CII - PwC report: "Untapped potential in Indian mutual fund market" (report attached)
Deepak Vaishnav
P R E S S R E L E A S E
Untapped potential in Indian mutual fund market, CII - PwC report
SEBI Chairman U K Sinha released the CII - PwC report on Mutual Fund
Mumbai, June 26, 2013 - The mutual fund industry has registered a compound annual growth rate (CAGR) of 18% from 2009 - 2013, but the national population is still largely underbanked with a very low level of financial inclusion.
The business of Indian mutual funds (MFs) industry is largely confined within the Tier 1 cities, however, the industry is focussed on developing the penetration ratio and increasing its presence in other cities. Currently, the top five cities of India contribute to 74% of the entire pie, with the remaining 26% distributed among other cities, according to the CII - PwC report on MFs titled “Unearthing the growth potential in untapped markets”.
The CII - PwC MF report was released today by U K Sinha, Chairman, Securities and Exchange Board of India at CII Mutual Fund Summit in Financial Capital of India –in Mumbai.
A. Balasubramaniam, Chairman – CII Mutual Fund Summit 2013 and CEO – Birla Sun Life Asset Management Co. Ltd, said, “Given the current scenario of market volatility and uncertainty, these are challenging times for the mutual fund industry, where the investor perceives investments in the capital market to be risky and unsafe, and hesitates to channelize his savings into mutual fund products. It is critical that the distributor undertakes measures and initiatives to educate the investor and increase the level of awareness. Considering the critical role played by the distributor, it is of immense importance that the distributor fraternity is adequately trained and regulated so that the mutual fund product is sold for the right purpose and adequate time period.”
Gautam Mehra, leader, Asset Management, PwC India, said, “Uncertainty appears to have become the new ‘normal’, with no immediate sight of an upsurge. It is important that mutual funds are positioned as a long-term investment vehicle, with the potential to achieve financial goals and provide investment solutions, especially in these challenging times.
In terms of opportunity, the infrastructure debt market has a lot of scope. Additionally, the other big growth catalyst could be the entry of pension products, with tax playing an enabling role in this growth story,” Mehra added.
According to the report, there is untapped potential in the Indian MF market. The primary challenges are low awareness levels and financial literacy, adapting the distribution channels, reach, scalability and cultural and attitudinal change. In order to reach the bottom of the pyramid, challenges remain in terms of unavailability of proper documentation like PAN card, bank account etc. However, it is likely that the roll out of ‘Aadhaar’ initiative will to some extent resolve these problems.
Mutual fund industry manifests big opportunity for growth and further penetration, and this can be achieved over time, with support from technology. It is also important to market MFs as a ‘concept’ in order to create a strong pull from customers.
The report suggests that mobile banking can be a potential game changer, because it can use existing infrastructure to reach out to un-banked rural population. With a subscriber base of over 900 million, mobile phones can be used as a huge facilitator to investing, redeeming and exiting funds. Additionally, new distribution channels can be explored for cash transactions beyond PoS (Point of Service) and ATM networks of banks.
The independent financial advisor (IFA) is another crucial link in the distribution chain of mutual funds. This segment has potential in widening the distribution network and expanding the client base on a sustainable basis.
The report also recommends use of social media to engage with customers for product innovation, customer service and distribution of real time information with the aim to create unique solutions and experiences. Best practices will need to be adopted from Micro-finance Institutions (MFIs), the FMCG industry, the telecom industry and the postal channel to bring about innovation in distribution model.
Looking ahead, the CII – PwC report points out that the industry needs to have a relook at their distribution path, product design, technology mix, awareness programmes for investors and service initiatives among other things to increase penetration and business as a whole.
Ends
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About CII
The Confederation of Indian Industry (CII) works to create and sustain an environment conducive to the development of India, partnering industry, Government, and civil society, through advisory and consultative processes.
CII is a non-government, not-for-profit, industry-led and industry-managed organization, playing a proactive role in India's development process. Founded over 118 years ago, India's premier business association has over 7100 members, from the private as well as public sectors, including SMEs and MNCs, and an indirect membership of over 90,000 enterprises from around 257 national and regional sectoral industry bodies.
CII charts change by working closely with Government on policy issues, interfacing with thought leaders, and enhancing efficiency, competitiveness and business opportunities for industry through a range of specialized services and strategic global linkages. It also provides a platform for consensus-building and networking on key issues.
Extending its agenda beyond business, CII assists industry to identify and execute corporate citizenship programmes. Partnerships with civil society organizations carry forward corporate initiatives for integrated and inclusive development across diverse domains including affirmative action, healthcare, education, livelihood, diversity management, skill development, empowerment of women, and water, to name a few.
The CII Theme for 2013-14 is Accelerating Economic Growth through Innovation, Transformation, Inclusion and Governance. Towards this, CII advocacy will accord top priority to stepping up the growth trajectory of the nation, while retaining a strong focus on accountability, transparency and measurement in the corporate and social eco-system, building a knowledge economy, and broad-basing development to help deliver the fruits of progress to all.
With 63 offices, including 10 Centres of Excellence, in India, and 7 overseas offices in Australia, China, France, Singapore, South Africa, UK, and USA, as well as institutional partnerships with 224 counterpart organizations in 90 countries, CII serves as a reference point for Indian industry and the international business community.