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Our Bureau

Mumbai, Sept. 4 Following the financial liberalisation since the early 1990s, some shifts have taken place in the ownership pattern of bank deposits, according to the Report on Currency and Finance, released by the Reserve Bank of India, on Thursday.

The household sector’s share in aggregate deposits has steadily declined, while the shares of the government and corporate sectors have increased.

The share of household sector in banks’ total deposits declined from 69.2 per cent in 1995 to 58.5 per cent in 2006. The share of the government sector in total deposits increased from 9.2 per cent in 1995 to 14.4 per cent in March 2006.

“This could be attributed mainly to improved public sector savings rate which, in turn, was due to improved performance of the non-departmental government enterprises,” the RBI report said

The share of the corporate sector (financial), increased from increased from 6.7 per cent in 1995 to 9.7 per cent in 2006 and the share of the corporate sector (non-financial), increased from 4.2 per cent in 1995 to 10.1 per cent in 2006. “The corporate sector’s (both financial and non-financial) share in total deposits also rose in recent years, reflecting their improved performance,” the report said.

The decline in household sector’s share reflects mainly the sharp fall in their shares in term deposits. The share of deposits of longer (above five-year) maturities in total deposits declined from 23.1 per cent in 1990 to 7.3 per cent in 2007. As against this, the share of deposits of shorter (up to 1-year) maturities increased from 9 per cent in 1990 to 25.2 per cent in 2007.

The decline in interest rates on term deposits and the increase in tax-adjusted returns on other saving instruments were the two major factors that contributed to this trend, the report said.

As the financial sector develops, the share of non-deposit saving instruments tend to increase at the expense of bank deposits. This trend is expected to accentuate in the coming years. The challenge, therefore, for banks is to mobilise hitherto untapped savings and to improve their services to not only retain their existing depositors but also attract new depositors, the report said.

More Stories on : Fixed Deposits | Small Savings

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