Indians are now investing more of their money in bank deposits and mutual funds. According to data, bank deposits form 36.5% of the total financial saving of the household sector in 2004-05, which has now increased to 55.6%. This marks a reversal in trend from the nineties, when bank deposits began losing share to debentures and small savings schemes. Also Mutual Funds have seen a four fold increase, rising from just . 4% in 2004-05 to 4.8% in 2006-07. The loyalty towards bank deposits can be attributed partly to the high returns offered by deposit-starved banks. Some banks were offering returns of up to 10%, for a period of one year. Also with the pace at which India is growing, the demand for credit has been really strong and the loan requirements are also rising steadily. This forced banks to raise deposit rates to attract more funds. The central bank also has signalled higher rates to control inflation. As a result, bank deposits have become attractive and the savings that were earlier parked in government-administered small savings schemes have now started shifting to banks .
| % of Total Savings | |||
|---|---|---|---|
Saving instrument | 2006-07 | 2005-06 | 2004-05 |
| Currency | 8.6 | 8.7 | 8.5 |
| Bank Deposits | 55.6 | 46.2 | 36.5 |
| Shares etc | 1.5 | 1.3 | 0.7 |
| Mutual Funds | 4.8 | 3.6 | 0.4 |
| Govt Securities | 0.2 | 2.4 | 4.9 |
| Small Savings | 4.9 | 12.2 | 19.6 |
| Insurance Funds | 15.0 | 14.0 | 15.7 |
| Provident Funds | 9.2 | 10.5 | 13.0 |
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