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Tapping into small investors’ savings

It Will be a long time before the theme reaching out to small investors becomes passé in mutual fund conclaves

Written by Sandeep Singh | Published: June 27, 2013 3:24:30 am

It Will be a long time before the theme reaching out to small investors becomes passé in mutual fund conclaves. So there was nothing surprising that yet another of those events included a report,this time by CII and PwC telling the industry how to go about it.

The happy news is that the extended period of collapse of its investment base since 2009 has come to an end and issues more than survival was at the forefront.

Meanwhile,the industry that was facing the challenge of Ulip(unit-linked insurance plan) then is now going to face the challenge of inflation indexed bonds which it seems will be a winner. Simultaneously,as Sebi chairman UK Sinha told the industry on Wednesday that there are still several grey investment vehicles to which people are willing to go instead of mutual fund.

As he noted there are incentives on offer to the industry for going beyond top 15 cities but there are no takers.

But is it the lack of offices which is holding up penetration of mutual funds in India or is it because they still find more incentive in ploughing corporate surplus liquidity through the funds?

For instance,the PwC report also points out that the AUM contribution from the top five cities has risen from 71 per cent in March 2012 to 74 per cent in March 2013. These figures show that the industry needs to do a lot more to achieve the objective of reaching out to the customers and routing investments towards themselves.

The work is needed because the investor base is on a decline in the mutual fund industry and in the financial year 2012-13,the mutual fund industry witnessed a decline in its folios by 3.6 million.

The report pointed to the obvious difficulties but offered a better solution. That lay in the examples of telecom,FMCG and postal network. The report advised the industry to adopt the best practices adopted by them. It also advised use technology,to go for demand driven approach and also tap the self-help groups and co-operatives.

Sandeep is a senior assistant editor based in Mumbai

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