Liquidity Hoarding and Politics: The Role of Elections

Using data for 1992–2020, the paper assesses the role of elections on liquidity hoarding by Indian commercial banks. The findings reveal that liquidity hoarding typically increases during election years, driven primarily by an increase on the asset side of their balance sheet. Such behaviour manifests mainly for public and private banks and much less for foreign banks. The evidence also indicates a cyclical pattern in the evolution of liquidity hoarding, such that it increases in the run-up to the elections.