Traditional fixed deposits (FDs) are still the first preference of many retail investors across the country. A report prepared jointly by PFRDA and CRISIL – Financial Security for India’s Elderly– finds that 44% of Indian investors still have faith in bank fixed deposits.
Insurance policies follow FDs with 19% of retail investors investing their money in it.
Only 14% respondents have social security through pension schemes. The report stated, “India is a grossly underpenetrated financial market in terms of retail participation. Most of the investors prefer investing in bank fixed deposits (FDs), which account for more than 44% of the financial savings in the market. Provident and pension funds form just 14% of the savings and are primarily fed by the organised section of society.”
Household financial savings
Source: PRFDA & CRISIL report
A mere 6% investors invest in shares and debenture, which include mutual funds.
Swarup Mohanty, CEO, Mirae Asset, attributes this to too much documentation needed in security investments. “Investors investing in Bank FDs and insurance do not need PAN card details while making an investment; therefore, the entire market is open to them. On the other hand, it is mandatory for retail investors to provide their PAN details while investing in mutual funds. If the number of mutual fund folios is compared with the number of PAN card holders in the country, it would be evident how well the MF industry is penetrated.”
As on April 2017, the total MF folio count stands at 5.61 crore. If we assume each investor has five folios, the MF industry would be having close to one crore investors. There are close to 25 crore PAN holders, as of March 2016.
