New Delhi: The Reserve Bank of India (RBI)’s bulletin has underlined that bank deposits held by households are falling now, reversing the growth seen over the previous two years. Deposits fell by 8.97% to Rs 12.54 lakh crore in the financial year ending 2025. Investments in life insurance funds have declined by nearly one-fifth or 17.3 per cent to Rs 5.3 lakh crore and small savings (excluding provident and pension funds or PPF) dipped by about one-fourth, or 24 per cent. Riskier instruments, like equity and mutual fund investments, show a sharp uptick. Equity investments zoomed by almost 153%, reports Businessline. Mutual fund inflows nearly doubled, as they jumped 95% over the year. Cash holdings too rose sharply by 77.6%. This signals a need for more liquidity and higher consumption among households. The share of bank deposits in overall financial savings fell from 40.9% in FY21 to 35.2% in FY25. Mutual funds ballooned from being just 2.1% of household savings, to 13.1% over the same period. The Economic Times also reports that bank credit is fast outstripping the deposits being made in banks. Mint calculates that the incremental credit-deposit ratio, or the ratio of fresh credit given to the amount deposited is up significantly, to 102%, as opposed to 79% just a year ago. This widening ratio, as anything above 100% means more credit with inadequate deposits to meet the demand, has led to banks relying on market borrowings, liquidation of excess Statutory Liquidity Raio (SLR) holding and “balance-sheet buffers”, as per three bank executives, the newspaper has cited. Prakash Agarwal, of Gefion Capital told Mint that weak deposit ratios are forcing banks to compete aggressively for funds. This gap between lending and deposit growth is not expected to ebb anytime soon.Analysts have pointed to a growing “financialisation of savings” that is a long-term structural factor in the Indian system, as very evident, since COVID-19. Financialisation of savings means a shift from bank deposits to mutual funds and equities.The mutual fund industry’s assets under management (or AUM) have grown much faster than bank deposits over the last decade, noted analysts last year.In 2024, former RBI governor, Shaktikanta Das had pointed to headwinds for banks and consequently for the economy, if the deposit slowdown continued. Speaking to CNBC, he had discussed the slump in bank deposits. He said that there was no cause for concern currently [in 2024], “but there could be trouble ahead if the situation persists.”