The stable deposit funding must remain sufficient to support sustained credit growth for broader economic stability. — Annu Kumari
The fixed deposits would dominate investment choices in India if financial behaviour depended only on awareness. The SEBI survey report published on 20th January, 2026 provides the investor awareness across different financial instruments:
Financial Instrument Awareness Level (%)
Fixed & Recurring Deposits 98
Mutual Funds 53
Stocks & Shares 49
Cryptocurrency 15
Futures & Options 13
Corporate Bonds, REITs & InvITs 10
Source: SEBI
As per SEBI survey report, 98 percent Indian household is familiar with fixed and recurring deposits. It implies that fixed and recurring deposits products hold a deep place in the country’s financial culture. Interestingly, the awareness of mutual funds stands at 53 percent whereas stocks and shares reach 49 percent which indicates that households are more aware about mutual funds than stock and shares. Moreover, the awareness of futures and options is even lower, at just 13 percent. While cryptocurrency reported more awareness than corporate bonds which raises questions about the future of bond market in India.
However, the actual flow of savings presents a different view. During the past decade, bank deposits have grown by about three times. Moreover, in the same period, mutual fund assets under management have increased by almost seven times. Additionally, mutual fund AUM as a share of bank deposits has risen from 12.6 percent in 2015 to more than 33.5 percent in 2025. The equity participation has also widened during these years. Similarly, systematic investment plans (SIPs) have entered the financial mainstream. However, derivatives trading continues at a strong pace despite limited awareness. As a result of which, investment activity moves ahead even when broad understanding remains modest.
The most widely understood instrument is steadily losing relative share. Moreover, instruments with lower levels of awareness are gaining traction. Additionally, in the case of derivatives, limited understanding exists alongside high participation. However, such a pattern creates a clear tension within the Indian financial system. Familiarity does not always lead to dominance. Similarly, limited awareness does not prevent active involvement. As a result of which, a clear paradox emerges at the centre of India’s financial transition.
Incentives Trump Awareness
Interest earned on fixed deposits is taxed at the individual income tax slab rate, which can reach 30 percent. Moreover, the long-term capital gains on equities and equity mutual funds receive more favourable treatment. As a result, the post-tax returns appear more attractive. The tax difference matter for the return conscious household. Therefore, Indian households show signs of moving away from passive saving.
The awareness of a financial product does not automatically create preference. Similarly, liquidity and tax efficiency now carry greater weight in decision making. Such tectonically shift in the financial behaviour is observed by banking industry representatives as well. The chairman of State Bank of India called for a more equal tax structure across the financial products. Moreover, the Indian Banks Association also argued for improved tax treatment of fixed deposits. Therefore, tax parity of fixed deposits with capital gains could strengthen the mobilisation of deposit. As almost every household understands fixed deposits yet incremental savings move toward other instruments. Therefore, the investor awareness does not guarantee allocation rather perceived reward plays a central role. As the households compare post tax returns and growth potential, which in turn mould the final decisions.
The Derivatives Dilemma
The SEBI survey report showed that only 13 percent of households has awareness of futures and options. However, the participation of households in derivatives trading has increased substantially in recent years. Between April 1 and February 10, Securities Transaction Tax (STT) collections reached Rs. 50,279 crore. While the growth of STT collection slowed, the absolute level is still substantial. Thus, there is a contrast between the low investor awareness and high trading volume in future and options which creates a policy concern. Additionally, when understanding of risk remains limited, the participation may expand at a faster pace.
What the Budget Chose Not to Do
The Budget 2026-27 provides no tax parity to fixed deposits to align taxation on FD interest with capital gains. The absence of tax parity on fixed deposits with capital gains raised concern among banks which were expecting relief. Though it appears deliberate as an immediate revision in tax rules could have led to large portfolio reallocations. Additionally, a rapid movement of funds back into deposits might have unsettled equity markets. Similarly, limited adjustments could have introduced distortions without correcting the deeper structural gap. As a result, policymakers preferred caution than quick intervention.
What the Budget Did Do
The Securities Transaction Tax (STT) on futures and options trading was increased. Though it appears to be a revenue measure. The collection of STT stood at Rs. 50,279 crores between 1st April and 10th February which appears flat as compared to previous year. To simply put, the increase in STT appears less focused on raising revenue and more about sending a signal. The investors awareness level of futures and options remain only 13 percent which means investor awareness is limited and speculative activity is high. Through increased STT, the government pushed the trading costs upward. Additionally, the higher transaction costs can slow excessive turnover which would help moderate risk taking. So, the higher STT can be observed as the behavioural regulation rather than direct prohibition. Although the tax treatment of fixed deposit which is widely understood and lower risk savings instruments was left unchanged. At the same time, the cost structure in a low awareness and higher risk segment was tightened. Thus, the budget proposal to increase the securities transaction tax (STT) appears measured and carefully calibrated.
Awareness Is Not Allocation
Therefore, the paradox remains central to the debate: the safest and extensively familiar savings option continues to lose relative share meanwhile, the complex financial instruments with lower awareness attract the growing interest of investors. Thus, it can be concluded that only awareness of financial instruments does not guarantees financial preference of investors. Today, the allocation decisions of investors dependent on expected returns and incentives rather than awareness of financial instruments. Therefore, the priority of the government of India should be to ensure that the shift in household financial behaviour does not weaken credit intermediation. The stable deposit funding must remain sufficient to support sustained credit growth for broader economic stability.
