Indian households
favouring mutual funds over FDs: RBI data
By Mr. Yaseen Sahar,
Financial Expert
The RBI's annual report, Basic Statistical Returns: Deposits
with Scheduled Commercial Banks, reveals that the share of households,
including Hindu Undivided Families (HUFs), in bank term deposits has declined
to 45.77% at the end of 2024-25 from 50.54% in 2019-20.
Investing
more in mutual funds..!
Indian households are increasingly moving away from
traditional bank deposits and investing more in mutual funds and shares, drawn
by better returns despite higher risks, according to fresh data from the Reserve
Bank of India (RBI).
This shift reflects a broader change in household savings
behaviour. “A compositional shift has been observed in Indian households'
portfolio of financial savings,” noted RBI economists in a research paper.
“The share of fixed deposits with banks has declined over
time, with a concomitant increase in insurance and mutual fund products,
pointing to a growing appetite for alternative financial instruments.” RBI added.
While interest rates have fluctuated over the past 5
years — with the RBI slashing the repo rate by 1.15% during the covid 19
pandemic and later hiking it by 2.25% before cutting again by a total of 1% in
2025 — the movement toward market-linked instruments has continued steadily.
23
crore mutual fund accounts..!
Retail participation in mutual funds has surged
significantly. According to data from the Association of Mutual Funds in India
(AMFI), individuals now hold 91% of the 23 crore mutual fund accounts as of April
2025, up from just over 10 crore in May 2021.
Mutual fund assets under management have more than
tripled to Rs 69.5 trillion as of April 30, compared with Rs 22.26 trillion at
the end of 2019-20.
Mutual Fund Industry’s Net AUM stands at ₹ 72,19,610.69 crores for the month of May 2025.
RBI data also show that household deposits as a share of
gross national disposable income (GNDI) have fallen from 6.2% in FY21 to 4.5%
in FY24. Meanwhile, the share of investments in shares, debentures, and mutual
funds has increased from 0.5% to 0.9% of GNDI over the same period.
The RBI's research further noted a decline in the number
of households not investing at all—except during the pandemic—suggesting a
growing inclination toward financial instruments.
The
shift, it said, could be driven by a combination of factors: rising incomes,
improved financial literacy, widespread smartphone and internet access, fintech
innovation, and regulatory reforms aimed at protecting investors.
Mr. Yaseen
Sahar has been reached at rahas84@gmail.com and 98433 13512
Disclaimer: Mutual Fund investments are subject to market
risks, read all scheme related documents carefully. The past performance of the
mutual funds is not necessarily indicative of future performance of the schemes.