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Do Households Still Prefer Bank Deposits? An Analysis of Shift in Savings and Savings Determinants

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  • A P Pati
  • D Shome

Abstract

Financial reforms have, in the recent years, opened up several avenues for the households for savings. Since households are supposed to be concerned with return, risk and liquidity aspects of their investment, it is expected that they move from the low-yielding bank deposits towards the high-yielding financial instruments. With the objective to explore this possible shift and to identify the determinants of the savings, an analysis of 26 years data spread equally over the pre- and post-liberalization period has been attempted. The findings suggest that despite the reform, households are still preferring the safe channel of bank deposit schemes rather than switching over to high yielding but risky channels of savings. However, between the two phases a significant structural shift of savings in bank deposit is observed. Variables like income and inflation are found to be statistically significant determinants of savings in bank deposit of Indian households.

Suggested Citation

  • A P Pati & D Shome, 2011. "Do Households Still Prefer Bank Deposits? An Analysis of Shift in Savings and Savings Determinants," The IUP Journal of Bank Management, IUP Publications, vol. 0(1), pages 46-59, February.
  • Handle: RePEc:icf:icfjbm:v:10:y:2011:i:1:p:46-59
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