Structural Shift
India’s household savings landscape is undergoing a fundamental reordering, one that marks a decisive break from the country’s long-standing reliance on bank deposits as the anchor of financial security. For decades, fixed deposits, small savings schemes and cash holdings formed the backbone of household balance sheets, prized more for perceived safety than for real returns. That equilibrium is now shifting. As Bain & Company’s How India Invests 2025 report shows, Indian households are increasingly reallocating savings towards market-linked instruments such as mutual funds and direct equities, making these the fastest-growing components of household portfolios over the past five years. This change is not merely cyclical, driven by a favourable equity market, but structural in nature. It reflects a gradual but unmistakable evolution in how Indian savers understand risk, inflation and long-term wealth creation. Importantly, this transition is no longer confined to metropolitan elites. The rise of participation from cities beyond the top 30 urban centres signals that financialisation is spreading deeper into the social and geographic fabric of the country.
The scale of this shift is substantial. Bain projects that India’s mutual fund industry could surpass ₹300 lakh crore in assets under management by FY2035, a figure that would have seemed implausible even a decade ago. This growth is being driven by two forces operating in tandem: a steady increase in household participation and a gradual rise in the amount each household commits to market-linked investments. Cities classified as B30 by the Association of Mutual Funds of India—such as Lucknow, Patna, Indore and Coimbatore—are emerging as important contributors to inflows, underscoring the role of rising incomes, urbanisation and digital access in reshaping savings behaviour. Yet, despite this momentum, India remains significantly under-penetrated when benchmarked against developed economies. Market-linked assets account for only about 15–20% of household investable wealth, compared to 50–60% in countries like the United States and Canada. This gap should not be read as a vulnerability. Instead, it represents latent potential. As financial literacy improves and households grow more comfortable with volatility, there is considerable headroom for a sustained expansion of India’s capital markets through domestic participation rather than reliance on foreign flows.
Technology has been the critical enabler of this transition. Digital-first investment platforms have lowered costs, simplified onboarding and made investing accessible to first-time participants across income and geography. Over the past five years, roughly 80% of direct equity investors and over a third of mutual fund investors have entered markets through digital channels. Combined with regulatory initiatives that emphasise transparency, simplified KYC norms and investor protection, this ecosystem has helped normalise market participation for millions of households. Behavioural changes are already visible. Systematic investment plans have become the preferred route for salaried investors, reflecting a move away from lump-sum speculation towards disciplined, long-term accumulation. Direct equity ownership, too, is evolving. Although the rapid rise in dematerialised accounts—nearly five-fold in five years—was partly fuelled by a strong post-pandemic IPO cycle, Bain notes a gradual shift in investor mindset from short-term trading towards wealth creation over longer horizons. Differences persist across income groups and demographics, with younger investors reacting more sharply to market movements, but the overall trend points towards increasing maturity in retail participation.
This transformation, however, places new responsibilities on policymakers, regulators and market institutions. A market-oriented savings culture can deepen capital markets, improve capital allocation and enhance household resilience, but only if growth is accompanied by stability, trust and strong governance. Rapid retail participation has already exposed vulnerabilities in market infrastructure, from technology outages to periods of extreme volatility that disproportionately affect inexperienced investors. Regulatory support must therefore evolve alongside participation, ensuring robust oversight, resilient systems and sustained investor education. Equally crucial is reinforcing the shift towards long-term investing. The projections outlined by Bain depend on consistent policy signals, credible regulation and the belief that patience is rewarded over churn. If these conditions are met, India’s household balance sheet a decade from now will look fundamentally different—less dependent on low-yield deposits, more aligned with productive assets, and better positioned to participate in economic growth. The move from saving to investing is not merely a financial adjustment; it is a generational shift in economic behaviour. Managed well, it can anchor India’s capital markets in domestic confidence and make households active stakeholders in the country’s growth story rather than passive savers watching it from the sidelines.
