SEBI’s push to increase the penetration of mutual funds in smaller towns seems to be yielding the desired results. The B15 market is growing at a steady pace, shows a note sent to fund houses by AMFI.
The note shows that B15 cities have overtaken T15 cities in terms of number of retail folios as over 50% of retail folios are from the hinterland. Of the 4.65 crore retail folios as on March 2016, close to 2.34 crore are from B15 cities compared to 2.31 crore folios of T15 cities.
Overall, the number of folios in B15 cities has increased by 13% or 26 lakh folios i.e. from 2.08 crore folios in FY 2014-15 to 2.34 crore folios in FY 2015-16.
In fact, assets from B15 locations in retail segment grew from Rs. 1.08 lakh crore in March 2015 to Rs.1.35 lakh crore in March 2016, an increase of Rs.27,622 crore. The rate of growth in assets for B15 locations in retail segment was 26% in FY 2015-16.
A Balasubramanian, CEO, Birla Sun Life attributed this growth to the increased awareness about mutual funds in such locations. He said this on the sidelines of a press conference held in Mumbai recently. In fact, AMFI data shows that close to 65% of IAPs were conducted in B15 cities in FY 2015-16.
Some officials believe that the B15 market will continue to grow. “There are many factors which will help us expand the B15 market. To start with, AMCs have tie up with banks, especially public sector banks which a good presence in smaller towns. Also, distributors want to grow their business irrespective of the reduced commission. Further, investor awareness campaigns held in smaller towns are also helping distributors acquire clients. Eventually, as the markets grow, the demand for mutual funds will go up,” said a senior official of a public sector fund house.
In September 2012, SEBI allowed AMCs to charge additional TER of up to 30 basis points if the new inflows from these cities are minimum 30% of the total inflows. In case of less inflows, the proportionate amount is allowed as additional TER. This allows AMCs to pay higher commission to B15 distributors. Also, the recent cap of 1% upfront is not applicable to B15 market.
Currently, the average ticket size of retail segment in B15 is Rs. 58,000 as against Rs. 2.08 lakh in T15 as on March 2016.
