Half of the term deposits and over one-third of savings deposits are held by the country's households.
Demonetisation seems to have brought a noticeable shift in deposit behaviour among countrymen.
As reported by Businesssline, a study by the Reserve Bank of India (RBI) said households shifted their preferences from term deposits to savings deporits since November 2016.
The study revealed that at 41.7 per cent, the share of savings deposits in the total deposits of households, reached a new high in March against 41.1 per cent and 36.9 per cent in March 2017 and March 2016, respectively.
On the other hand, the share of term deposits in the total deposits of households declined to 52.5 per cent in March against 53 per cent and 57.7 per cent in March 2017 and March 2016, respectively.
The term "households" means individuals, trusts, associates, clubs, proprietary and partnership concerns, educational and religious institutions, self-help groups, NGOs and other such entities.
“This suggests a premium on liquidity induced by the (demonetisation) shock, partly incentivised by lower rates of returns on term deposits and alternative avenues of saving which combine the benefits of liquidity and returns,” according to an article authored by Tarun Kumar Saxena and Thoppil Bhargavan Sreejith, officers with the Department of Statistics and Information Management, in the RBI Bulletin.
In 2016-17, an overwhelming share (66.2 per cent) of incremental deposits took the form of savings deposits in sharp contrast to the average share of 27.5 per cent during the 15-year period 2001-2016. Correspondingly, term deposits accounted for less than 20 per cent of incremental deposits as against an average share of around 63 per cent 2001-16.
Half of the term deposits and over one-third of savings deposits are held by the households.
As per the study, the overall behaviour of households’ bank deposits in the recent period has also been affected by schemes such as Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Jeevan Jyoti Bima Yojana and the Atal Pension Yojana.