Microfinance and bank sustainability

Abstract

Deposits are foundations upon which banks thrive and grow. Deposits generate cash reserves, and it is out of the excess cash reserve a bank holds that the new loans are created. The management should ensure that the bank always has enough deposits to support the volume of loans and other financial services demanded by public. The twin objectives of a commercial bank i.e., acquiring deposits and advancing credit cannot be attained without good banking habits of the people. Therefore, people’s banking habits seem to be a major factor that affects sustainability of the banks concerned. With the macro level bank data it has been found that the number of deposit accounts accruing to females is rising over the recent years as compared to male counterpart. Since in India micro financing Self Help Groups (SHGs) which recently came into existence as informal organizations in India are linked to bank and its members are females, this paper makes a modest attempt to examine whether there is any association between growth of SHGs and increase in female bank deposit accounts and whether these SHGs have a tendency to influence the account holding in formal banks.