The days when fixed deposits were relegated to conservative investors are long gone. Today’s savvy investors are rediscovering fixed income, not as a reluctant concession to age, but as strategic investments for thoughtful wealth creation.
This shift began in post-pandemic years, which unleashed an unprecedented equity boom in India. Armed with smartphones and social media, millions of first-time investors flooded into the stock market. An example is an increase in demat account holders, which were only around 4 crore in 2020, and have increased to 20 crore by August this year.
But then came the reality check.
When the Reserve Bank of India began its aggressive rate-hike cycle in 2022, pushing the repo rate to 6.5% by February 2023, fixed deposit rates climbed to the 8.5-9% range. Suddenly, boring seemed beautiful again. This wasn’t just a cyclical shift, but a structural rebalancing of retail portfolios.
The new retail mindset: From safety to strategy
Walk into any middle-class Indian home a decade ago, and fixed income meant only one thing: opening an FD at the neighbourhood bank branch, often where the family had banked for generations. The decision-making process was practically non-existent. However, this has changed, or rather transformed completely, as investors understand the importance of diversifying their portfolio and protecting from downside risk.
Fixed income instruments like FDs and bonds are not related to equity, which means that if the market faces turbulent times, fixed income holds a part of the portfolio afloat.
As a result, young professionals in Tier-1 and Tier-2 cities are building hybrid portfolios, with 30-60% in safety instruments—such as fixed income—and 40-70% in growth assets, such as equity.
Changing investor behaviour — A Key Factor
Today’s investors readily venture beyond traditional banks to explore small finance banks offering premium rates. Financial literacy and awareness have increased.
For example, investors are now familiar with concepts like the DICGC insurance coverage of ₹5 lakh per bank. It has emboldened investors to distribute funds across multiple banks for both safety and return optimisation. They also focus on diversification, not just in fixed-income instruments, but also within the segment across different maturity periods and ticket sizes. This ladder investment helps them balance liquidity needs with yield opportunities.
There has been a rising adoption of fixed deposits in small finance banks that typically offer 1-2% extra interest while amounts up to ₹5 lakh are insured by DICGC per bank.
The new fixed-income playbook
In 2025, the approach to fixed income went well beyond the simplistic deposit and forget methodology. It includes:
- Inflation-adjusted thinking: Investors now care more about real returns after considering inflation instead of just looking at nominal rates. Hence, the move toward higher-interest fixed deposits from small finance banks.
- Attention to laddering: Investors have become more thoughtful about their choices and are spreading their capital across fixed deposits and other fixed- income instruments with maturities of 1-5 years rather than sticking to one-time deposits. This strategy gives them regular access to cash while also allowing them to benefit from higher long-term rates and reduce risk when reinvesting across different interest-rate periods.
- Digital-first execution: Digital tools have changed how individuals invest in fixed income. Investors can now compare options instantly, sign up without paperwork or new bank accounts, and track their portfolios in real time. Tasks that used to take long hours at a branch can now be done in minutes with mobile apps.
- Increased financial education: Social media platforms and the internet has made complex ideas easier to understand and accessible. This knowledge has empowered self-directed investors to understand fixed-income products better.
- Family inclusion: Financial planning has taken on new sophistication, with investors strategically distributing investments across family members to optimise senior citizen preferential rates while managing tax implications.
Conclusion
Fixed income, once relegated to the conservative corners of the portfolio by default, is increasingly recognised as a dynamic asset class deserving thoughtful allocation. However, investors need to understand the basics, consider their financial goals as well as risk appetite, when making an investment decision.
The author is Saurabh Jain, co-founder and chief executive officer at Stable Money—a Bengaluru-based fixed-return investment platform.