Why More Indians Prefer SIPs Over FDs in 2025

Aarti, 26, works as a content writer in Jaipur. Like many of us, she grew up thinking fixed deposits were the safest bet. She was saving ₹5,000 in an FD every month. Consistent, tension-free, and something her father always used to say.

At the end of 3 years, her savings came to approximately ₹1,94,000, all thanks to a standard 5.5% interest.

And then came a random phone call with her college buddy, who had been investing the same ₹5,000/month in SIPs. “Mere toh ₹2,80,000 ho gaye,” her friend said casually. That one line stuck with Aarti like a jammed song lyric.

She ran the numbers herself. Same amount. Same time. But better growth.

So in January 2023, she dived in. Started her own SIP of ₹6,000/month. 

Fast forward to early 2025, she's already created a portfolio of ₹1,70,000—and counting. She still regards FDs, but now SIPs are her default reaction for long-term plans.

And guess what: she's not the only one flipping the script.

SIP vs FD: The 2025 Showdown—Slow and Steady vs. Fast and Smart

FDs have always been the "safety zone" for your funds—5% to 6% returns, as solid as a rock. But in 2025, that rock seems a bit shaky. 

Why? Inflation is eating into those returns. For example, in March 2025, India's retail inflation fell to a 5-year low of 3.34% (Reuters). So, if you earn 6% on an FD, your real return is hardly 0.4%!

Enter SIPs! People are finally catching on to the power of compounding and higher returns. March 2025 saw a record ₹19,271 crore inflow into SIPs, proving that smart investors are moving away from FDs (AMFI).

Take Aarti’s case: She switched her ₹5,000/month from an FD to a SIP. Her FD gave her ₹1,94,000 in 3 years, but her SIP grew to ₹2,80,000. That’s an extra ₹86,000—without breaking a sweat.

SIPs are the new cool, and FDs? Oh, they're just getting older.

Returns Ka King Kaun? SIPs Are Winning the Race

When it comes to growing your money, returns are the ultimate test. And right now, SIPs are outpacing FDs by a big margin. Let’s break it down:

Why the difference?

• FDs: Fixed interest rates like 6% lock in your returns, but inflation eats into them, leaving you with almost no growth beyond the initial deposit.

• SIPs: By tapping into the power of compounding, SIPs provide an average annual return of 10-15%, helping your money grow faster over the long run.

For example, Aarti decided to switch her ₹5,000/month from an FD to a SIP. 

Here’s the magic of compounding over 10 years:

• FD at 6%: ₹8,20,000
• SIP at 12% CAGR: ₹11,60,000

That’s a ₹3,40,000 difference! The kind of difference that could get you a Royal Enfield for free just by investing smarter!

“Compounding Ka Jadoo”: SIPs Are the Long Game Winners

If you think compounding is just a fancy finance term, think again! It's the secret sauce that turns small investments into big sums over time. And in the SIP world, this magic happens at lightning speed!

FDs vs SIPs: Compounding Showdown

Just like a snowball rolling downhill, the longer you stay invested in SIPs, the bigger and faster your returns get.

For example, let’s take Aarti again. At 25, she started an SIP of ₹2,000/month. Let’s see how compounding worked its magic over 30 years at 12% CAGR.

• At 25 (30 years investment): ₹70,00,000+
• At 35 (20 years investment): ₹22,00,000

That’s ₹48,00,000 left on the table, all because time is money! The earlier you start, the bigger your snowball of wealth.

Inflation Ko Takkar: SIPs Fight Back, FDs Fall Flat

In 2025, inflation is expected to be around 5.4% in India. That means if you're stuck with an FD, you’re barely keeping up with the rising prices of goods. In simple terms, your real returns (returns after inflation) are getting squeezed.

FDs at 6%: Inflation eats up nearly 1.4%, leaving you with almost 0.6% in real returns.

But wait—there’s a hero in the story. SIPs in equity mutual funds are making inflation tremble!

How SIPs Outsmart Inflation

Historically, equity mutual funds via SIPs have consistently outperformed inflation. While not risk-free, SIPs have a higher probability of wealth appreciation over the long term. When you invest in the market, your money grows with the economy, beating inflation and growing your wealth over time.

For example, Aarti plans to save for her niece’s higher education, estimated to cost ₹10,00,000 in 10 years (considering 5% annual inflation).

Let’s compare her two saving strategies:

Despite investing less per month, her SIP plan not only keeps up with inflation, it overtakes it. The FD, even with ₹1,500 more per month, still misses the ₹10,00,000 goal.

Taxation Tadka: SIPs Offer Better Post-Tax Gains

FDs look sweet—until tax season arrives, like that one relative who never leaves without extra mithai.

 Tax Treatment: FDs vs. SIPs

• Fixed Deposits (FDs):

Interest earned from FDs is fully taxable as per your income slab. 

For example, if you're in the 30% tax bracket, a significant portion of your FD interest goes to taxes.

• Systematic Investment Plans (SIPs):

Long-term capital gains (LTCG) from equity-oriented mutual funds are taxed at 12.5% on gains exceeding ₹1,25,000, provided the units are held for more than 12 months.

For example, Aarti received a bonus of ₹1,00,000 in April 2024. She parked it in:

*Assumed long-term equity return.

Difference? Aarti pockets ₹6,000 more with SIPs—almost enough for a weekend staycation at a Goa Airbnb. 

Liquidity on Demand: Flexibility Favours SIPS

Let’s be honest—life’s curveballs don’t check your FD maturity dates. Whether it’s a medical emergency, a surprise travel plan, or a flash sale on your dream laptop, liquidity becomes king.

FDs: Rigid but Reliable?

• Lock-in periods of 1 to 5 years (or more)
• Premature withdrawal = penalty (typically 0.5% to 1% lower interest)
• Processing takes 1 to 2 days minimum

SIPs: Exit Anytime, No Drama

• Open-ended equity mutual funds allow partial or full redemption
• No exit load after 1 year in many funds
• Money credited in T+1 to T+3 days (depending on the fund)

For example, in March 2025, Aarti faced an unexpected ₹25,000 dental emergency. Here’s how her money behaved:

Result? SIP won the flexibility round—no strings attached.

Keep your emergency corpus in liquid or ultra-short-duration funds via SIPs. 

Flexibility + returns = full paisa vasool!

Millennials & Gen Z: SIPs Are the New Cool

SIPs are no longer just investment tools—they’re part of the lifestyle flex.

From Instagram Reels with "#SIPKaFunda" to YouTube Shorts on compounding magic, today’s youth are sipping their way to wealth, one ₹100 installment at a time.

Why SIPs Are the Gen Z Gold Standard?

For example, Aarti wanted to upgrade from her entry-level phone to a sleek mid-range model worth ₹30,000.

She started a ₹2,000/month SIP in a balanced fund in Jan 2023.

By April 2025:

• CAGR: ~11%
• Invested: ₹58,000
• Fund Value: ₹65,400+

Phone? Sorted.

Extra ₹7,000? A new case, earbuds, and a little treat!

Risk Management: Don’t Fear SIPs, SIP Smartly

Yes, FDs are the “safe and steady” aunties of the investment world—predictable and peaceful. But SIPs? They're the adventurous yet calculated younger sibling. Risky? Only if you don’t know how to play the game smart.

Balanced Advantage Funds (BAFs)

These funds auto-adjust their equity and debt mix based on market mood. Think of it as cruise control for market ups and downs—perfect for first-time investors like Aarti.

Aarti’s Safe Start with SIP:

That’s ₹90,000 invested turning into ₹2,50,000, with lower volatility than pure equity funds. 

Not bad for a “safe” adventure, right?

Smart Move: Aarti set up a SIP in a hybrid fund via a robo-advisor app that rebalances her portfolio—no stress, no sweat.

“FD Wale Uncle” vs “SIP Wali Aunty”: Changing Financial Culture

Gone are the days when FD slips were tucked safely into bank folders and shown off during family functions like medals. 2025 is the era of the “SIP ka link bhej de beta” revolution.

Meet Rekha Aunty—50, a homemaker and a late-bloomer investor from Delhi. In 2021, her son helped her start a SIP of ₹10,000/month in a large-cap mutual fund.

Fast forward to 2025:

Difference: ₹3,30,000 — enough for a Euro trip or two full weddings’ worth of lehengas!

The Cultural Plot Twist?

Rekha Aunty now gives SIP advice in WhatsApp groups. 

Her bhaiya? Still holding onto that FD with a 6.5% return and a sigh.

Debt Consolidation Goals? SIPs Can Help You Strategise

Sick of juggling multiple loans? Here’s how Aarti used a simple strategy to consolidate her debts into one manageable plan.

It combines your several outstanding debts into a new loan with a single monthly payment and a reduced interest rate to help you lower your financial stress.

For example, in 2023, Aarti was overwhelmed with different debts: a personal loan, credit card dues, and an education loan. Here’s what it looked like before she started consolidating:

Before Debt Consolidation

After Debt Consolidation

Outcome:

• Before: Aarti was paying a combined total of ₹33,000 per month for multiple loans.
• After: By consolidating her debt into one loan, she reduced her payment to ₹16,000/month, which is lower and more manageable.

While Aarti used a personal loan for debt consolidation, she later started a ₹6,000/month SIP to build a wealth corpus for future financial goals. 

The power of SIPs helped her grow her wealth over time, ensuring that she wasn’t just managing debt but also creating a strong financial foundation for herself.

“Set It and Forget It”: The Lazy Genius Way to Wealth via SIPs

Not everyone has the time—or, frankly, the patience to track the stock market every day. 

Enter SIPs: the ultimate “no-drama, full-paisa” investing hack.

SIPs automate your investments, making wealth-building as effortless as your morning alarm (minus the snoozing). Ideal for busy bees, side hustlers, and Netflix binge-watchers alike.

Here’s your lazy investor checklist to get started with SIPs:

1. Set up auto-debit for a fixed amount
2. Choose a goal-based fund (like retirement, travel, or emergency)
3. Pick a long-term horizon (minimum 5 to 10 years)
4. Don’t panic during market dips—just keep going
5. Review once a year, not daily

For example, in April 2023, Aarti set up a SIP of ₹7,500/month in a flexi-cap mutual fund. She didn’t touch it, tweak it, or obsess over it. Just two years later, in April 2025, her corpus is already around ₹2,04,000 (assuming a 12% CAGR).

She calls it “Investment on Autopilot, returns on point!”

Conclusion

In 2025, the SIP vs FD debate isn’t about risk anymore—it’s about reward, relevance, and real returns. Aarti’s journey proves that with the right mindset and a bit of planning, SIPs can outshine FDs not just in returns, but in flexibility and future-readiness. 

Whether you’re saving for a trip, a phone, or your financial freedom, SIPs are the smarter way forward. After all, aaj ka ₹100 SIP kal ka ₹1,00,000 ban sakta hai—if you start now.

FAQs

• Are SIPs risk-free like FDs?

No. SIPs are market-linked and carry some risk, but long-term investing helps manage it.

• Can I start a SIP with ₹500?

Yes, many funds let you start with just ₹100 or ₹500 monthly.

• Should I move all my FD money to SIPs?

Not entirely. Keep FDs for emergencies; use SIPs for long-term goals.

• What if I miss a SIP payment?

It’s okay—no penalties. That month’s SIP just won’t get invested.

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?