Why Mutual Funds Are Catching Up with Bank Deposits

For decades, the fixed deposit (FD) was the hero of Indian households. Safe, predictable, and backed by trust in banks, it became the default choice for parking hard-earned savings. But today, something is shifting. Mutual funds (MFs), once seen as risky or “for the experts,” are fast catching up with bank deposits.

According to the Reserve Bank of India’s July 2025 Bulletin, mutual funds are now emerging as a strong contender. The report noted that mutual funds collectively managed assets worth ₹75 trillion in July 2025, which is 32.3% of total bank deposits (₹232 trillion).

This isn’t just a passing trend — it’s a reflection of how India’s relationship with money is evolving. 

The Great Indian Savings Shift

Ask your parents or grandparents about savings, and chances are you’ll hear about FDs, recurring deposits, or post office schemes. They were safe, familiar, and delivered steady returns. Fast forward to 2025: mutual funds now manage assets worth over ₹75 trillion, which is more than 32% of the total value of bank deposits in India. A decade ago, this ratio was just 12%. That’s a huge leap in a short span of time.

Think of it this way: if earlier every 10 households put all their money in deposits, today at least 3 of them are choosing mutual funds. That’s the scale of change we’re witnessing. And the reasons are clear — higher returns, easy digital access, and growing awareness are turning mutual funds into a mainstream choice.

Why Mutual Funds Are Winning Over Indians

So, what’s behind this surge?

• Better returns: Over the last 10 years, FDs have delivered around 5–7% annual returns. Many equity mutual funds, on the other hand, have delivered 10–12% CAGR. That’s almost double.
• Low entry barrier: With SIPs, you can start investing with just ₹500 a month. Compare that to the lump sums often needed for FDs.
• Digital convenience: Thanks to UPI, mobile apps, and online KYC, starting an MF investment is as simple as ordering food online.
• Awareness campaigns: AMFI’s “Mutual Funds Sahi Hai” campaign has made mutual funds less intimidating and more relatable.
• Mindset change: Young professionals are no longer satisfied with “safe but slow” returns. They’re open to taking calculated risks for higher growth.

In short, mutual funds are no longer seen as a niche product. They’re becoming a natural choice for Indians who want their money to grow faster without losing control.

Risks vs Rewards – Balancing the Equation

Of course, every investment has two sides.

• Bank deposits = Safety & predictability. You know exactly how much you’ll get at maturity.
• Mutual funds = Growth & volatility. Returns aren’t fixed, and markets can fluctuate.

But that doesn’t mean mutual funds are “unsafe.” In fact, diversification helps reduce risk. Equity funds, debt funds, hybrid funds — there’s something for every type of investor.

Here’s a quick example:

• If you invest ₹1 lakh in a 5-year FD at 6%, you’d end up with around ₹1.34 lakh.
• The same ₹1 lakh in a diversified mutual fund growing at 11% CAGR could give you nearly ₹1.7 lakh.

That’s the power of compounding. And here’s another advantage: liquidity. Most mutual funds can be redeemed in a few days. FDs, on the other hand, usually have lock-ins, and premature withdrawals come with penalties.

So, the real question isn’t “FD or MF?” It’s “How much of my savings should I keep safe in FDs, and how much should I grow in MFs?”

What This Means for You as an Investor

As someone managing their household finances, here’s a simple way to think about it:

• For short-term needs and emergency funds: Stick with bank deposits. They’re safe, and you’ll sleep peacefully knowing the money is secure.
• For long-term goals like retirement, buying a home, or your child’s education: Mutual funds are your growth engine. They give your money a chance to outpace inflation and create real wealth.

The key is balance. You don’t have to give up deposits completely. But if all your money is sitting in FDs, you might be missing out on the growth potential that mutual funds offer.

Remember: your savings should work for you, not just sit quietly.

The Bigger Picture – From Investments to Liquidity

Here’s something many investors don’t realize: your mutual funds aren’t just about long-term growth. They can also help you in the short term — without selling them. That’s where Loan Against Mutual Funds (LAMF) comes in.

At Quicklend, we help you unlock instant liquidity against your mutual funds. Think of it as borrowing against your investments instead of breaking them. Here’s why it matters:

• No liquidation: Your funds stay invested, and you keep earning returns.
• Speed: Approvals in minutes, disbursal in hours.
• Flexibility: Pay interest only on what you use; no pre-closure penalties.
• Affordability: Rates starting at 10.49% p.a. — lower than most credit cards or personal loans.

Life is unpredictable. Medical bills, education fees, or urgent home repairs don’t wait. But with LAMF, you don’t have to choose between financial growth and liquidity. You get both.

Conclusion

Bank deposits will always have their place in our lives — they’re safe, trusted, and reliable. But mutual funds are proving that Indians don’t have to settle for just safety; they can aim for growth too. The shift from FDs to MFs isn’t about abandoning tradition. It’s about finding balance. A mix of safety and growth, security and flexibility. And the best part? With solutions like Loan Against Mutual Funds, you don’t have to break your investments when life throws a curveball. You can stay invested, stay secure, and still meet your needs.

Your money deserves to work harder — without making you lose sleep. Isn’t it time you gave your savings a smarter chance too?