Household savings shift in India: Financial inclusion, banking stability, and sustainable capital markets

Abstract

Purpose. This study investigates India’s household investment transformation (2015–2025), examining the shift from bank deposits to market instruments and its implications for financial inclusion, banking stability, and sustainable capital formation. Methodology. Mixed-methods longitudinal design combines descriptive analysis with econometric hypothesis testing. Household data from the Reserve Bank of India, SEBI, and All-India Debt and Investment Survey (48,000 observations) are analysed using logistic regression and time-series models. Results. Household deposit share declined from 48 per cent to 25 per cent, while market instruments rose from 40 per cent to 63 per cent. High financial literacy, income, and urban residence increase market participation by 18.8, 31.2, and 25.1 percentage points, respectively. However, participation disparities persist: urban residents and high-income households account for 55–58 per cent of investors, versus 35–12 per cent of the population. Declining deposit ratios are associated with slower credit growth to the MSME and renewable energy sectors - sectors critical to sustainable development. ESG-classified IPOs exhibit lower underpricing and superior long-run returns, suggesting that sustainability disclosure influences valuation. Theoretical and Practical Contributions. The study extends sustainable finance theory by linking household financial behaviour to macro-level resilience. Recommendations include targeted financial literacy programmes, diversifying bank funding to maintain credit supply to the SDG sector, and strengthening ESG disclosure standards to align retail investment flows with sustainable development objectives. Sustainable Development Goals (SDGs): SDG 10: Reduced Inequalities; SDG 8: Decent Work and Economic Growth; SDG 13: Climate Actio