Mutual funds added 72 lakh folios in the pandemic ravaged the year 2020 as higher disposable income and low interest on bank deposits attracted investors towards this financial instrument.

In comparison, the industry had seen an addition of 68 lakh investor accounts in 2019, data with Association of Mutual Funds in India (Amfi) showed.

Folios are numbers designated to individual investor accounts. An investor can have multiple folios.

According to the data, the number of folios with 45 fund houses rose to 9.43 crore at the end of December 2020 from 8.71 crores at the end of December 2019, registering a gain of 72 lakh folios.

In the year 2020, many investors added to their mutual fund investment during the market correction due to COVID-19 and the recovery phase as well, said Harshad Chetanwala, co-founder MyWealthGrowth.com.

"First-time investors chipped in during this period as the markets were looking attractive and existing investors diversified their investments in new schemes as well. Both these actions did result in new folio creation," he added.

According to him, the number would have been higher, but a segment of investors also opted to book profits and shuffle from non-performing funds to a better option, which is quite natural.

Harsh Jain, co-founder and COO of Groww, said that digital investment platforms have made the onboarding and account opening seamless, increasing accessibility to mutual funds.

In addition, the popularity of direct mutual funds as low-cost alternatives to regular plans has also attracted investors'' attention to mutual funds, he added.

On the regulatory front, Aadhaar-based verifications, UPI-based payments, introduction and simplification of new and existing mutual fund categories, transparency in net asset value (NAV) calculations have made the process simpler, giving the necessary push to the mutual fund industry.

"In 2020, the Reserve Bank of India (RBI) slashed interest rates on advances and deposits to inject liquidity into the economy. Also, with most people working from home and unable to step outside for leisure, expenses dropped, and savings increased. Hence, people had more disposable income with marginal returns being offered by bank deposits. Many people turned towards mutual funds to get better returns as a result," Jain said.

In 2018, over 1.38 crore investor accounts were added, more than 1.36 crore in 2017, nearly 70 lakh in 2016 and close to 56 lakh in 2015.

The number of folios under equity and equity-linked saving schemes rose by 27 lakh to 6.52 crore at the end of December 2020, which is much higher than 12.75 lakh added in the preceding year.

Debt-oriented scheme folios count rose by 15.84 lakh to 86.74 lakh. The number of investors'' accounts was at 71 lakh in December 2019.

Also, the industry's 'Assets Under Management' (AUM) surged by an impressive 17 per cent to Rs 31 lakh crore at the end of December, from Rs 26.54  lakh crore at the end of December 2019.

MyWealthGrowth.com's Chetanwala said the mutual fund industry continues to grow and the potential is immense. "If we consider an average of 3-4 folios per unique investor in mutual funds, that means there are just around 3 crore unique investors at present. Hence, there is a lot of potential for the industry in the coming years."

"In the year 2021, investors will continue to invest in mutual funds and the folio count is expected to grow further. A lot of investors are showing interest and looking up to mutual funds as a core part of their investment plan for their long term as well as short term goals," he added.