Opinion
Women micro-savings: The missing piece in India's deposit growth puzzle
Summary
- Women form a big segment of untapped savers who can serve as a significant source of regular funding for banks if apt saving products are designed to serve their needs. This is not just a matter of equity but a strategic necessity for the long-term health of the banking industry and the economy.
The widening gap between credit and deposit growth has become a significant concern across the financial industry. Recently, Reserve Bank of India (RBI) governor Shaktikanta Das underscored this issue as a potential risk to the structural liquidity of the country’s financial system.
The credit-deposit (CD) ratio, a critical measure of banking stability, is under mounting pressure as household savings are increasingly diverted from traditional bank deposits to mutual funds, stocks and other investment avenues. As of 12 July 2024, the CD ratio stood at 79.4%, reflecting a steady rise over the past three years.
This trend poses a substantial challenge for banks, which rely heavily on deposits as a stable, low-cost source of funds vital for financing loans and maintaining liquidity. In response, many banks have resorted to costly market borrowings and increased interest rates on deposits.
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However, these measures are short-term fixes. A more sustainable approach involves expanding the depositor base by engaging segments of the population that are either currently not using formal saving services or are unable to fully use these services.
One such segment is that of women across India. According to the World Bank’s Findex Survey 2021, while 79% of Indian women have bank accounts, 32% of these accounts are inactive.
Additionally, RBI’s report Deposits with Scheduled Commercial Banks (March 2023) reveals that women account for just 20.5% of total deposits. This represents a significant missed opportunity, both for women and the banking sector.
By promoting savings among women through gender-intentional design and marketing of savings products, banks can mobilize deposits from an untapped segment with immense potential.
Data from the Unique Identification Authority of India (UIDAI) indicates there are about 516 million women Aadhaar holders in India aged 18 and above.
If we conservatively assume each of these women saves ₹500 per month, this will generate total monthly savings of ₹25,800 crore. Over a year, this could sum up to ₹3.1 trillion in savings, amounting to nearly 13% of the total deposit growth between 2022-2023 and 2023-2024.
However, achieving this requires addressing a critical gap that prevents many women from engaging in formal savings. Many women prefer the convenience of saving cash at home, such as in a rice jar or cupboard, because it is perceived as safe, easily accessible and highly liquid. Others favour alternative savings models like chit funds, which offer privacy and convenience but carry their own risks.
On the supply side, the Business Correspondent (BC) model, which many rural women rely on, is not structured to encourage small deposits due to limited profit margins and high transaction costs.
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This clearly highlights the lack of formal saving products that are intentionally designed to meet women's unique needs and circumstances, and this remains a significant gap in the financial sector. Without addressing this, women’s participation in formal savings will remain limited.
Increasing women’s share of deposits requires innovation in gender-intentional financial services and products. Banks and financial institutions must leverage tailored behavioural nudges to enhance the uptake of micro-savings among women.
Such initiatives should focus on understanding the unique challenges women face in accessing financial services and developing gender-intentional solutions.
This includes creating goal-based savings products tied to personal or family aspirations, designing products that balance saving lock-ins with the option of immediate liquidation, setting appropriate default values in savings goals, and using nudges to encourage women to reach their financial objectives.
Segmenting women based on their income sources and agency, while incentivising BCs to accept small deposits, can significantly boost women’s participation in formal savings mechanisms.
Moreover, addressing these gaps not only involves designing innovative products, but also enhancing financial literacy and awareness among women. Educational campaigns and financial literacy programs tailored to women’s specific needs can empower them to make informed decisions about their savings and investments.
Collaborative efforts between banks, non-governmental organisations and community groups can play a pivotal role in bridging the knowledge gap and fostering a culture of formal savings.
As banks face increasing pressure to boost deposit growth, it is crucial that they turn their attention to these unserved and underserved segments. Empowering women with the right tools and incentives to save formally would not only enhance their financial security, but also strengthen the stability and growth of the banking sector.
By doing so, banks can address the systemic challenges of deposit growth while simultaneously fostering a more inclusive and resilient financial ecosystem in India.
By acknowledging and addressing these gaps, we can create a financial system that serves women better and ensures sustainable growth for the future.
Also read: Weak bank deposit growth: Beware faulty explanations
Empowering women to engage more fully in the financial system is not just a matter of equity, it is a strategic necessity for the long-term health of the banking industry and the broader economy.
Rajesh Bansal is CEO of Reserve Bank Innovation Hub (RBIH), a wholly owned subsidiary of RBI.
