Bank deposits shrink in household savings as MFs, equities gain ground: Economic Survey

MUMBAI: Bank deposits have steadily lost prominence in Indian households’ financial savings as mutual funds and equities capture a larger share.

Bank deposits now account for just 35% of annual financial savings in fiscal year 2024-25 (FY25), down sharply from 58% in FY12, according to the Economic Survey for 2025-26, tabled in Parliament on Thursday.

This decline has been largely offset by a rise in investments in mutual funds (MFs) and shares, whose combined share jumped from 1.8% to 15.2% over the same period. The shift has coincided with a steady rise in systematic investment plans (SIP) contributions, with average monthly SIP flows increasing seven times – from under ₹4,000 crore in FY17 to over ₹28,000 crore in FY26, the survey added.

The pattern suggests portfolio diversification rather than displacement, with households adding equity exposure to existing savings instead of substituting entirely away from traditional instruments, it said.

Assets managed through mutual funds have also risen steadily relative to the size of the economy, increasing from around 10% of GDP in 2010 to around 23% as of November 2025.

The increased participation and resilience come at a time when Indian equity markets have shown weaker performance over the past year amid the imposition of US tariffs, weaker-than-expected corporate earnings, and consistent foreign capital outflows.

In 2025, foreign institutional investors (FIIs) sold shares worth ₹90,992 crore of Indian equities, according to data from the National Securities Depositories Ltd (NSDL). Indian markets have also underperformed global peers. The benchmark Nifty 50 has gained 7.7% in the current financial year so far, compared with a 104% surge in South Korea’s Kospi, a 43% rise in Japan’s Nikkei and a 21% gain in China’s CSI 300 over the same period.

Increased retail participation

Since the pandemic, domestic retail participation has witnessed an unprecedented surge among investors trading in direct stocks as well as mutual funds. Stable macroeconomic fundamentals, corporate earnings prospects, seamless investor onboarding through simplified KYC processes, and strong regulatory oversight have collectively contributed to this expansion, the survey added.

In the financial year till December 2025, 23.5 million demat accounts were added, taking the total count beyond 216 million. The mutual fund industry also saw 59 million unique investors as at the end of December 2025.