Inflows into mutual funds (MFs) have been on a steady uptrend in the wake of banks cutting their fixed deposit rates. MF inflows are expected to gather pace in the coming months as the RBI has ushered in a soft interest rate regime to boost the economy.
Leading public and private sector banks, including SBI, HDFC Bank, ICICI Bank, IDFC First Bank and Kotak Mahindra Bank have cut their fixed deposit rates of more than one year by 15-60 basis points in the last few months, following a series of policy rate cuts by the RBI.
Net inflows into mutual funds have increased multi-fold to ₹3.55 lakh crore in the June quarter, against ₹12,658 crore in the March quarter. In fact, debt funds registered the highest inflow of ₹2.01 lakh crore in the June quarter, against a net outflow of ₹80,536 crore in the March quarter.
The MF industry’s assets under management have jumped to ₹74.41 lakh crore in the June quarter, from ₹65.74 lakh crore in the March quarter, aided by strong inflows and a better equity market performance.
In contrast, bank deposits increased one per cent to ₹239 lakh crore as of June-end, against ₹236 lakh crore as of April 4, according to RBI data.
In fact, the compounded annual growth rate of bank deposits has stagnated at 11 per cent in the last five years, while that of MFs has increased to 24 per cent as of June-end, against 20 per cent logged in the same period last year.
Last month, the RBI had cut the repo rate by 50 basis points to 5.5 per cent, to improve liquidity and boost the economy amid growing global uncertainty.
The Repo Rate is the interest rate at which RBI lends money to commercial banks when they need short-term funds.
The repo rate cut in June was the third in a row after the cuts in February and April. When RBI cut the repo rate for the first time in February, it was done after five years. The repo rate has remained unchanged at 6.50 per cent since February 2023.
Sandeep Bagla, CEO, TRUST Mutual Fund, said while lower interest rates are likely to guide flows into mutual funds, choppy equity markets act as headwinds for incremental allocations to equities.
Investors from smaller cities have been increasing their exposure to equities and this would rise further once there is greater clarity on corporate earnings growth, he said.
However, retail investors are taking the SIP route, which has seen a steady rise, while a few new fund offers have also mobilised good inflows, he added.
Published on July 26, 2025
