The Indian households' indebtedness to banks increased by over 55 per cent in the year ended March 31, 2007. The retail lending boom and softer interest rates in the first half of 2006-07, were the main driver for the increased borrowings by households from banks.

Indian households' borrowings from banks increased to Rs 2,72,136 crore (Rs 2,721.36 billion) in 2006-07 from Rs 1,75,010 crore (Rs 1,750.1 billion) a year earlier, according to the Reserve Bank of India's [Get Quote] handbook of statistics on the Indian economy.

Loans and advances availed from other financial institutions have also witnessed an increase of 39 per cent to Rs 9,017 crore (Rs 90.17 billion) from Rs 6,472 crore (Rs 64.72 billion).

Even as the Indian consumer has been availing of cheap credit from banks, household savings have also simultaneously increased. Household savings are being parked in bank deposits and shares.

The RBI data also show an increase in households' investments in shares, debentures, public sector bonds and mutual funds. Investments in shares and debentures by individuals increased by 62 per cent at Rs 48,228 crore (Rs 482.28 billion) in 2006-07.

"With the domestic stock market hitting new highs everyday, individual investors are parking their funds in shares. The demographic profile of Indian investors has decreased to as low as 25 years. This investor is willing to take risk and is ready to borrow from institutions to meet his or her consumption needs,'' said the retail head of a private bank.

Household assets in bank deposits have risen by 53 per cent to Rs 4,22,039 crore (Rs 4,220.39 billion) as compared with Rs 2,74,693 crore (Rs 2,746.93 billion) in 2005-06. The rise in bank deposits is mainly on account of increase in interest rates in the second half of 2006-07 to over 9 per cent.

The increase in life insurance assets and pension funds has been around 36 per cent and around 10 per cent respectively.