Thanks to the booming equity markets and growing investment culture, the assets under management of SBI Mutual Fund are growing faster than the domestic fixed deposits of its parent, State Bank of India.
The AUM of SBI MF was up 27 per cent in the financial year ending March to ₹9.14 lakh crore against ₹7.17 lakh crore in the same period last year, as per the Association of Mutual Funds in India data.
In comparison, the domestic deposits of the country’s largest bank SBI increased 11 per cent in the same period to ₹47.24 lakh crore against ₹42.53 lakh crore logged in the previous year, as per the bank data.
Similarly, SBI MF asset rose 11 per cent in FY’23 while the domestic deposit mopped up by its parent was up 8 per cent.
Riding high on buoyant equity markets and record mop-up through new fund offers, SBI MF crossed ₹10 lakh crore of average AUM on June 3.
Palka Arora Chopra, Director of Master Capital Services said MFs are narrowing the gap with traditional bank deposits as investors demonstrate a growing willingness to assume a small risk in favour of potentially higher returns.
As investors become more financially literate and seek avenues for enhanced returns, MFs are seen as an attractive alternative to traditional bank deposits, he said.
Rajiv Anand, Deputy Managing Director, Axis Bank, at a recent IMC Chamber of Commerce and Industry Banking summit said that retail investors can invest as little as ₹250 in a MF scheme and the cost of entry is zero, thereby enabling financial inclusion.
Currently, SBI offers a maximum interest rate of 7 per cent on domestic retail term deposits of two to three years. In sharp contrast, SBI Magnum Gilt fund has delivered an 8.45 per cent return over two years, and the SBI Flexi Cap has given 20 per cent in the same period.
Akshat Garg, Senior Manager at Choice Wealth said the comparison between SBI MF and SBI fixed deposits in terms of AUM serves as a classic example and a benchmark for understanding emerging investment trends.
Given the enthusiasm of Gen Z for financial markets, it is only a matter of time before MFs surpass bank FDs in popularity and AUM, he added.
Anil Rego, founder of Right Horizon PMS, said that when the RBI significantly lowered interest rates during the pandemic, deposit rates also dropped, and people started gaining a better experience with MF investment even though bank deposits remain safe and offer conservative but assured returns.
Investors are increasingly shifting from FDs to MFs due to several unique factors, including regular small investment through SIPs, goal-based investment, and enhanced digital platforms, which make investing in MFs more convenient than traditional FDs, he added