Bank time deposits, debt MFs act as complementary investment avenues: RBI report

An RBI analysis indicates that bank time deposits and debt mutual funds serve as complementary investment options regardless of whether liquidity is in surplus or deficit.

A likely reason for this complementarity is that, in India’s bank‑centric and maturing debt market, these two products mainly cater to different investor groups.

This structural separation reduces direct competition, encouraging investors to hold both products simultaneously rather than choosing one over the other, the analysis notes.

Using monthly data from 2013‑14 to 2024‑25, the analysis found no statistically significant link between bank time‑deposit flows and equity mutual‑fund inflows.

The RBI notes that bank time deposits and mutual funds are key conduits for channeling domestic savings into productive investment, thereby supporting economic activity.

Bank time deposits are viewed as safe, capital‑preserving products, whereas debt mutual funds deliver market‑linked returns from fixed‑income holdings and equity mutual funds can generate long‑term capital appreciation, albeit with greater market risk.

Recent data show that mutual funds have become a significant alternative investment channel in India. Between 2020‑21 and 2024‑25, average outstanding bank time deposits rose 10.7 %, debt‑fund AUM grew 5.3 %, and equity‑fund AUM surged 32.4 %, according to the analysis.

Published on May 29, 2026