Title - "Growth of Bank
Deposits and Its Determinants: A
Pragmatic Study on Commercial Banks"
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.
To read more…….
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