Bank deposits still the most preferred savings option

KOLKATA: Guess which is the most preferred mode of saving for Indians? Well 51% people prefer to keep their surplus funds in bank deposits, while 36% keep it at home. A miniscule 2% buy insurance policies with it.

An all-India household survey on financial security conducted by the National Council of Applied Economic Research (NCAER) reveals startling facts on the earning, spending and saving patterns of Indians across towns and villages. The study was commissioned by Max New York Life to study the potential of insurance as a risk-mitigating tool for Indian households.

Among the major cities, the proportion of savings allotted to bank deposits varies from 87% in Delhi to 29% in Bangalore. In Kolkata and Hyderabad, the ratio is in the 80s, while in Mumbai it is 39.7%.

The survey found that, while awareness on life insurance is at a high of 78%, only 24% own some form of insurance. Interestingly, Bangalore tops the chart among metros, with 31% of the people finding it as a preferred mode of saving.

As far as purchase in insurance policies is concerned, only 0.8% of the people in Greater Mumbai and 0.9% in Delhi find purchase of insurance policies as the preferred form of saving. Kolkata is higher at 2.2%. Awareness on insurance in these metros is, however at 90-95%.

“Key findings point to a lack of financial literacy and understanding of life insurance as a tool for financial protection and long term wealth creation in a majority of households. People take their financial wellbeing a little casually. The study indicates a huge untapped potential of life insurance,” Debashis Sarkar, director, marketing products and corporate affairs, Max New York Life said.

The study points out that about 53.8% of the Indian households are confident of their financial stability, but 36% have no idea how to find an equivalent in case of loss of the major household income source. Almost 34% of them are not able to survive on their personal savings in case of loss of the major household income source. According to Sarkar, there is an urgent need to improve the financial literacy and the true value of life insurance.