Mutual fund assets double to 31% of bank deposits in 10 years, Uday Kotak says savers turning investors

Uday Kotak

Indian households are increasingly moving their savings into mutual funds, marking a significant behavioural shift since the pandemic. Describing this transformation, Uday Kotak, Founder of Kotak Mahindra Bank, noted, "India’s savers are turning investors."

In a recent post on X, Kotak pointed out that mutual fund assets under management (AUM) now make up 31 percent of total bank deposits in May 2025—a significant structural shift in financial intermediation since the COVID-19 era. While calling it a "huge post-covid shift", the veteran banker also struck a note of caution, warning, "Let's be alert about excessive exuberance," urging both investors and regulators to stay vigilant against potential overheating in the equity markets.

Mutual fund assets under management (AUM) as a share of bank deposits have seen a steady rise over the years—from 13 percent in FY15 and 16 percent in FY17, to a sharper uptick post-Covid. The ratio surged to 21 percent in FY21, climbed to 26 percent in FY24, and reached 29 percent in FY25, reflecting a growing shift toward financial investments.

Kotak noted that before COVID-19, mutual funds formed a far smaller proportion of India’s household savings. Since then, their share has grown sharply, driven largely by greater participation in equity mutual funds. The proportion of equity AUM within total mutual fund assets has nearly doubled, he said, suggesting a rising preference for market-linked instruments over traditional fixed-return products.

India’s saver turns investor. Post Covid, mutual fund AUM share, mainly equity,has doubled to 31% of bank deposits. Reflects structural change in financial intermediation. It grows domestic risk capital and creates an equity culture. But let’s be alert about excessive exuberance. pic.twitter.com/KajiUX4f5B

— Uday Kotak (@udaykotak) June 20, 2025

To be sure, the monthly inflow into mutual funds through the Systematic Investment Plan (SIP) route rose by 0.21 percent to a fresh high of Rs 26,688 crore in May, latest data from AMFI showed on June 10.

Experts believe that the underlying trend remains robust. Strong SIP inflows, which we have witnessed in recent times, can be expected to continue. This continues to reflect investors’ long-term commitment to equities.

The moderation in monthly flows (equity funds) appears more cyclical than structural, and with macroeconomic indicators largely supportive, flows into equity funds could regain momentum in the coming months.

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