Industry body AMFI says total asset base of mutual funds could reach Rs 20 trillion in the next 4-5 years from about Rs 9.85 trillion currently.
According to AMFI, there is huge scope for expanding the reach of mutual funds and channelising household savings into them.
"Mutual fund industry may see its assets under management (AUM) growing to Rs 20 lakh crore in the next 4-5 years," Association of Mutual Funds in India (AMFI) Chairman Sundeep Sikka told PTI.
The collective AUM of 45 fund houses stood at about Rs 8 lakh crore at the end of 2013 and has grown to Rs 9.85 lakh crore during the first quarter of the current fiscal.
However, the asset base of mutual funds together had touched a record Rs 10.11 lakh crore in May.
The likely impressive growth in AUM to Rs 20 lakh crore would be accompanied by an increase in folio numbers, substantial contribution from smaller cities and a higher number of distributors, among others, it said.
Growth in the mutual fund industry has remained sluggish in the past couple of years although the capital markets regulator Sebi has taken several measures to re-energise the sector.
In February, board of Securities and Exchange Board of India (Sebi) cleared the first ever long-term policy for the mutual fund industry, proposing a number of tax benefits and measures for growth of this business.
Besides, Sebi, in 2012, allowed mutual funds to levy additional charges on existing schemes to bear the cost of distribution across locations beyond the top 15 cities in the country.
According to an estimate, over 44 per cent of households in the US have their savings in mutual funds, while in India the figure stood at a mere 2.5 per cent.