Indians are fast shedding their risk aversion and households are changing the way they invest. CNBC-TV18 reports that while rising interest rates have meant a higher inflow into bank deposits last year, mutual funds are fast scoring over traditional government sponsored investment schemes.

Indian investors who are known to prefer safe and secure investments are gradually developing risk appetite. According to the latest Reserve Bank of India's annual report, the share of mutual funds in household savings has shot up close to 4 per cent from less than 0.5 per cent a year ago.

Bank deposits also continue to rise on the back of rising interest rates to now command a share of 46 per cent as against 36 per cent the previous year. Share of insurance too has come down from over 15 per cent to a little over 13 per cent now.

In sharp contrast, the share of small saving schemes of the government has fallen to 12 per cent as against 20 per cent the previous year. Contribution to pension and provident funds is also going down, from 13-10 per cent.

According to the RBI annual report, net household investments in mutual funds stood at Rs1,500 crore in 2004-05 and jumped to Rs21,000 crore in 2005-06. Bank deposits meanwhile was up 72 per cent from the previous year.

But investments in small saving instruments are down Rs13,000 crore to Rs72,000 crore.

Last year has seen huge inflows into mutual funds and expert says Indians are fast reeling a bit of risk may not be such a bad idea after all.