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A study done by Franklin Templeton Mutual Fund reveals that the AUM of mutual funds is 27% of the total bank deposits in India.
This proportion has doubled in 8 years. In March 2014, the AUM of mutual fund was just 10.7% of the total bank deposits in India.
While the AUM of mutual funds stood at Rs.54.54 lakh crore in February 2023, Indians have deposited Rs.202 lakh crore in banks.
Experts attribute this rise in popularity of mutual funds to the increasing awareness about mutual funds among savers.
Major Ashish Chadha, Chadha Investment, Delhi feels that many investors have become educated and are aware of benefits that mutual funds offer. He said that his clients have put majority of their fixed income money in debt funds. He said, “We believe in following asset allocation. All our clients have invested in debt funds as part of their asset allocation strategy.”
Mumbai MFD, Gajendra Kothari, Etica Wealth feels that the ‘Mutual Fund Sahi Hai’ campaign and financialization of savings drew many people to mutual funds. However, the industry has a long way to go considering the low AUM to GDP ratio. “I think mutual funds will be 75% of the total bank deposits in the next years.”
Further, if we dig deeper, the AUM of equity funds including pure equity funds, aggressive hybrid funds, dynamic asset allocation fund and multi asset funds is 14% of the bank deposits. The equity AUM of the MF industry was Rs.29 lakh crore in Feb 2024.
On the other hand, debt funds, which are somewhat similar to bank deposits have AUM to bank deposit ratio of just 4% if we exclude the AUM of overnight funds and liquid funds.
Chadha said that majority of MFDs focus on equity assets. “MFD should integrate debt funds to build trust among clients. While margins will be low, it adds a lot of value to clients through asset allocation.”
Kothari believes that many investors prefer hybrid funds like BAF and multi asset allocation fund for debt allocation. “Post removal of indexation benefits, HNIs have moved to PMS and AIFs for debt allocation. Retail investors invest in hybrid funds for better post tax returns,” he said.
