Bank deposits turned out to be the most popular abode of saving, and its share of net bank deposit increased to 16.3 per cent during 1993-94 to 1988-99 from 9.88 per cent during 1985-86 to 1992-93.

The Indian saving experience during the period 1970-71 to 1998-99 was marked by a simultaneous secular increase in the rate of gross domestic savings (GDS: as a percentage of GDP at current market prices) and the rise in the rate of financial savings of the household sector and private corporate sector.

During the nineties, household financial savings has emerged as the single most important contributor to GDS. The performance of the corporate sector improved during the nineties, while the public sector experienced a notable downturn in its saving performance the RBI report added.

"Given the fairly high public sector deficits in relation to GDP during the nineties, the public sector had to make a draft on household savings in general and household financial savings in particularthe RBI report addedThe implications of this development for growth and macro-econmic balance are important, both from the point of view of closing the potential output gap and promoting financial stability", the RBI said in its Report on Currency and Finance (1999-2000) released on Monday the RBI report addedOne of the basic channels to influence financial growth is the savings rate.

The primary mode through which this occurs is financial savings and in particular, it is intermediated financial savings. In fact, a distinction should be made between the determinants of the capacity to save and the willingness to save. While the capacity to save depends on the level and growth of per capita income, the willingness to save is influenced by a number of financial variables: Rate of interest and financial deepening, according the RBI report.

However, the effect of interest rate on savings in developing economies is not clear, partly because of the presence of either administered interest rates or some rigidities in the working of interest rate mechanism. After all, a change in interest rate could cause a variation in the portfolio composition of the household sector's saving without perceptible impact on the total quantum of saving. Financial deepening, on the other hand, is capable of increasing the total quantum of saving, the Rserve bank report added.