Determinants of savings behaviour: A study on the rural households of India

The research in this paper has been conducted from within the theoretical framework of behavioral finance. The aim of this paper is to examine the determinants of households’ savings behavior in the rural households in India. The study provides an analysis of the determinants of household savings and its different aspects in Indian households. The data comprise a random sampling of 115 respondents drawn through a field survey. Household savings function is estimated to test households’ responses to income, savings, consumptions and other household factors including demographic factors. Different statistical tests such as descriptive statistics and multiple linear regression method were performed for analysis of the responses of the survey. The results show that Household Income is the major determinants in explaining the cross sectional variation of household savings. The marginal propensity to save is 0.54 among the households. Age, gender, marital status, primary occupation, number of dependents and land holdings are inducing factors increasing the household saving significantly, while family size, dependency, liabilities to be paid, location are reducing factors decreasing the household saving. No relationship is found between savings and type of family i.e. nuclear or joint family. The study reveals that the age old savings mentality among Indian Households is still very high in spite of the turbulent times. Most of the households save for meeting long-term goals rather than meeting any short term requirements.