Bank deposits are more preferred over equities

Posted on April 8, 2017

According to the latest survey done by SEBI, 95% or more Indians prefer to keep their hard earned money in the bank deposits and only 10% prefer to invest in stocks and mutual funds.

This result was compiled based on the survey of most of the rural and urban areas spread across the country. From the top five investment sources, Life Insurance grabbed the second position and others like post office savings, investment in precious metals and investment in real estate stood after Life Insurance.

For urban areas, the ranking was as follows: Mutual funds at 6th position, Investment in Stocks at 7th position, and other investment vehicles like pension schemes, shares, and debentures, commodity futures, etc.

For the rural areas, these investment vehicles weren’t used by even 1% of the Indian Household. Even the information about the mutual funds and other investment vehicles was lagging amongst the people living there.

But shockingly, 95% of the rural Indian Households had opened their bank account, 47% were already investing in Life insurance, 29% were involved in post office deposits and a rare almost 11% invested in precious metals.

The overall results of this report are positive and it has been concluded that over the last 5 years, 75% of the investors have started investing actively in the securities market. This percentage of Indian households invested for the first time in the year 2015. Let us look at step-wise movement taken by the survey holders:

In the first and the most important step, a list containing 2,04,694 households was compiled and the basic information like their demographics, savings, income, and investments were noted.
In the second step, over 50,453 households were finalized for the survey.
This information was then used to find the total number of households that are investing in the year 2015. Using bootstrapping method, it was found that over 3.37 crore households are investing in India. Out of these, 70% are in urban areas and the rest 30% reside in rural area.

According to SEBI former chairman UK Sinha, its high time to understand the changing behavior of investors as an effect of this survey conducted by the professionals.

Bank deposits are more preferred over equities