Bank time deposits and debt mutual funds act as complementary investment avenues in both surplus and deficit liquidity regimes, according to an RBI analysis.“One plausible explanation for this complementarity is that within India’s bank-centric and evolving debt market, bank time deposits and debt mutual funds predominantly serve distinct investor segments.”“This structural segmentation minimises direct competition between the two instruments, fostering concurrent allocation rather than substitution,” per the analysis.The analysis, based on sample period 2013-14 to 2024-25 using monthly data, found no statistically significant relationship between bank time deposits and equity mutual fund flows.Time deposits with banks and mutual funds serve as important channels for mobilising domestic savings for investment to support economic activity, according to the RBI.“While time deposits with banks are regarded as safe and capital protected instruments, the debt mutual funds provide market-linked returns from fixed-income securities and the equity mutual funds may offer long-term capital gains with higher market risk.”“Recent evidence suggests that mutual funds have emerged as a major alternative investment avenue in India. For instance, during 2020-21 to 2024-25, on an average, outstanding bank time deposits grew by 10.7 per cent, while the assets under management (AUM) of debt mutual funds increased by 5.3 per cent and the AUM of equity mutual funds expanded by 32.4 per cent,” per the analysis.Published on May 29, 2026