Winning Bizness Sports Desk
Mumbai. With Mutual Funds becoming increasingly popular, bank deposits are facing tough competition. In its report titled as 'How serious threat are mutual funds to bank deposits?, Bank of Baroda (BoB) said that now most of the people have developed the habit of taking financial risks. The overall growth of the mutual fund industry has increased from ₹ 46.37 lakh crore to ₹ 46.93 lakh crore in August as compared to July this year. The report found that bank deposits (except HDFC merger) for August 2023 recorded a year-on-year (YoY) growth of 12.3%. Whereas for mutual funds this growth was 18.6%. The report gives an example that if we talk about Compound Annual Growth Rate (CAGR), then it will increase at the rate of 24.8% in the next three financial years of 2019-20 i.e. 2020-21, 2021-22 and 2022-23. Whereas the bank deposits, only 10% growth (CAGR) has been seen in it. From FY 2020 to 2023, it has increased only from ₹135.67 lakh crore to ₹180.44 lakh crore.
Quoting the report of RBI and Association of Mutual Funds in India (AMFI), the bank has said that before Covid, the share of mutual funds in the combined outstanding amount, which was 13%, has now reached 20%. In August 2023 alone, investors invested a record ₹15,813 crore in SIP through mutual funds.
Greater attention given to mutual funds
It has been said in the report that when it comes to investment, people are giving more importance to mutual funds despite the risk. Because they offer different types of schemes according to the wishes of the investor creating a possibility of much higher returns as compared to banks. While the safety of funds is guaranteed in bank deposits, returns are available only as per the fixed rate. According to the report, the reason for decline in bank deposits has been attributed to the major cut in bank rates by the Reserve Bank of India (RBI) during the pandemic. Due to this cut, retail and corporate investors have started investing heavily in mutual fund schemes. Due to this, a huge growth has been seen in the Assets Under Management (AUM) of mutual funds.
