MF AUM increases to 29% of bank deposits on equity rally, inflows

In the financial years ending March 2023 and March 2022, MFs had cornered over 6 per cent of household savings. In FY21, this figure had been a mere 1.3 per cent, according to RBI data

Mutual funds (MFs), which were largely limited to a few urban pockets of India until four years ago, have emerged as a key competitor to traditional savings and investment avenues in recent times.

Reserve Bank of India (RBI) Governor Shaktikanta Das highlighted this fact recently, saying that households were allocating a higher portion of their savings to mutual funds, insurance products and pension funds.

Data also points to a similar trend. MFs' assets under management (AUM) have grown nearly threefold in the past four years, while bank deposits went up 1.6x.

As a result, MF AUM is now equivalent to 29 per cent of bank deposits against just 16 per cent in March 2020.

 

Although MF AUM growth owes a lot to the equity market rally, the inflows have also seen a spike in recent years.

This is because of the strong performance of equity MF schemes and growing popularity of systematic investment plans (SIPs), which boosted the MF investor base.

In the financial years ending March 2022 and March 2023, MFs had cornered over 6 per cent of household savings. In FY21, this figure had been a mere 1.3 per cent, according to RBI data.

During the first six months of calendar year 2024, investors, including institutions, invested a net Rs 3.9 trillion in MFs.

The MF AUM went up by Rs 10 trillion during the period as a rally in the equity market, appreciation in bonds and commodity prices led to mark-to-market gains of over Rs 6 trillion.