Synopsis : Mutual fund assets now equal 31% of bank deposits, marking a major shift in India’s financial behaviour. Uday Kotak highlights this transformation but urges caution against unchecked optimism in equity investing.
India is undergoing a pivotal transformation in its financial ecosystem, with mutual fund investments gaining unprecedented traction among households. Veteran banker Uday Kotak recently highlighted this trend, noting that mutual fund assets under management (AUM) have surged to 31% of total bank deposits—a landmark shift from traditional savings to market-linked investments. Referring to the phenomenon as a “structural change in financial intermediation,” Kotak stated, “India’s saver turns investor,” signalling a deeper evolution in the country’s economic fabric.
While Kotak acknowledged the positive development in expanding domestic risk capital and fostering an equity investment culture, he also cautioned investors to “be alert about excessive exuberance.” His remarks, posted on X (formerly Twitter), come amid growing discussions around the sustainability of the current equity wave and its potential impact on financial stability.
This shift is not just anecdotal but backed by strong data. As per reports from Franklin Templeton, RBI, and AMFI, mutual fund AUM as a proportion of bank deposits has grown steadily—from 13% in FY15 to 31% as of May 2025. A sharp rise began post-FY21, reflecting increased awareness, digital access, and more appealing returns in equity markets compared to traditional fixed-income instruments.
The Indian mutual fund industry has clocked a 20% CAGR in AUM over the past decade, far outpacing the 8% CAGR seen in the US. The AUM reached a historic high of ?72.2 lakh crore by May 2025, with a whopping ?13.3 lakh crore added in just the past year. This significant surge in domestic participation also acts as a buffer against volatile foreign portfolio investor (FPI) flows. In the last year, domestic institutional investors (DIIs) have pumped in ?6 lakh crore, even as FPIs withdrew ?3.1 lakh crore—a clear indicator of local resilience.
What’s more notable is that this financial awakening is no longer limited to metro cities. Investors from B15 cities now contribute 35% to total mutual fund AUM, up from 25% in March 2020. Similarly, contributions from B30 cities rose to 18% from 16% in just five years. This reflects a wider penetration of financial literacy and access, driven by digital platforms and simplified onboarding.
As of May 2025, the total mutual fund investor count stands at 5.49 crore, with 89 lakh new investors joining over the past year alone. This is a significant jump from the 78 lakh added in the previous year. Sectoral and thematic funds have led the charge in both gross and net sales, while most equity fund categories recorded positive net inflows in May, reaffirming strong investor confidence in equities.
The rise of mutual funds as a core part of household portfolios signals a generational shift in India’s financial mindset. While this trend bodes well for long-term capital formation and domestic market stability, Kotak’s reminder to exercise caution serves as a timely warning. In an era of expanding financial participation, balance remains key.
Disclaimer : This article is for informational purposes only and does not constitute financial or investment advice. Readers are encouraged to consult with a certified financial advisor before making any investment decisions.
