Get ready for more redemptions and SIP stoppages

In the coming days, your clients will stop further investments, and their SIPs will face instant redemptions. Client investments will be used more for uncertain times and less for wealth creation. In fact, the study below shows very clearly that in the coming years, wealth creation by the middle class will be slower and will experience delayed growth despite the capital market giving a return of 10% to 12% in the coming years.  To what level do you manage your client, and do you restrict yourself to investments only? Iran is just a warning sign to get into good shape before it goes for a ventilator. Neither Iran nor is the end of the issue, you have AI too to displace many, many things, but we are not listening to the silence.  As a financial advisor, are you only focusing on investments of the clients and selling only NFO's? Truth is, we are selling NFO's and earning high commission from the same and not working as true advisors. This is just the perfect recipe for a long-term wealth creation crisis.

The biggest risk for Indian banks is no longer Indian corporates but household debt. In 2025, retail loans accounted for approximately ₹45,404 crore of write-offs, making them the largest contributor to banking sector write-offs for the first time.  

Another aspect that comes up is why clients are chasing past returns and investing in products and avoiding India. Instant gratification, fulfilment, and uncontrolled consumption. Everything to be achieved simultaneously without waiting.

Why India needs more savings and more retirement planning? India is a country which has is country which does not have social benefits like other countries. The requirement of retirement planning is more important in today's volatile AI-driven economy. Loss of jobs and preparation for the uncertain times bring more demand for savings growth.

But where does India stand in terms of savings and consumption? Between March 2021 and March 2026, outstanding household loans nearly doubled from ₹30.5 lakh crore to ₹69.4 lakh crore. During the same period, the share of household loans within the overall banking credit pie expanded steadily.

Data indicates that household debt as a percentage of GDP increased from approximately:

• 37% in 2021
• 39% in 2022
• 41% in 2023
• 42% in 2024
• Nearly 49% in 2025

More concerning is the pace of growth. Household debt is reportedly growing at nearly twice the rate of household incomes, creating pressure on family balance sheets. Getting more into the break-up, we find that housing loans remain the largest component of household debt, accounting for over ₹33.5 lakh crore of outstanding loans.

Household Savings Rate:

• Fell to 18.1% of GDP in FY24 (third consecutive year of decline).
• Overall household savings dropped from ~22.7% in FY21 to 18.4% in FY23.

Net Household Financial Savings (financial assets minus liabilities):

• Hit a multi-decade low of 5.0–5.3% of GDP in FY23.
• Modest recovery to ~5.1–5.2% in FY24 and around 6.0% in FY25 (preliminary).

·        Bank deposits' share in household financial savings has declined (from ~40-43% to ~35%)

A growing share of borrowing is directed toward:

• Personal loans
• Credit cards
• Consumer durable financing
• Gold loans
• Vehicle loans

 Instant gratification and consumption boom are the prime reasons behind depleting household savings and an increase in debt. Easy loans, pay later have taken full uncontrolled consumption habits of people.

All your clients' investments will face tough times where redemptions will follow, and future investments will dry up across all age brackets.

In our study, we find that the following age brackets of clients will face the problem, and further over the next 5 years to 10 years, the decline will become steep in investments, and also, past performance-based investments will become the new norm.

·        31–40 age group: Dominates the retail credit portfolio by value and outstanding balances. This is the prime earning years group with higher loan sizes (home, auto, personal).

·        Under 30 / 26–30: Drives the highest growth in new borrowers and accounts. The ≤25 and 26–30 groups contribute heavily to new-to-credit (NTC) and unsecured lending.

·        Young borrowers (under 35, especially NBFC/fintech): ~65% of borrowers in some segments (especially unsecured personal & consumer loans)

Now, as per RBI data reflected in the analysis, nearly 46% of household borrowing is consumption-oriented, compared with roughly 36% linked to asset creation and productive purposes.

The biggest risk is that all the borrowings are related to consumption and not asset creation.   Borrowing to purchase a home, fund education, or start a business can generate future economic returns. Borrowing to fund current consumption relies entirely on future income growth to support repayment. Now, any job uncertainty, business uncertainty, loss of income, hike in interest rates, etc., leads to a significant blowup of this household debt. Debt servicing crowds out investments, insurance, and long-term wealth creation. Consumption accounts for nearly 60% of India's GDP.  Debt can only support growth sustainably when incomes rise alongside it.

Now you can figure out why investments will decline in the coming years, why savings are becoming less, and retirement will be a nightmare for Indians.  Aspiration is good until the same is funded by borrowing.

So it's well clear that retirement planning plays a critical role now, followed by checks and balances on household debt. The behavioural aspect of spending budgeting has been diluted in our household's instant gratification process, creating a major problem with investments.

When the race for debt reduction and aspiration is uncontrolled, past performance-based investments become the new norm without understanding the underlying risk, which further reduces the investment's ability for the client in the long term. This process does not create wealth. Now you can relate why job changes and pay hikes have become so frequent. As a financial advisor its not only important to set the client's return expectations but also to change and guide his consumption lifestyle so as to reduce the debt burden and prepare him for wealth creation. As I said previously you work is not only to manage client investments.  Did you guide him on his expenses?