MF industry recorded a 24% rise in AUM at ₹68-lakh crore (₹55 lakh crore).
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Despite volatility in the equity market, mutual fund inflows over the past 11 months have far exceeded bank deposits,
In the last 11 months of the current fiscal, growth in banks’ time (fixed) deposits slowed to 9.2% (or up by ₹17.29-lakh crore) against 11.2% (₹18.69-lakh crore) in the year ago period, per RBI data.
In the same period, inflows into mutual funds were up 90% at ₹9.79-lakh crore (₹5.14-lakh crore), according to the Association of Mutual Funds in India data.
In fact, the growth in overall bank deposit slowed compared to that of mutual funds. Bank deposits, including savings bank and time deposits, have grown 8% year-on-year to ₹231-lakh crore against ₹213-lakh crore as at February-end 2024.
In the same period, MF industry recorded a 24% rise in AUM at ₹68-lakh crore (₹55 lakh crore).
Young investors
Sunil Subramaniam, CEO of an independent think-tank Sense and Simplicity, said mutual funds will continue to attract more money than bank deposit as young investors are willing to take the additional risk for creating long-term wealth.
Even after all the noise and the recent fall in equity markets, the three-year MF equity returns are positive and investors are confident of beating market volatility through SIPs, he said.
New tax regime
Also, the new tax regime has some what eased investor concern on tax implications and made young investors bet big on mutual funds.
The new tax regime has taken away the 80C tax benefit and made 5-year bank FDs unattractive. While Equity Linked Savings Scheme (ELSS) has also become less attractive under the new tax regime, people are no longer considering MFs from a tax savings perspective alone, said Subramaniam.
Despite having the same taxation rate, debt MFs are better than savings and FDs because tax is payable only on redemption. Whereas in the case of FDs, the accrued income is taxed and TDS deducted every year, he added.
The emergence of low risk equity taxation products such as arbitrage, equity savings schemes and balanced advantage have also eaten into bank deposits.
Ankit Shah, an individual financial advisor, said that unlike one-size-fits-all strategy of bank FDs, the MF industry has products that suit every investors risk appetite, and technology has played a major role in taking MFs to even smaller towns.
Distributors have done a commendable job in making investors understand MF investments are subject to market risks, he added.
Published – March 15, 2025 11:28 pm IST
