Davos : India is witnessing a surge in inflows into financial savings, which have reached nearly Rs 28 lakh crore in the past 18 months — an amount equivalent to the gross domestic product (GDP) of countries like Thailand, said banker Chanda Kochhar, who added that the flow into financial savings jumped significantly post the demonetisation exercise, executed in November 2016.
Kochhar, who was in the Swiss resort town to participate in the World Economic Forum (WEF) annual meeting, told the PTI in an interview that the formalisation of the economy and digitisation of banking transactions have proved to be among the most significant benefits of the demonetisation exercise. On the GST and other reforms undertaken in India, she said since 2014, the government has focused on several structural reforms which are strengthening the economy. “The government has focussed on creating a sound policy framework, prudent fiscal management, strengthening the monetary policy framework, mitigating inflation risks, improving ease of doing business, encouraging adoption of digital technology.
“Pioneering initiatives like [the] goods and services tax (GST) and demonetisation have led to increasing formalisation of the economy and financialisation of savings. These changes are forging new paradigms and I expect the government to continue to focus on steps that will augur well for the economy,” the ICICI Bank chief said. On her take on the economic impact of demonetisation after more than one year having passed, Kochhar said an important outcome of demonetisation has been the structural shift in terms of financialisation of savings. The financial services sector, including banks, insurance companies and mutual funds, are the biggest beneficiaries of the formalisation of savings, she added. “Post demonetisation, there has been a net inflow of Rs 19 lakh crore of financial savings into bank deposits, mutual funds and life insurance put together.
“If we look at the 18-month period from April 2016 onwards, the net inflow into financial savings in the country has been about Rs 28 lakh crore which is equivalent to the GDP of an entire country like Thailand,” she said. Kochhar further said the second impact of demonetisation was the acceleration in digitisation of banking transactions. The monthly volume for UPI transactions during demonetisation in November 2016 was 1 million transactions which has increased to 145 million transactions as of December 2017. Mobile banking transactions have almost doubled to nearly 150 million in October 2017 as compared to a year ago, the banker added.