Microfinancing and Bank Sustainability

This paper explores how people's banking habits affect sustainability of banks. In the Indian context, the paper examines the association between growth of Self Help Groups (SHGs) and the increase in female bank deposit accounts, and whether these SHGs influence the account holding in formal banks.Further, the paper studies:

• Banking habits at macro level;
• Growth of SHGs in India;
• Association between SHGs and bank deposit account growth at macro level;
• Impact of microfinancing SHGs on formal banking habits at micro level.

In conclusion, the study reveals:

• SHGs in India help the formal banks by increasing the number of accounts through inculcating banking habits in the rural people, especially the women;
• Banking habit has emerged as a positive function of years of experience of micro finance programs through SHGs;
• Bank account holding is influenced to some extent, if the person is a SHG member and has a leadership experience in SHGs;
• SHGs help members gain exposure to the formal banking system and further inculcate banking habits.