Saturday, 17 June 2017

Title - "Growth of Bank Deposits and Its Determinants: A Pragmatic Study on Commercial Banks"

Title - "Growth of Bank Deposits and Its Determinants: A
Pragmatic Study on Commercial Banks"


Introduction importance and significance of the study
Banking system in India, the dominant segment of the financial sector, accounts for a major portion of fund flow. Banks are the vehicle for monetary policy signals, credit channel and facilitators of the payment system. Deepening and widening of the financial markets, growing disintermediation process, adoption of modern technology, rising customer expectations, and providing innovative financial services and schemes supplemented by suitable credit delivery mechanisms, are some of the challenges for which banks would be required to reorient their organizational structure and modify their strategies. Commercial banks are highly sensitive organizations open to public scrutiny. As such, they must continuously ensure their profitability, which is essential for their growth and viability as also for ensuring public confidence. Thus, banks have assumed greater responsibilities in mobilizing domestic resources for financing economic priorities. Deposit mobilization is the most important functions of commercial banks. Among different sources of funds available to the banks, deposit mobilization is the mainstay of bank liabilities.
Deposit mobilization is a significant indicator of a bank’s performance. The basic principle of bank branch expansion is to tap deposits and culminate savings habit in the community.
Further, tapping of potential savings and marshalling them for strategic and productive purposes is the main objective of bank nationalization. As a result, various schemes were launched over the years. Under the 20-point program (1975), the government of India directed the banks to make all possible efforts to mobilize new deposits so that the pace of lending activities could be accelerated. The financial sector reform also highlighted the need for growth of financial savings and their efficient channelization into industrial activity. There has been a substantial rise of bank deposits since the nationalization of banks. The aggregate deposits with Scheduled Commercial Banks recorded an increase of 10.9 per cent (as on January 28, 2011) as against an increase of 12.1 per cent in the corresponding period of last year. As per the Advance Estimate (AE) of Central Statistics Office (CSO), the growth in Gross Domestic Product (GDP) at factor cost at constant (2004-05) prices was estimated at 8.6 per cent in 2010-11 as compared to 8.0 per cent in 2009-10 (Quick Estimate). At disaggregated level, this (AE 2010-11) comprises an increase of 5.4 per cent in agriculture and allied activities, a growth of 8.1 per cent in industry and 9.6 per cent in services as compared to a growth of 0.4 per cent, 8.0 per cent and 10.1 per cent respectively during 2009-10.
In the changing scenario of commercial banking in the liberalized era, the importance of efficiency has assumed a critical significance for the viability of banks, particularly in the backward regions of the country. This scenario highlights the vital question as to whether the performance of commercial banks in terms growth of deposits is up to the desired extent in backward areas. The present study is an attempt to evaluate the growth of deposit mobilization of banks and its determinants in the Barak Valley region of Assam in the Indian context.
Rationale
The bank nationalization witnessed a fantastic achievement in the banking system through the expansion of bank branches. The establishments of more rural branches have undoubtedly served the twin objective of mobilization of rural deposits and channelization of credit to the rural areas. However, the pace of acceleration of deposit mobilization depends on the economic and industrial infrastructure, as well as creating greater awareness among rural populace for effective use of bank credit. Otherwise, rural deposits would continue to be siphoned off to urban centers (Raul, 1997). Therefore, the credit absorption capacity in the rural areas largely depends on the availability of required infrastructure.
Objectives of the Study
The specific objectives of the study are to:
Ø  To study the extent of mobilization of bank deposit in the districts under study;
Ø  To examine the relationship between the growth of deposits and growth of advances of banks; and
Ø   To identify the factors influencing the growth of deposits in backward areas.

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