Winning Bizness Desk

Mumbai. Bank fixed deposits (FDs) are no longer the go-to investment for Indian households. With the evolving financial landscape, people are now seeking better returns elsewhere. Investments are shifting to mutual funds and the stock market, as these alternatives offer higher potential gains compared to traditional bank deposits. The trend reflects a growing inclination toward wealth creation and informed financial planning.

Falling Share of Term Deposits

As per data from the Reserve Bank of India (RBI), the share of bank term deposits such as FDs and RDs in total household savings dropped from 50.54% in 2020 to 45.77% in 2025. This notable decline suggests that individuals are no longer parking their surplus funds in banks as extensively as before. The trend indicates a growing appetite for diversified investment options.

Changing Interest Rate Scenario

Interest rate fluctuations have also played a role in this shift. During the COVID-19 pandemic, RBI slashed the repo rate significantly—from March 2020 to May 2022, it was reduced by 1.15%. It was then increased by 2.25% to control inflation. Recently, however, RBI started easing rates again, cutting them by 1% between February and June 2025. These changes have influenced the appeal of fixed deposits, which depend heavily on interest rate cycles.

Savings Accounts Still Stable

While term deposit investments have dropped, savings account contributions have remained relatively stable. RBI data shows that individuals’ share in savings deposits has consistently hovered around 77% over the past five years. This indicates that while long-term deposits are declining, people still rely on savings accounts for liquidity and short-term needs.

Mutual Fund Investment Sees Surge

There has been a significant rise in mutual fund investments among Indian households. As of April 2025, individual investors held 91% of the 23 crore mutual fund accounts. This is a massive leap from just over 10 crore accounts in May 2021. The increase reflects growing awareness and comfort with market-linked instruments that offer potentially higher returns than fixed-income products.

Shift in Household Savings Portfolio

A research paper by RBI economists highlights a clear transition in the way Indian households save and invest. There is a gradual decline in the share of bank deposits, while investments in mutual funds and insurance have grown. The asset under management (AUM) of mutual funds stood at ₹69.50 lakh crore as of April 30, 2025, up from ₹22.26 lakh crore in 2020. Furthermore, in 2022, 17.8% of households invested in risky assets, up from 15.7% in 2019—indicating a growing risk appetite and financial sophistication among Indian investors.

Story in a Nutshell

• Popularity of bank fixed deposits has declined significantly since 2020.
• Term deposits now form a smaller share of household savings—down to 45.77%.
• Interest rate fluctuations have impacted FD attractiveness.
• Savings accounts remain stable with 77% share in deposits.
• Mutual fund investment accounts grew from 10 crore in 2021 to 23 crore in 2025.
• Mutual fund AUM jumped from ₹22.26 lakh cr (2020) to ₹69.50 lakh cr (2025).
• Household investments in risky assets rose from 15.7% (2019) to 17.8% (2022).