The total assets of mutual funds reached 21% of the total bank deposits in FY21, up from 17.7% in the last fiscal.
While the total bank deposits stood at Rs 151.13 lakh crore, the MF AUM was at Rs 32.17 lakh crore at the end of March 2021, according to AMFI data.
This is the highest MF AUM to bank deposit ratio at the end of any fiscal year.
Here's how the MF AUM to bank deposit percentage has changed over the last four fiscal years:
*All figures are in lakh crore
Experts attributed the rally in equity markets and fall in deposit rates for the improvement in the ratio.
“Sharp recovery in equities and simultaneously, fall in deposit rates to decadal lows have nudged investors to invest in mutual funds to earn better returns. This shift from deposits to mutual funds is also fueled by the launch of innovative and investor friendly products that combine returns with better liquidity”, Radhika Gupta, MD & CEO, Edelweiss AMC said.
Vishal Dhawan, CEO of Plan Ahead Wealth Advisors, shared similar views. "From an overall perspective, there has been some migration happening towards equity assets over the last one year as interest rates have dipped. It's also because of the fairly large mark-to-market gains over the last one year," he said.
Despite the gains, the penetration of mutual funds is still low in India. The MF AUM as a percentage of GDP is 12%, as per global brokerage firm Jefferies. The percentage is the lowest among all major economies in the world and is a fraction of global average of 63%. Emerging markets peers like Brazil and South Africa have a MF AUM to GDP ratio of 68% and 48% respectively.
