Banks and People in the Development Process: A District-Level Analysis of the Banking Habits in India

Abstract

Economic development is crucially an end product of mobilizing dormant savings into the fragrance of a new life - what is commonly called as investment. Banks play a crucial role in this channelization. In an underdeveloped economy like India, there are many traditional avenues of savings (such as gold, land, livestock, real estate, and so on). There may be many motives why people opt for traditional avenues rather than formal banking. The traditional avenues are believed to be more trustworthy and down to earth. The strict rules and stereotyped functioning of the formal banks can make them uncomfortable to the people in the underdeveloped areas. Thus, a huge fund in India is caught in the web of informal banking streams. This chapter seeks to understand how far and to what extent these changes have occurred in India. First, the authors consider a case study from rural India that depicts disparate banking behavior of rural populace. Next, they use district level data on banking habits across all the states of India. The authors first note the pattern and distribution of banking habits of people across the subcontinent. They then try to assess the reasons behind such discrepancy.