Mutual funds gain ground, but bank deposits reign supreme
MUMBAI : Although growth in mutual fund (MF) investments has outpaced bank deposits, the asset managers have quite a bit of catching up to do as banks still maintain a considerable lead in attracting incremental funds. Banks got deposits worth ₹225 for every ₹100 going into MF schemes in the June quarter, according to an analysis of data from the Reserve Bank of India (RBI) and the Association of Mutual Funds in India (Amfi).
While banks reaped the benefits of RBI’s decision to withdraw ₹2,000 notes, resulting in increased deposits, MFs thrived amid strong market conditions. In the June quarter, bank deposits witnessed a net addition of ₹11.2 trillion, while net MF assets under management (AUM) increased by ₹5 trillion.
In the year-ago period, incremental bank deposits rose by ₹1 trillion, and net MF AUM declined by ₹2 trillion, the data showed. Figures mentioned here are net of redemptions and withdrawals.
Given that MF assets are expanding faster than bank deposits, albeit on a smaller base, experts see them as strong competitors for the consumer wallet. Net MF AUM grew 25% from a year earlier to ₹44.4 trillion in June, much faster than the 16% growth in bank deposits in the same period.
Naveen Kukreja, the co-founder and chief executive of Paisabazaar, said the total inflows of household savings into bank deposits stood about four times that of their net inflows to MFs, citing the latest RBI household financial savings data for the year ended 31 March 2022 released in September. “Thus, there is still some ground to cover for MFs before they beat bank deposits in terms of attracting incremental household savings, especially when banks are offering higher fixed deposit (FD) rates for their deposit mobilization goals,"
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