FDs Losing Appeal, Investors Turning To Higher Returns; Here's Why The Trend Is Changing

Mumbai: Indians are moving away from traditional Bank Fixed Deposits (FDs) and exploring other investment options that offer higher returns, even if they come with higher risks.

Why Are FDs Losing Popularity?

Falling Interest Rates:

During the COVID-19 pandemic (2020–2022), the Reserve Bank of India (RBI) reduced the repo rate by 115 basis points (1.15 percent). This caused FD interest rates to fall significantly.

Low Real Returns:

FD returns often do not beat inflation, which means the actual value of your money doesn’t grow much over time.

Recent RBI Rate Cuts:

RBI has cut rates again recently (Feb: 25bps, April: 25bps, June: 50bps), making FDs less attractive.

Where Are People Investing Instead?

Mutual Funds:

As of April 2025, there are 23 crore (230 million) mutual fund accounts.

91 percent of these belong to individual investors.

In May 2021, the number was just over 10 crore (100 million).

Stock Market:

In 2022, 17.8 percent of Indian households invested in high-risk assets like stocks.

In 2019, this was only 15.7 percent.

Insurance & Other Products:

Investments in insurance plans and other diversified products are also increasing.

Changing Savings Behavior

According to RBI economists, Indian households are diversifying their savings portfolios.

The share of bank deposits in total financial savings is falling, while mutual funds and insurance are gaining more traction.

Key Figures at a Glance

Investment Type FY 2020 FY 2025

Share of bank FDs 50.54 percent 45.77 percent

Mutual Fund AUM Rs 22.26 lakh crore Rs 69.50 lakh crore

Why Does This Matter?

This shift shows increasing financial awareness among Indians.

More people are aiming for long-term wealth creation instead of just safe savings.

Digital platforms, online education, and easier access to markets are helping investors make informed decisions.

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