Evolving distribution channels

The potential for MF industry to grow is huge. Currently 77% of the investments in mutual fund come from  super metros and Tier I towns. The scenario is most likely to change with everyone expanding. SBI MFalone has more than 100 points of acceptance across India, 28 investor service centers, 45 investor’sservice desk and 52 district organizers, a base of over 20,000 agents currently. SBI’s branch network,which is one of the widest networks in the country, as well as India Post and offices of CAMS, is a part ofthis distribution network. Reliance and HDFC are believed to have plans to have their presence in 400places. UTI already has probably the largest network. The strategy, firstly, is to increase the penetration tocover Tier II-Tier III cities and rural areas. Secondly, complementary to the first idea, enhancing investoreducation and awareness initiatives by the industry is getting high priority. Savvy fund houses are increasing appropriate technological infrastructure in rural areas and strengthening alternative distribution networks. Recent regulatory changes may have temporarily brought despondency to the distribution channels but in time suitable strategies (including fee for advisory) will restore balance. Investment is an area where consultation is very important; the direct route will be used by very few investors.

What is needed is standardization of operational areas and services like inner fund house swaps, common Portals providing single view of investments with the entire industry, uniform and pooled customer education including investor communication. The country is enjoying robust economic health. This is due to the efforts of all citizens including the farmers and small workers in the most rural of rural India. The capital market owes its rise to these humble workers as much as to any one else. Therefore, the India story cannot be called a success unless these people too can partake in the capital market boom. The only way to do this is through mutual funds and it is the distribution which has to deliver. This can happen only with the support of the regulator and the industry.

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