RBI study bats for steps to benefit stock markets, boost deposits

Accelerating the pace of growth of the Indian economy and disposable incomes are the key to higher deposit mobilisation by the banking system

A study by the Reserve Bank of India (RBI) has rooted for regulatory reforms and tax arbitrage, which benefit stock market investments, while flagging risks of slow bank deposit growth. 

Similar to Sensex returns, small savings substitute for bank deposits in the short run but supplement them in the long run. It shows income tax exemptions or deductions can provide benefit. Eventually, they even out substitution effects and allow income to be the key determinant of small savings and bank deposits in the long run. This warrants an appraisal of regulatory reforms and tax arbitrage even as efforts need to be