How are Indian families saving their money?:Major portion is in bank accounts; investment in equity mutual funds gathers pace

The financial savings habits of Indian households are undergoing a major shift. While bank deposits, insurance, and provident/pension funds remain the largest destinations for household wealth, a rapidly growing portion of new savings is flowing into shares and mutual funds. According to data from the National Stock Exchange (NSE), the share of direct equities and mutual funds in total household savings was just 1.8% in FY12 (2011-12). This has skyrocketed to 15.2% in FY25 (2024-25)—a massive 8-fold increase. Data from the Reserve Bank of India (RBI) clearly highlights this transition. In FY25, Indian households added ₹35.61 lakh crore to their financial assets. While the largest chunk of this money still went into bank deposits, the growth rate of mutual funds and stock market investments was significantly faster. Mutual Funds: Households added ₹1.79 lakh crore to mutual funds in FY23. This figure jumped to ₹4.66 lakh crore in FY25, marking a 2.6-fold increase in just two years. Direct Equities: Direct investment in shares grew from ₹23,038 crore in FY23 to ₹73,567 crore in FY25. In the last year alone, this investment grew more than 2.5 times from ₹29,080 crore. FDs Still Rule, But Mutual Funds are Growing Faster This shift does not mean that households are withdrawing their money from banks. The overall size of bank deposits remains several times larger than mutual funds. In FY25, new bank deposits stood at ₹11.86 lakh crore, compared to ₹4.66 lakh crore that flowed into mutual funds. The real difference lies in the pace of growth: Bank Deposits: Total household bank deposits grew from ₹127.07 lakh crore in March 2023 to ₹153.16 lakh crore in March 2025 (a 20.5% or 1.21-fold increase). Mutual Funds: During the same period, mutual fund assets held by households surged from ₹23.68 lakh crore to ₹41.29 lakh crore (a 74% increase). This means mutual fund assets grew 3.6 times faster than bank deposits. “The stock market has become a key tool for long-term wealth creation for households. This is driven by two factors: long-term wealth generation by the market and bank deposit returns becoming less attractive,” says G. Chokkalingam, Founder of Equinomics Research. How Indian Households are Saving: FY25 Breakdown Here is how Indian households distributed their new financial savings of ₹35.61 lakh crore in FY25: Investment Avenue New Savings (in ₹ Lakh Crore) Total Financial Assets ₹35.61 Lakh Crore Total Deposits ₹12.55 Lakh Crore* (includes ₹11.86 L Cr in banks ₹68,582 Cr in non-banks) Provident Pension Funds ₹7.93 Lakh Crore Life Insurance ₹5.35 Lakh Crore Mutual Funds ₹4.66 Lakh Crore Direct Shares ₹0.73 Lakh Crore (₹73,567 Crore) Source: RBI (Data for FY 2024-25) The Shift Within Banks: Savings Accounts to FDs The data also reveals a second major trend: even within banks, people are moving their money. Instead of leaving idle cash in low-yield savings accounts, depositors are aggressively shifting to Fixed Deposits (FDs). Savings vs. FDs: In March 2022, savings deposits accounted for 34.6% of total bank deposits. By March 2026, this share dropped to 28.7%. Meanwhile, the share of FDs (Term Deposits) rose from 55.2% to 61.6%. The FD Wealth Distribution: FDs up to ₹5 lakh account for 17.8% of total FD value. FDs of ₹1 crore or more account for a massive 46.3% of the total value. FDs of ₹5 crore or more make up 34.8% of the total value. Market Savings Doubled in Two Years: Annual household savings through shares, bonds, mutual funds, and other securities grew from ₹3.58 lakh crore in FY24 to ₹6.91 lakh crore in FY25—a near 93% increase. Expert Take: “FDs and Mutual Funds are Complementary, Not Competitors” Vijay Kuppa, CEO of InCred Money, explains that household savings are being distributed based on specific financial needs: Seeking Higher Yields Within Banks: The drop in savings account shares (from 34.6% to 28.7%) and the rise in FDs (from 55.2% to 61.6%) shows that depositors are actively seeking better returns for their surplus cash. Safety Remains a Priority for Large Capital: The fact that FDs of ₹1 crore or more hold 46.3% of total term deposits proves that capital safety and guaranteed returns remain crucial for high-net-worth individuals. A Balanced Approach: FDs and mutual funds do not replace each other. FDs are used for safety, liquidity, and guaranteed returns, while shares and mutual funds are used for long-term wealth creation. The rise in market investments does not mean banks are losing money; rather, households are smarter about diversifying their portfolios.