000 crore by 2015-16.

The report says financial inclusion, agriculture and rural banking have emerged as key areas of focus for banks, driven by regulatory priorities. Rural and semi-urban financial services are the fastest growing sector. Financial services would have a potential reach of around Rs 78,000 crore in revenue by 2015.

The report stated three types of core opportunities exist to deepen financial services, by monetising both flows and stock of physical changes. They include introduce new products and expanding emerging financial products with similar risks and returns as physical assets, improving penetration of existing financial products and providing liquidity through monetisation of the existing idle stock of physical assets.