The rally in stock prices between 2022 and last quarter of 2024 seems to have made households reduce fixed income investments such as bank deposits, insurance and small savings to move money into direct equity and mutual funds.
RBI’s monthly bulletin shows that bank deposits held by households fell by 8.97 per cent to ₹12.54 lakh crore in FY25, reversing the growth seen over the previous two years. Investments in life insurance funds declines 17.3 per cent to ₹5.3 lakh crore and small savings (excluding PPF) dipped 24 per cent. These safe investments, which give relatively lower returns seem to have been spurned by investors.
The money is being allocated towards higher-yielding instruments. Equity investments surged nearly 153 per cent, while mutual fund inflows jumped 95 per cent during the year. Currency holdings also rose sharply by 77.6 per cent, pointing to greater liquidity preference and higher consumption among households.
This shift is also evident in the composition of household financial assets. The share of bank deposits in overall financial savings fell from 40.9 per cent in FY21 to 35.2 per cent in FY25. While mutual funds expanded their share from just 2.1 per cent to 13.1 per cent over the same period. Equity holdings, though relatively small, also increased their share from 1.3 per cent to 2.1 per cent.
“Any year of economic growth opens up opportunities for investors across equity and debt markets. People tend to mobilise their savings into these instruments depending on their risk appetite and return expectations,” said Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton Bharat. “Given India’s demographic dividend, this trend reflects a broader shift towards risk-adjusted return opportunities over traditional bank deposits.”
While several traditional instruments lost traction, provident and pension funds remained resilient, growing 10.17 per cent in FY25. Iyer attributed this to policy efforts and awareness campaigns. “PFRDA’s focus on strengthening retirement planning and revamping products such as the NPS is reflected in the growth of pension assets and subscriber base,” he said.
The surge in equity and mutual fund investments also mirrors broader structural changes in the economy. “The rise in market-linked investments reflects the broader growth of Indian markets, supported by government and regulatory initiatives aimed at improving ease of doing business and lowering transaction costs,” Iyer added.
Taken together, the data points to a gradual but meaningful shift in household behaviour, from safety-led saving to opportunity-led investing, signalling a transformation in how Indian households manage and grow their financial assets.
Published on January 1, 2026
