




































INDIAN JOURNAL OF FINANCE AND BANKING 15(1) (2025), 1-9 

1 

 

                         FINANCE AND BANKING 
                                                             IJFB VOL 15 NO 1 (2025) P-ISSN 2574-6081  E-ISSN 2574-609X     

           Journal homepage: https://www.cribfb.com/journal/index.php/ijfb 

               Published by American Finance & Banking Society, USA 

SHIFT FROM BANK DEPOSITS TO INVESTMENTS IN INDIA: 

IMPLICATIONS FOR BANKING STABILITY                                                             

        
 Rukmini Mundhara (a)1   

 

(a) Student, Department of Commerce, St. Joseph’s College of Commerce (Autonomous), Bangalore, India; E-mail: rukminiimundhara@gmail.com 

 

 
A R T I C L E I N F O 
 

 

Article History: 
 

Received: 15th March 2025 

Reviewed & Revised: 15th March 
to 10th July 2025 

Accepted: 15th July 2025 

Published: 18th July 2025 

 
Keywords: 
 

Financial Behaviour, Investments  

Preferences, Bank Liquidity, Financial Literacy,  

Fintech Platforms, India, Household Savings,  

Monetary Policy, Digital Finance, Banking 

 
JEL Classification Codes: 

 

G21, G41, E44 

 

Peer-Review Model:  

 
External peer review was done through  

double-blind method. 
 

 
  

 
A B S T R A C T 

 
Over the last twenty years, the financial landscape of Indian households has undergone a significant 

transformation, characterized by a decline in dependence on traditional bank deposits and an increasing 

preference for market-oriented investment options. This shift reflects broader changes in financial 

behavior driven by macroeconomic factors, shifting consumer preferences, and advancements in 

financial technology. This study aims to explore the transition from traditional bank deposits to 

alternative investment opportunities in India and assess their impact on the liquidity and stability of the 

banking sector. By examining long-term trends, the research considers the determinants of this shift, 

including GDP growth, inflation, interest rates, financial literacy, and engagement with digital 
platforms. A mixed-methods approach is utilized, integrating quantitative analysis of secondary data 

sourced from the Reserve Bank of India (RBI), AMFI, and leading commercial banks, alongside 

qualitative insights drawn from existing literature and publicly accessible datasets. Analytical tools such 

as regression analysis, correlation metrics, and pivot tables are employed to investigate the relationships 

among macroeconomic indicators, deposit behaviors, and investment trends. The findings indicate a 

strong positive correlation between GDP and both deposits and investments. In contrast, financial 

literacy and digital engagement exhibit a significant inverse relationship with deposit preferences and 
a direct correlation with investment decisions. Additionally, regression analysis reveals that factors 

beyond traditional interest rates and banking metrics are increasingly influencing the growth of 

investments. These results highlight the evolving dynamics of household financial behavior in India and 

their long-term implications for deposit mobilization and the operational frameworks of commercial 

banks. 

 
 

© 2025 by the authors. Licensee American Finance & Banking Society, USA. This article is an open-

access article distributed under the terms and conditions of the Creative Commons Attribution (CC 

BY) license (http://creativecommons.org/licenses/by/4.0/).                           

 

INTRODUCTION 

Over the last twenty years, India's financial landscape has undergone a remarkable evolution. A key development has been 

the steady transition of household savings from conventional bank deposits to market-oriented investment options, including 

mutual funds, stocks, and digital savings solutions. Previously, fixed and recurring deposits were the primary choice for 

Indian households due to their perceived security, reliable returns, and broad availability. However, current trends indicate 

a shift in consumer preferences towards investment vehicles that provide greater returns, adaptability, and diversification. 

            This developing trend cannot be attributed to a singular cause. Instead, it is shaped by a confluence of structural, 

economic, and technological influences that have driven this shift in behavior.  

            Macroeconomic factors, such as a prolonged decrease in real deposit interest rates and increasing inflationary 

pressures, have diminished the actual returns on standard savings vehicles, particularly affecting urban middle-income 

groups. Concurrently, India's GDP has experienced significant growth, broadening the pool of financially engaged 

individuals (World Bank, 2023; Reserve Bank of India, 2023b). The rising desire for wealth accumulation and strategic 

financial planning has prompted a growing number of individuals — especially younger, tech-savvy populations — to seek 

alternatives to conventional deposit accounts (Kamath, Shenoy, & Subrahmanya, 2022; Gaurav, Ray, & Pradhan, 2023). 

            Technological and informational transformations are equally significant, as they have broadened the accessibility 

and attractiveness of investment opportunities. The rise of fintech platforms has been crucial in closing the accessibility gap 

for novice investors. Applications like Zerodha, Groww, and Paytm Money have streamlined investment processes, 

eliminated conventional barriers to entry, and offered instantaneous financial data. Concurrently, financial influencers on 

social media, government-supported financial literacy initiatives, and algorithm-based advisory tools have further promoted 

public comprehension of diversified investment portfolios (Chouhan et al., 2023; Lakhotia, 2023). These digital platforms 

have not only heightened awareness but also bolstered investor confidence, fostering a new generation of retail investors 

                                                      
1Corresponding Author: ORCID ID: 0009-0009-4682-3989 

© 2025 by the authors. Hosting by American Finance & Banking Society. Peer review under the responsibility of the American Finance & Banking Society, 

USA. https://doi.org/10.46281/sda7c887 
 

To cite this article: Mundhara, R. (2025). SHIFT FROM BANK DEPOSITS TO INVESTMENTS IN INDIA: IMPLICATIONS FOR BANKING 

STABILITY. Indian Journal of Finance and Banking, 15(1), 1-9. https://doi.org/10.46281/sda7c887 

http://creativecommons.org/licenses/by/4.0/)
http://creativecommons.org/licenses/by/4.0/)
https://www.openaccess.nl/en
https://doi.org/10.46281/sda7c887
https://orcid.org/0009-0009-4682-3989


Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

2 

whose decisions are influenced by peer feedback and real-time interaction with digital resources. 

            Nonetheless, this swift transition has prompted significant inquiries about the enduring effects on the Indian banking 

industry. Historically, commercial banks in India have relied on consistent household deposits to finance their lending 

operations and maintain adequate liquidity reserves. A prolonged decrease in deposit growth poses a risk to this framework. 

It could impair banks' capacity to provide credit to essential sectors such as infrastructure, micro, small, and medium 

enterprises (MSMEs), and housing (Kantharia & Biradar, 2022). Simultaneously, regulatory structures are still evolving in 

response to the rapid changes, which present both avenues for innovation and possible systemic risks. 

            This research addresses the scientific issue of the incomplete understanding of the interplay between macroeconomic 

factors, financial technology, and consumer psychology in shaping household financial choices, particularly the reduction 

in traditional bank deposits. Although previous studies have focused on individual elements such as interest rate 

responsiveness (Yadav & Kishore, 2017) or the impact of fintech (Chouhan et al., 2023), there is a notable absence of 

comprehensive research that synthesizes economic, behavioral, and technological aspects. This study aims to investigate 

the degree, reasons, and implications of the transition from bank deposits to market-oriented investments in India. Utilizing 

a mixed-methods framework that combines macroeconomic evaluation with behavioral insights, this research enhances the 

existing literature on consumer finance and the sustainability of banking in developing economies. 

            The paper commences with a comprehensive literature review that integrates contemporary research on deposit 

dynamics, investment patterns, and the impact of financial digitization, concluding with the identification of research gaps 

and the formulation of hypotheses. The Materials and Methods section outlines the datasets, variables, and statistical 

methodologies used. The results section articulates empirical outcomes derived from regression and correlation analyses. 

The discussion interprets these results within the framework of macroeconomic trends and the prevailing literature. 

Ultimately, the conclusion summarizes essential insights, implications for financial institutions and policymakers, and 

suggests avenues for future research. 

 

LITERATURE REVIEW 

The changing dynamics of financial behavior, particularly the shift from conventional bank deposits to more diverse 

investment options, have garnered significant attention in academic research. Numerous studies have investigated this shift, 

both directly and indirectly, emphasizing both macroeconomic factors and behavioral aspects that affect deposit patterns 

and the stability of the banking sector. 

            The evolving dynamics of household savings in India have garnered significant scholarly interest over the last twenty 

years. Traditionally, bank deposits were the cornerstone of household savings due to their perceived security, ease of use, 

and availability (Mohan, 2005). Nevertheless, a noticeable shift is occurring as consumer preferences increasingly lean 

towards investment-oriented financial products such as mutual funds, stocks, and digital savings platforms. Sinha and 

Sharma (2016) noted a transformation within the Indian banking landscape from income models reliant on deposits to a 

broader array of revenue sources, while Sathye (2003) pointed out the disparities in efficiency among various banking 

sectors that influenced consumer engagement with financial institutions. Although these foundational studies remain 

pertinent, they were conducted prior to the fintech revolution and the surge in investment activities that followed in 2016, 

highlighting the need for a modern reassessment. 

            Recent macroeconomic studies further elucidate the impact of external factors on behavioral changes in financial 

practices. Yadav and Kishore (2017) demonstrated that fluctuations in inflation, GDP growth, and interest rate volatility 

have a substantial influence on deposit behaviors. In a similar vein, Singh and Sharma (2016) observed that deposit volumes 

are highly responsive to factors such as trust in banking institutions, liquidity conditions, and inflation expectations. 

Following the demonetization initiative, Murarichaturvedi and Metha (2019) noted a significant increase in alternative 

investment avenues, including mutual funds, systematic investment plans (SIPs), and various smaller savings instruments, 

indicating a more profound reallocation of household financial resources. These findings are consistent with global patterns. 

Lin (2020) reported that, in the context of the United States, there was a rise in deposit withdrawals during periods of market 

optimism, illustrating how positive economic sentiment can influence investment choices even in the face of elevated 

interest rates. 

            Recent geopolitical events have significantly influenced financial decision-making processes in India. For example, 

the rise in tensions between India and Pakistan in April 2025, following the Pahalgam incident, resulted in short-term market 

fluctuations and a marked increase in investments in gold and debt instruments. Such occurrences serve as external shocks 

that affect investor risk tolerance, often resulting in temporary exits from equity markets and a heightened interest in more 

secure financial options, such as fixed deposits and government bonds. Nevertheless, the rapid rebound of the Indian stock 

market after a diplomatic easing demonstrates the increasing sophistication and resilience of Indian retail investors, who are 

more inclined to adopt rebalancing strategies in response to these events rather than succumbing to panic (Reuters, 2025). 

These changes in behavior underscore the importance of incorporating geopolitical risks into analyses of household financial 

preferences, particularly in emerging markets such as India. 

            The rapid evolution of technology has significantly influenced these transformations. Daneshvar and Ramesh (2012) 

identified a positive relationship between the adoption of information technology and the growth of deposits in earlier 

periods. However, contemporary studies indicate that fintech platforms are increasingly reallocating funds from traditional 

deposits to digital investment avenues. Chouhan et al. (2023) illustrated that fintech ecosystems, especially peer-to-peer 

lending and algorithm-based investing, are starting to supplant conventional banking offerings. Kamath, Shenoy, and 

Subrahmanya (2022) associated the increase in retail investors with social media sentiment and digital engagement, while 

Surana (2021) reported a substantial surge in IPO subscriptions following the COVID-19 pandemic, particularly among 



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

3 

novice investors using applications. These findings highlight a rising familiarity among retail investors with digital 

instruments and market fluctuations, thereby redefining the conventional distinctions between saving and investing. 

            Financial literacy is pivotal in driving this transformation. The National Strategy for Financial Education (2020–

2025), established by the National Centre for Financial Education, emphasizes the importance of organized awareness 

initiatives to bridge and reduce urban-rural and gender disparities in financial engagement. Research by Gaurav, Ray, and 

Pradhan (2023) indicates a strong correlation between heightened financial awareness and increased investment activities 

among salaried individuals. Additionally, Murarichaturvedi and Metha (2019) noted that consumers with enhanced financial 

knowledge tend to maintain more diversified investment portfolios and exhibit reduced dependence on bank deposits. 

Concurrently, the influence of social media on financial literacy is becoming increasingly apparent. The rapid proliferation 

of finance-related content on platforms such as YouTube and Instagram has distinctly affected the investment behaviors of 

urban millennials and Gen Z users. This trend is particularly significant, considering that over 120 million Indians under the 

age of 35 are actively consuming financial content (Kamath, Shenoy, & Subrahmanya, 2022). 

            Demographic elements further enhance this shift in behavior. The emergence of a digitally savvy youth population, 

coupled with rising urbanization and changes in household income levels, has facilitated more risk-acceptant financial 

decisions. Data from the Reserve Bank of India (2023a) and AMFI (2023) reveal a consistent decline in the growth rate of 

household deposits, alongside a significant increase in SIP registrations and mutual fund assets under management. 

Government initiatives, such as the 'Mutual Funds Sahi Hai' campaign and digital financial inclusion efforts, have supported 

this trend. The introduction of the Financial Inclusion Index (FI-Index) (Reserve Bank of India, 2023c) and SEBI's initiatives 

to lower entry barriers in capital markets — including the promotion of ₹250 SIPs (Reuters, 2025) — have rendered 

investment markets more accessible to a broader demographic, particularly individuals from tier 2 and 3 cities. 

            Despite the extensive body of research, notable deficiencies remain. A considerable portion of the current literature 

examines deposit behavior, investment patterns, or the adoption of fintech in isolation. There is a scarcity of comprehensive 

analyses that integrate macroeconomic, technological, and psychological factors to expose the ongoing structural decline in 

deposits. Additionally, while digital finance and fintech are often studied from the standpoint of consumer adoption, their 

broader macroeconomic consequences — particularly regarding credit intermediation, deposit mobilization, and systemic 

stability — are insufficiently explored. As banks continue to depend on household deposits for their funding, a reduction in 

deposit inflows could jeopardize credit availability and liquidity strength, particularly in the context of post-pandemic 

recovery. 

            This analysis provides a foundation for an in-depth examination of the interplay between macroeconomic indicators, 

technological innovations, and shifting consumer preferences, which collectively shape household financial behavior in 

India. By integrating these aspects, the present study fills a significant gap in the existing literature and enhances our 

understanding of the financial system's evolution in one of the largest emerging markets globally. 

 

MATERIALS AND METHODS 

This research employs a mixed-methods framework, combining quantitative trend analysis with qualitative content synthesis 

to explore the transition from conventional bank deposits to alternative investment vehicles in India. The investigation relies 

solely on secondary data gathered from reputable and publicly accessible sources spanning the years 2003 to 2023. Principal 

sources encompass the Reserve Bank of India (RBI), the Association of Mutual Funds in India (AMFI), annual reports from 

prominent banks such as HDFC Bank, ICICI Bank, and State Bank of India, as well as macroeconomic databases provided 

by the World Bank, Trading Economics, and the Economic Survey of India. 

 

Data Sources and Variables 

Quantitative data encompasses yearly figures related to household deposits, mutual fund investments, interest rates, inflation 

rates, and GDP. These figures were organized into time series datasets spanning 20 years (2003–2023). The primary trend 

variables were derived from the Reserve Bank of India's Database on the Indian Economy and the Association of Mutual 

Funds in India's mutual fund inflows. Furthermore, proxy data from the National Sample Survey Office, the National 

Financial Education Council, and pertinent academic literature (Murarichaturvedi & Metha, 2019; Kamath, Shenoy, & 

Subrahmanya, 2022) were utilized to incorporate social media penetration, financial literacy indices, and the growth of 

digital investment platforms.  

The key independent variables considered in this analysis include GDP (measured in INR trillion) as an indicator 

of macroeconomic growth, inflation (expressed as a percentage based on the Consumer Price Index), and the average interest 

rate on term deposits. Additionally, the study incorporates financial literacy rates, disaggregated by rural and urban 

demographics, to capture differences in financial knowledge and awareness across regions. Digital engagement, measured 

by the usage of social media and investment platforms, is also included to reflect the growing influence of technology in 

financial decision-making. The dependent variables examined are the volume of household bank deposits (in INR crore) 

and the volume of investments in mutual funds and equities (in INR crore), representing the key channels through which 

households allocate their financial assets. This framework facilitates an examination of how macroeconomic factors, 

financial literacy, and digital adoption influence household savings and investment behaviors. 

 

Methodological Design 
The quantitative component of the study involves several analytical approaches. First, trend analysis is conducted to identify 

historical patterns and movements in household deposit and investment behavior over time. This is complemented by linear 

regression models, built using Microsoft Excel, which are employed to test the relationships between household deposits, 



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

4 

investments, and various macroeconomic variables. Additionally, correlation analysis is used to assess the strength and 

direction of associations among different financial behavior indicators and macroeconomic factors. Together, these 

quantitative methods provide a comprehensive understanding of the interplay between macroeconomic conditions and 

household financial decisions. 

The qualitative analysis is based on a comprehensive literature review that encompasses more than 50 sources, 

including peer-reviewed journal articles, government policy documents, and white papers. This review aimed to 

contextualize the findings, identify behavioral changes, and assess the impact of institutional factors, including fintech 

disruptions and regulatory frameworks. Reports from the government, including the Financial Inclusion Index and NSFE 

2020–25 (National Centre for Financial Education, 2020), were utilized to elucidate the qualitative factors driving behavioral 

change. 

 

Analytical Tools and Software 

Microsoft Excel served as the primary tool for data cleansing, creating charts, regression analysis, and developing correlation 

matrices. A variety of visual representations, including pivot tables, scatter plots, and time series graphs, were employed to 

illustrate the results. The journal's guidelines restricted the number of chart outputs to fewer than 20 tables and figures. 

 

RESULTS 

This study utilizes a dataset spanning two decades (2003–2023) to assess the shifts in fund allocation among Indian 

households between conventional deposits and various investment options. The results are illustrated through regression 

analyses, correlation matrices, and a collection of figures and pivot tables generated in Microsoft Excel.  

 

 
Figure 1. Linear trend comparison between deposits and investments over the past 20 years 

 

A comparative analysis of linear growth trajectories throughout this timeframe reveals that bank deposits 

experienced a more pronounced increase in the initial years, underscoring their status as the preferred savings mechanism 

for households. However, from the fiscal year 2015–16 onwards, the investment trajectory has shown a marked acceleration, 

indicating a shift in behavior towards financial products linked to market performance. This pivotal change is effectively 

depicted in Figure 1, which shows the linear trend lines for cumulative volumes of deposits and investments. 

 

 
Figure 2. Annual growth rates of deposits and investments, highlighting periods of divergence during economic fluctuations 

 

The significant rise in the investment trajectory starting from fiscal year 2015–16 signifies a critical juncture. This 

trend is further illustrated in Figure 2, which depicts the annual growth rates of both financial instruments. Prior to fiscal 

year 2007–08, deposits and investments exhibited similar growth patterns, reflecting a stable savings approach. However, 

following 2008, investments started to surpass deposits amid economic volatility. 

-500000
0

500000
1000000
1500000

LINEAR TREND ANALYSIS

Deposits (₹  Crore) Investments (₹  Crore)

Linear (Deposits (₹  Crore)) Linear (Investments (₹  Crore))

-500000

0

500000

1000000

1500000

2
0

0
3

-0
4

2
0

0
4

-0
5

2
0

0
5

-0
6

2
0

0
6

-0
7

2
0

0
7

-0
8

2
0

0
8

-0
9

2
0

0
9

-1
0

2
0

1
0

-1
1

2
0

1
1

-1
2

2
0

1
2

-1
3

2
0

1
3

-1
4

2
0

1
4

-1
5

2
0

1
5

-1
6

2
0

1
6

-1
7

2
0

1
7

-1
8

2
0

1
8

-1
9

2
0

1
9

-2
0

2
0

2
0

-2
1

2
0

2
1

-2
2

2
0

2
2

-2
3

Bar Graph Showing Data for Past 
Two Decades

Deposits (₹  Crore) Investments (₹  Crore)



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

5 

 
Figure 3. Cumulative deposits and investments showing overlap until 2007 - 08, followed by a consistent rise in cumulative 

investments surpassing deposits by 2016 – 17 

 

Figure 3 illustrates the progression of cumulative totals, highlighting the pivotal crossover that occurred in the 

fiscal year 2016–17, when cumulative investments surpassed cumulative deposits. This event marks a significant 

transformation in the financial habits of households. 

The results of the regression and correlation analysis are detailed below. A straightforward linear regression 

analysis was performed to assess the impact of bank deposits on household investments in India over the two-decade period 

from 2003 to 2023. The correlation matrix offers valuable insights into the interconnections among deposits, investments, 

and significant macroeconomic variables. 

 

Table 1. Regression Output: Effect of Deposits on Investments (2003–2023) 

 
Model Component Coefficient Standard Error t-Stat p-Value 

Intercept –30,470.90 - - 0.350 

Deposits (X Var 1) 0.176 - - 0.002 

Model Summary 

Statistic Value 

Multiple R 0.646 

R Square 0.417 

Adjusted R Square 0.385 

F Statistic 12.89 

Significance F 0.002 

 

Table 2. Correlation Matrix: Deposits, Investments, and Macroeconomic Indicators 

 
Variable GDP  Inflation Interest Rate  

Deposits  0.866 0.010 -0.317 

Investments 0.799 -0.428 -0.426 

 

Deposits exhibit a significant positive correlation with GDP, a minimal relationship with inflation, and a moderate 

inverse relationship with interest rates. Similarly, investments align positively with GDP but exhibit an inverse sensitivity 

to both inflation and interest rates. 

            Pivot tables were developed to examine behavioral data related to financial literacy and savings/investment 

preferences from 2008 to 2023. Table 3 illustrates the percentage increase in financial literacy among both rural and urban 

households. Tables 4 and 5 outline the trends in deposit and investment preferences, respectively. 

 

Table 3. Urban vs. Rural Financial Literacy Percentage (Pivot Table) 

 
Average of Financial 

Literacy (%) 

Column 

Labels 

       

Row Labels 2008 2010 2015 2017 2020 2022 2023 Grand Total 

Rural 30.00% 35.00% 45.00% 50.00% 55.00% 60.00% 65.00% 48.57% 

Urban 20.00% 25.00% 30.00% 35.00% 45.00% 50.00% 55.00% 37.14% 

Grand Total 25.00% 30.00% 37.50% 42.50% 50.00% 55.00% 60.00% 42.86% 

 

 

 

 

0
2000000
4000000
6000000
8000000

10000000
12000000
14000000

2
0

0
3

-0
4

2
0

0
4

-0
5

2
0

0
5

-0
6

2
0

0
6

-0
7

2
0

0
7

-0
8

2
0

0
8

-0
9

2
0

0
9

-1
0

2
0

1
0

-1
1

2
0

1
1

-1
2

2
0

1
2

-1
3

2
0

1
3

-1
4

2
0

1
4

-1
5

2
0

1
5

-1
6

2
0

1
6

-1
7

2
0

1
7

-1
8

2
0

1
8

-1
9

2
0

1
9

-2
0

2
0

2
0

-2
1

2
0

2
1

-2
2

2
0

2
2

-2
3

Compound Line Graph

Cumulative Investments (₹  Crore)

Cumulative Deposits (₹  Crore)



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

6 

Table 4. Urban vs. Rural Savings Preference (Pivot Table) 

 
Average of Savings 

Preference (Deposits) 

Column 

Labels 

       

Row Labels 2008 2010 2015 2017 2020 2022 2023 Grand Total 

Rural 60.00% 58.00% 55.00% 53.00% 50.00% 47.00% 45.00% 52.57% 

Urban 65.00% 62.00% 60.00% 58.00% 55.00% 52.00% 50.00% 57.43% 

Grand Total 62.50% 60.00% 57.50% 55.50% 52.50% 49.50% 47.50% 55.00% 

 

Table 5. Urban vs. Rural Investments Preference (Pivot Table) 

 
Average of Investments 

Preference 

(Equities/Mutual Funds) 

Column 

Labels 

       

Row Labels 2008 2010 2015 2017 2020 2022 2023 Grand Total 

Rural 40.00% 42.00% 45.00% 47.00% 50.00% 53.00% 55.00% 47.43% 

Urban 35.00% 38.00% 40.00% 42.00% 45.00% 48.00% 50.00% 42.57% 

Grand Total 37.50% 40.00% 42.50% 44.50% 47.50% 50.50% 52.50% 45.00% 

 

The correlation analysis reveals a strong inverse relationship between financial literacy and household deposits, 

with a correlation coefficient of –0.9947. This suggests that as financial literacy increases, the volume of household deposits 

tends to decrease significantly. Conversely, there is a strong positive correlation between financial literacy and investments, 

with a coefficient of +0.9947, indicating that higher levels of financial literacy are closely associated with greater volumes 

of mutual fund and equity investments. These findings highlight the pivotal role of financial literacy in influencing 

household financial behavior, particularly in shifting preferences from traditional savings towards more diversified 

investment options. 

The evidence indicates that as financial literacy has improved, there has been a decrease in the preference for 

deposits, accompanied by an increase in investment activities. 

 

 
Figure 4. Trends in social media engagement and investment. Figure 5. Trends in social media engagement and investment 

Participation through online platforms, illustrating the role        participation through online platforms, illustrating the role 

of digital platforms in influencing savings in India, and of digital platforms in influencing investments in India 

               

 Additionally, Figures 4 and 5 illustrate the influence of digital platforms on this behavioral shift. Figure 4 illustrates 

the relationship between increased social media interaction and the expansion of fintech platforms, which corresponds with 

a decrease in deposit preferences. Meanwhile, Figure 5 highlights the significant correlation between investment choices 

and digital engagement. 

Over two decades, the preference for investment rose significantly from 50% to 95%, whereas the preference for 

deposits experienced a substantial decrease from 50% to 5%. Concurrently, engagement with social media and access to 

fintech services exhibited similar growth, escalating from less than 5% in 2008 to more than 65% by 2023. 

2000

2005

2010

2015

2020

2025

0%

10%

20%

30%

40%

50%

60%

70%

80%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Impact of Key Variables on Saving 
Preferences (2008–2023)

Social Media Engagement with Investment Content (%)

Growth in Online Investment Platforms (%)

Age Group (18-35) Engaged (%)

Preference (Deposits)

Year

0%

50%

100%

2000

2010

2020

2030

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Impact of Key Variables on 
Investment Preferences (2008–

2023)

Year

Social Media Engagement with Investment
Content (%)

Growth in Online Investment Platforms (%)

Age Group (18-35) Engaged (%)



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

7 

This study provides evidence of the increase in investment growth compared to deposits in the Indian banking 

sector, driven by factors such as GDP, interest rate fluctuations, financial literacy, and the influence of social media 

platforms. 

 

DISCUSSIONS 

The results of this research highlight a significant shift in the behavior of Indian households, moving away from conventional 

bank deposits towards market-linked investment alternatives over the last twenty years. This shift is influenced by a 

combination of economic growth, increased financial literacy, greater access to digital platforms, and shifting attitudes 

towards risk. The notable rise in investment volumes following the fiscal year 2015–16, as indicated by the data, suggests a 

new approach to savings that prioritizes long-term returns and liquidity management over mere capital preservation. 

            The findings align with the work of Kamath, Shenoy, and Subrahmanya (2022), who noted that increasing digital 

engagement and evolving investor sentiment are significant factors driving Indian savers towards direct equity investments. 

In a similar vein, Chouhan et al. (2023) highlighted that the rise of FinTech platforms has enhanced access to investment 

opportunities for individuals, especially in Tier-II and Tier-III cities, thereby facilitating a shift away from traditional 

banking systems. The statistical analysis presented in this study further supports these conclusions, particularly the nearly 

perfect inverse relationship between financial literacy and the preference for deposits (–0.9947), as well as a strong positive 

correlation with investment activities (+0.9947). 

            A significant consequence of these trends is the reduced responsiveness of deposits to inflation and interest rates, 

even in the context of declining real returns. This observation aligns with the arguments presented by Sharma and Negi 

(2025), who suggest that deposit inertia in India may be attributed to psychological factors, including habitual behavior, a 

sense of security, and trust in financial institutions. However, the growing inclination towards investments, particularly 

among younger, technology-oriented individuals, suggests a diminishing of this inertia, increasingly shaped by mobile 

investment applications and tailored content on social media. 

            The findings from the regression model indicated a moderate predictive correlation between deposits and 

investments (R² = 0.417), suggesting that factors beyond the reduction in deposits influence shifts in financial behavior. The 

low significance of the intercept also indicates that investment activities are becoming increasingly independent of the 

deposit base. This trend aligns with observations made by Lin (2020) in developed markets, such as the United States. 

            Furthermore, macroeconomic indicators reveal a strong positive correlation between GDP growth and both deposits 

(r = 0.866) and investments (r = 0.779), supporting the notion that an increase in national income enhances overall financial 

participation. Conversely, the observed negative correlations between investments and both inflation and interest rates imply 

that when traditional returns diminish, households are more likely to shift their focus towards equities and mutual funds — 

a trend that became especially pronounced in the aftermath of the pandemic, as highlighted by Surana (2021) and validated 

by the 20-year trend analysis conducted in this study. 

            The significance of digital platforms and social media is paramount. Interaction with investment-related material 

increased dramatically from 5% to 65% between 2008 and 2023, correlating with a heightened preference for investment. 

As highlighted by Murarichaturvedi and Metha (2019), these platforms not only broaden access but also influence 

perceptions of what is deemed 'intelligent' financial conduct, even among those who have historically favored conservative 

savings options. 

            Collectively, the evidence and relevant literature indicate that Indian households are undergoing a significant 

transformation, moving from traditional, interest-driven saving practices to more proactive wealth creation approaches. This 

shift not only presents new opportunities for financial inclusion and economic development but also raises critical questions 

about the future liquidity status of banks, the evolving dynamics of credit intermediation, and the necessary adjustments in 

public policy to maintain systemic stability in the face of such behavioral fluctuations. 

 

CONCLUSIONS 

This research aimed to investigate the changing pattern of Indian households shifting away from conventional bank deposits 

towards market-linked investment options, while also assessing the implications for deposit growth and the overall stability 

of the banking sector. Utilizing two decades of secondary data, the study revealed significant evidence of a fundamental 

change in savings behavior, with investments increasingly surpassing deposits, particularly from the fiscal year 2015–16 

onwards. 

            The research indicates that macroeconomic factors, including GDP growth, have a favorable impact on both deposits 

and investments. Conversely, inflation and decreasing interest rates negatively affect the growth of traditional deposits. 

Additionally, the utilization of digital platforms and the level of financial literacy have been identified as crucial behavioral 

influences, facilitating the transition from deposits to more lucrative investment options. 

            This research integrates macroeconomic data with behavioral insights to offer a comprehensive understanding of a 

significant shift in India's financial landscape. The findings suggest that banking institutions, which were previously the 

primary repositories of personal wealth, are now sharing this function with capital markets and digital platforms. This 

evolution not only mirrors emerging economic conditions but also indicates a developing financial awareness among Indian 

households. 

             Grasping the direction of these changes is crucial for predicting forthcoming difficulties in deposit mobilization, 

liquidity management, and risk management at the household level within an increasingly digital economy. 

The implications of this study suggest several practical recommendations for stakeholders in the financial sector. 

First, there is a need to develop integrated financial products that offer both security and growth potential, catering to the 



Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

8 

evolving preferences of consumers. Comprehensive financial literacy initiatives should be implemented, targeting diverse 

demographic groups to ensure widespread understanding and participation in financial markets. Furthermore, leveraging 

digital platforms and social media can enhance investor engagement and provide timely, relevant information. It is also 

crucial to design financial products that align with prevailing macroeconomic trends and indicators. Additionally, promoting 

policy advocacy is recommended to support the development of balanced investment instruments that encourage both 

savings and investment. However, the study has certain limitations, such as its reliance on secondary data, which restricts 

the depth of primary insights. The absence of demographic segmentation in the analysis means that variations in consumer 

behavior across different groups are not fully explored. Moreover, the use of static assumptions may overlook sudden 

economic changes, and the influence of behavioral and psychographic factors remains under-investigated. Future research 

should therefore focus on assessing the impact of hybrid financial instruments on saving behaviors and consider 

incorporating primary data and broader behavioral dimensions for a more comprehensive understanding. 

By understanding the evolving preferences of Indian consumers and adapting to the dynamic financial landscape, 

stakeholders can foster more informed investment decisions, promote financial stability, and play a significant role in 

shaping India's economic future. 

  

 
Author Contributions: Conceptualization, R.M.; Methodology, R.M.; Software, R.M.; Validation, R.M.; Formal Analysis, R.M.; Investigation, R.M.; 
Resources, R.M.; Data Curation, R.M.; Writing – Original Draft Preparation, R.M.; Writing – Review & Editing, R.M.; Visualization, R.M.; Supervision, 

R.M.; Project Administration, R.M.; Funding Acquisition, R.M. Authors have read and agreed to the published version of the manuscript. 

Institutional Review Board Statement: Ethical review and approval were waived for this study, due to that the research does not deal with vulnerable 
groups or sensitive issues. 

Funding: The authors received no direct funding for this research. 

Acknowledgments: Not applicable. 

Informed Consent Statement: Informed consent was obtained from all subjects involved in the study. 

Data Availability Statement: The data presented in this study are available on request from the corresponding author. The data are not publicly available 
due to restrictions. 

Conflicts of Interest: The authors declare no conflict of interest.                                                                                                                                                                                                                                   

 

REFERENCES 
AMFI. (2023). Monthly reports on mutual fund investments. Retrieved from https://www.amfiindia.com/research-

information/amfi-monthly 
Chouhan, V., Ali, S., Sharma, R. B., & Sharma, A. (2023). The effect of financial technology (Fintech) on the conventional 

banking industry in India. International Journal of Innovative Research and Scientific Studies, 6(3), 538–544. 
Retrieved from https://www.ijirss.com/index.php/ijirss/article/view/1578  

Daneshvar, P., & Ramesh, H. N. (2012). Determination of IT strategies to improve banks' performance- Indian public banks 
experience. Asian Journal of Research in Business Economics and Management, 2(2), 115–131. Retrieved from 
https://www.indianjournals.com/ijor.aspx?target=ijor:ajrbem&volume=2&issue=2&article=010  

Gaurav, K., Ray, A. S., & Pradhan, A. (2023). INVESTMENT BEHAVIOR OF CORPORATE PROFESSIONALS 
TOWARDS MUTUAL FUNDS IN INDIA. International Journal of Accounting & Finance Review, 14(1), 30–
39. https://doi.org/10.46281/ijafr.v14i1.1961  

Kantharia, N. J., & Biradar, J. (2022). What influence the performance of banks? Evidence from public sector banks in 
India. Journal of Indian Business Research, Journal of Indian Business Research, 15(1), 23-39. 
https://doi.org/10.1108/JIBR-04-2022-0112  

Kamath, A. N., Shenoy, S. S., & Subrahmanya, K. N. (2022). An overview of investor sentiment: Identifying themes, 
trends, and future direction through bibliometric analysis. Investment Management & Financial Innovations, 
19(3), 229–242. http://dx.doi.org/10.21511/imfi.19(3).2022.19 

Lakhotia, R. (2023). TO INVESTIGATE THE TREND AND EXPANSION OF PRIVATE EQUITY INVESTMENT IN 
INDIA. Indian Journal of Finance and Banking, 13(2), 36–44. https://doi.org/10.46281/ijfb.v13i2.2174 

Lin, L. (2020). Bank deposits and the stock market. The Review of Financial Studies, 33(6), 2622–2658. 
https://doi.org/10.1093/rfs/hhz078 

Mohan, R. (2005). Reforms, Productivity, and Efficiency in Banking: The Indian Experience. The Pakistan Development 
Review, 44(4), 505–538. Retrieved from https://www.jstor.org/stable/41260730 

Murarichaturvedi, K., & Metha, M. (2019). A Research on the Impact of Banks of Deposits and Operational Efficiency in 
India. Think India Journal, 22(14), 3621–3628. Retrieved from https://thinkindiaquarterly.org/index.php/think-
india/article/view/13142 

National Centre for Financial Education. (2020). National Strategy for Financial Education (NSFE): 2020–2025. Reserve 
Bank of India. Retrieved from https://rbi.org.in 

Reserve Bank of India. (2023a). Annual Report 2022-23. Retrieved from 
https://rbi.org.in/Scripts/AnnualReportPublications.aspx?head=Annual+Report 

Reserve Bank of India. (2023b). Database on Indian Economy: Financial Ratios of Commercial Banks. Retrieved from 
https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!3 

Reserve Bank of India. (2023c). Annual report: Financial Inclusion Index (FI-Index). Retrieved from https://rbi.org.in 
Reuters. (2025). India pushes $3 investment plans to deepen reach of equities. Retrieved from 

https://www.reuters.com/world/india/india-pushes-3-investment-plans-deepen-reach-equities-2025-01-16/ 
Sathye, M. (2003). Efficiency of banks in a developing economy: The case of India. European Journal of Operational 

Research, 148(3), 662–671. Retrieved from https://researchprofiles.canberra.edu.au/en/publications/efficiency-
of-banks-in-a-developing-economy-the-case-of-india 

Sharma, S., & Negi, V. (2025). Effect of Behavioural Biases on Investors’ Decision Making: A Systematic Literature 
Review. Metamorphosis, 24(1), 105–113. https://doi.org/10.1177/09726225251319119 

https://www.amfiindia.com/research-information/amfi-monthly
https://www.amfiindia.com/research-information/amfi-monthly
https://www.ijirss.com/index.php/ijirss/article/view/1578
https://thinkindiaquarterly.org/index.php/think-india/article/view/13142
https://thinkindiaquarterly.org/index.php/think-india/article/view/13142
https://rbi.org.in/
https://rbi.org.in/Scripts/AnnualReportPublications.aspx?head=Annual+Report
https://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!3
https://rbi.org.in/
https://www.reuters.com/world/india/india-pushes-3-investment-plans-deepen-reach-equities-2025-01-16/
https://researchprofiles.canberra.edu.au/en/publications/efficiency-of-banks-in-a-developing-economy-the-case-of-india
https://researchprofiles.canberra.edu.au/en/publications/efficiency-of-banks-in-a-developing-economy-the-case-of-india


Mundhara, Indian Journal of Finance and Banking 15(1) (2025), 1-9 

 

9 

Singh, A., & Sharma, A. K. (2016). An empirical analysis of macroeconomic and bank-specific factors affecting liquidity 
of Indian banks. Future Business Journal, 2(1), 40–53. https://doi.org/10.1016/j.fbj.2016.01.001 

Sinha, P., & Sharma, S. (2016). Determinants of bank profits and its persistence in Indian Banks: a study in a dynamic 
panel data framework. International Journal of System Assurance Engineering and Management, 7(1), 35–46. 
https://doi.org/10.1007/s13198-015-0388-9 

Surana, S. (2021). INDIAN RETAIL INVESTORS AND INITIAL PUBLIC OFFERS: PRE AND POST COVID 
ANALYSIS. INFORMATION TECHNOLOGY IN INDUSTRY, 9(2), 345–352. 
https://doi.org/10.17762/itii.v9i2.353 

World Bank. (2023). GDP and macroeconomic trends for India. Retrieved from https://data.worldbank.org/country/india 
Yadav, H., & Kishore, R. R. (2017). Bank Deposits in India – Econometric Analysis of Macroeconomic 

Determinants. Journal of economics and sustainable development, 8(12), 20–30. Retrieved from 
https://www.iiste.org/Journals/index.php/JEDS/article/view/37491 

 
 
Publisher’s Note: American Finance & Banking Society stays neutral with regard to jurisdictional claims in published maps and 

institutional affiliations. 

 

 

© 2025 by the authors. Licensee American Finance & Banking Society, USA. This article is an open-access article distributed under the terms and 
conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/). 

 
Indian Journal of Finance and Banking (P-ISSN 2574-6081 E-ISSN 2574-609X) by American Finance & Banking Society is licensed under a Creative 

Commons Attribution 4.0 International License. 

 

https://doi.org/10.17762/itii.v9i2.353
https://data.worldbank.org/country/india
http://creativecommons.org/licenses/by/4.0/)
http://creativecommons.org/licenses/by/4.0/
http://creativecommons.org/licenses/by/4.0/
http://creativecommons.org/licenses/by/4.0/

