Investment trends 2024: Mutual Funds overtakes fixed deposits, life insurance shows a downtrend

A recent report by BankBazaar revealed that in 2024, mutual funds and Systematic Investment Plans (SIPs) emerged as the top investment choices for Indians. Gold saw a resurgence in popularity, while interest in cryptocurrencies decreased significantly. The annual MoneyMood Retail Credit Trends Report for 2024, which focused on working professionals in India aged 22 to 45, surveyed 1,529 respondents across major metros and Tier-2 cities. 

The report highlighted that mutual funds and SIPs were the preferred choice for 62% of respondents, surpassing all other options. Fixed deposits followed closely behind at 57%, but the disparity between the two reached a historic 5% gap.

The popularity of gold saw a resurgence, with 30% of respondents opting to invest in the metal, a notable increase from the previous year’s 27%. Conversely, interest in cryptocurrencies plummeted to a mere 12%, signaling apprehensions regarding regulation and security concerns.

However, insurance trends showed a different graph. The report revealed that the number of Indians with health insurance increased, but there was a drop in the uptake of life insurance. The percentage of individuals with both health and life insurance remained steady at 38%. However, the number of people without any insurance nearly doubled.

Here is a summary of the insurance coverage trends:

> Individuals with both life and health insurance: 38% of respondents, showing a small increase from 37% in 2023.
> Those with only health insurance: 19%, up from 16%.
> Individuals with only life insurance: 38%, down from 41%.
> People without any insurance: 5%, a slight improvement from 6% last year.

Retirement preparedness

Retirement preparedness among Indians has shown improvement, with 58% now having a retirement fund, up from 56% the previous year. The majority are aiming to retire between the ages of 51 to 60, with about 12% having saved over Rs 2 crore for their retirement.

Breakdown of retirement fund sizes:

Less than Rs 25 lakh: 6%
Rs 25-50 lakh: 19%
Rs 50-75 lakh: 17%
Rs 75 lakh-1 crore: 14%
Rs 1-1.5 crore: 12%
Rs 1.5-2 crore: 11%
Rs 2-5 crore: 10%
Over Rs 5 crore: 11%

Retirement goals:

Desired retirement age breakdown:
By 40 years: 7%
Between 41-50 years: 21%
Between 51-60 years: 54%
Between 61-65 years: 12%
Over 65 years: 6%

Adjustments to retirement plans:
12% increased investments to retire earlier
43% remained on track with their original retirement plans
18% slowed investments and postponed retirement.

Loans and lending

In 2024, retail lending experienced a 16% growth, reaching Rs 5.28 trillion. This growth rate was slightly lower than the 18% recorded in 2023. Secured loans, specifically home loans and gold loans, were the main drivers of this growth.

Home loans saw an increase of 18% year-on-year, reaching Rs 2.52 trillion compared to 14% growth in 2023. Gold loans, on the other hand, surged by an impressive 56% to Rs 154,282 crore, marking the fastest growth among all categories. Combined, home loans and gold loans made up a significant portion of total retail credit.

In contrast, personal loans and vehicle loans experienced slower growth rates of 11% each. This was primarily due to stricter lending norms impacting smaller personal loans, particularly those below Rs 50,000.

Personal loans grew by 11% to Rs 1.41 trillion, a decrease from the 23% growth seen in 2023. Vehicle loans also grew by 11%, reaching Rs 616,405 crore, down from the 20% growth in 2023. Credit card dues increased by 17%, totaling Rs 281,392 crore.

In terms of contributions to retail credit in 2024, home loans accounted for 47.84%, followed by personal loans at 26.73%, vehicle loans at 11.68%, gold loans at 2.92%, credit card dues at 5.33%.

Personal, auto loans

Smaller loans below Rs 50,000, particularly for subprime borrowers, experienced reduced demand due to the implementation of stricter RBI regulations and inflationary pressures.
On the other hand, larger loans granted to prime and super-prime borrowers continued to expand, resulting in an overall year-on-year growth of 11% in personal loans.
Similarly, vehicle loans also witnessed a deceleration in growth, increasing by 11% to reach Rs 616,405 crore.

Credit card usage

In 2024, Indians set new records with their credit card usage. The number of active credit cards reached 106.8 million, nearly doubling from the amount in 2019. Monthly credit card expenditures soared to Rs 2 trillion, thanks to enticing cashback offers, no-cost EMIs, and increased shopping during festive periods.

It is worth noting that only approximately 6% of Indians currently possess a credit card, indicating significant growth potential in the market. Despite concerns surrounding escalating delinquencies, the usage of credit cards continues to rise, particularly in smaller towns and cities.

Key statistics include outstanding credit cards at 106.8 million, marking a 13% year-on-year increase and a nearly twofold rise since 2019. Monthly credit card expenditures surged to Rs 2 trillion, driven by no-cost EMIs, cashback deals, and festive season spending.