In recent times, mutual funds investment plays a significant role in economic growth. The rise in the mutual fund prices uplifts the economy. Similarly, financial literacy also plays a crucial role in the economic growth of the country. Moreover, financial literacy is essential for making an effective ID. Financial literacy has been identified as an important tool for enhancing the financial inclusion and security of an individual. Financial literacy enhances the awareness level of an individual regarding financial activities and schemes to enhance the economic status. Hence, the study examines the financial literacy of mutual funds investors and its effect on making an effective ID. The study also evaluated the factors determining the ID of mutual fund investors in Mayurbhanj. The study collected data 294 mutual funds investors in Mayurbhanj. Later, the collected data was evaluated using chi-square and frequency analysis. The outcome of the current study proves that the financial literacy level of the mutual funds investors impacts the ID of investors. The outcome of the frequency analysis illustrates the FL level of mutual funds investors and also factors which determines the ID of investors in Mayurbhanj. As per outcome, the factor such past performance of securities, market awareness and company’s stability determines the ID of mutual funds investors. Hence, the current study suggests that mutual funds investors especially in Mayurbhanj district of Mayurbhanj, have to attain significant knowledge regarding mutual funds before making investment decision.