You are putting your money in only 1 bank. So if it collapses, you money is gone. Here comes the diversification in MF, even 1 Company or bank got busted in MF, there are other investments also and thus you are not going to loose all your money. Even if MF invest in some risky avenues, they make sure that they balance it out with investment in less risky assets too.
Moreover, the money which you put in as FD, is also going to be given as loan to people/organization of which many dont fully return it back. So its a myth that FD is a secure investment.
Nothing is secure except Government securities, and that is why MF dont put money in one kind of security. They DIVERSIFY.
(Now G-Secs are also not secure, Countries are defaulting too nowadays :scared14