CAN BANK TRANSFER OF SALARY OR WAGES NUDGE SAVINGS IN FORMAL FINANCIAL INSTITUTION? : A CASE STUDY OF INDIA

. Abdul Motin Ostagar

Abstract


Policymakers are always looking for the determinants which have an impact in the financial behavior of the people. Nudging for a good financial practice is always a thrust area for study in this field. Payment of salary or wages directly to bank account may nudge people to join attractive savings and investment plans with formal financial institutions. This work explores this idea using the Indian sample from Global Findex 2017 microdata. The work finds that direct transfer of salary or wages in the employees’ bank accounts induce savings in formal financial institutions while controlling for the effects of gender, age, education, and income. Employers may credit their salary or wages directly in their bank accounts. This will nudge them to choose formal financial institutions for saving and investment. To making nudging easier the employers shall also provide financial education to employees.


Keywords


Household savings, Financial Inclusion, Nudge

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References


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