Uday Kotak spots a big shift in India’s money habits: Savers turning investors
In a post on X (formerly Twitter), Kotak noted that the share of mutual fund assets under management (AUM) primarily in equity schemes has doubled to 31% of bank deposits in the post-Covid period.
“India’s saver turns investor. Post-Covid, mutual fund AUM share, mainly equity, has doubled to 31% of bank deposits,” said Kotak, founder and director of Kotak Mahindra Bank. He added that the trend reflects a “structural change in financial intermediation,” strengthening the domestic risk capital base and nurturing an equity culture in the country.
However, Kotak also sounded a note of caution: “Let’s be alert about excessive exuberance,” he warned, implying that investors and regulators must guard against overheating in the equity markets.
Read More: India’s declining household savings
The shift comes amid a sustained rise in retail participation in stock markets.
India’s saver turns investor
Over the past five years, Indian households have been moving away from traditional bank deposits and reallocating their savings into higher-yielding, though riskier, assets such as mutual funds (MFs) and equities, according to data from the Reserve Bank of India (RBI).The share of bank term deposits held by households, including Hindu Undivided Families (HUFs), declined from 50.54% at the end of FY20 to 45.77% at the end of FY25, as per the RBI’s annual report Basic Statistical Returns: Deposits with Scheduled Commercial Banks.
This shift has taken place against a backdrop of fluctuating interest rates. During the Covid-19 pandemic, the RBI slashed the key repo rate by 115 basis points (1.15 percentage points) between March 2020 and May 2022. This was followed by a tightening phase, during which the rate was raised by 225 bps, and more recently, the central bank has begun an easing cycle with a cumulative cut of 100 bps—25 bps in February, another 25 bps in April, and 50 bps earlier this month.
Read More : Household savings in India drop to 18.1% of GDP in FY24
The rise of mutual funds
While the share of individuals in savings deposits has remained relatively stable at around 77% over the five-year period, their participation in mutual funds has surged. According to data from the Association of Mutual Funds in India (AMFI), individuals account for 91% of the 230 million mutual fund accounts as of April 2025, up from just over 100 million in May 2021.
“A compositional shift has been observed in Indian households’ portfolio of financial savings,” noted an RBI research paper. “The share of 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.”
This trend is also being driven by reduced household savings and increased investments in equity markets, according to Gaura Sengupta, chief economist at IDFC Bank.
Mutual fund assets under management (AUM) have more than tripled, rising from ₹22.26 lakh crore at the end of FY20 to ₹69.50 trillion as of April 30, 2025.
“It is to do with markets but not necessarily due to demographics—this has been the trend of households moving from deposits to mutual funds,” said Madan Sabnavis, chief economist at Bank of Baroda. “That’s why bulk deposits are going up along with certificates of deposits to meet credit requirements.”
A December 2024 RBI paper titled Determinants of Household Saving Portfolio in India: Evidence from Survey Data also underlined the shifting investment preferences. It reported that 17.8% of Indian households held risky assets in 2022, up from 15.7% in 2019.
Further evidence of this shift can be seen in the RBI’s latest annual report on household financial savings. The share of household deposits as a percentage of gross national disposable income (GNDI) dropped from 6.2% in FY21 to 4.5% in FY24. Meanwhile, the share of investments in shares and debentures—including mutual funds—increased from 0.5% to 0.9% of GNDI during the same period.
The RBI research paper noted a significant drop in households opting not to invest—except during the pandemic—indicating a growing “proclivity” toward financial instruments.
“This could possibly be driven by rising income levels, increased financial literacy due to educational initiatives, technological advancements, such as proliferation of smartphones and improved internet connectivity, fintech innovations and regulatory reforms aimed at safeguarding investors’ interests,” the paper concluded.
