Listen to this article
A study done by Franklin Templeton Mutual Fund reveals that the AUM of mutual funds is 31.30% of the total bank deposits in India. This ratio was 24.20% a year ago.
This proportion has tripled in 10 years. In March 2014, the AUM of mutual funds was 10.70% of the total bank deposits in India.
While the AUM of mutual funds stood at Rs.66.70 lakh crore in August 2024, Indians have deposited Rs.213 lakh crore in banks.
Experts attribute this rise in popularity of mutual funds to the increasing awareness about mutual funds among savers.
Pune Advisor Amit Bivalkar of Sapient Finserv believes that the growth was due to a combination of three factors – digitalization facilitated ease of investment, higher returns attracted many investors and increased contribution of EPFO through passive funds. He said, “Both bank deposits and MF AUM depend on economic growth. Higher growth ensures higher savings and investment rates. However, if MF schemes continue to deliver good performance, it could come closer to bank deposits in future.”
Mumbai MFD, Gajendra Kothari, Etica Wealth attribute this to increasing investor awareness and mark-to-market gains. He said, “A healthy portion of growth has come from mark-to-market gains due to a rally in equity markets. However, investor education has played a key role in this achievement. We receive at least 20 new queries each day about mutual funds. This clearly shows the rising interest of investors in mutual funds. Also, the adoption of passive funds is also going up. This is evident from the fact that the AUM of passive funds has crossed Rs.10 lakh crore, recently.”
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 23% of the bank deposits. The equity AUM of the MF industry was Rs.48.90 lakh crore in Feb 2024.
On the other hand, debt funds have AUM to bank deposit ratio of just 8%.
Overall, while the MF AUM went up by CAGR of 21%, bank deposits saw 11% annual growth over the last five years.
