A recent data published by the National Account Statistics, a government organisation, shows that Indian household have invested 1% of their investible corpus in mutual funds with the highest exposure to physical assets such as bullions and real estate where they have invested close to Rs.15.39 lakh crore that is 54% of the total household investments.
The data captures statistics for the financial year 2015-16. According to the data, Indian households have invested Rs.30.53 lakh across various asset classes while their liabilities stood at Rs.4.31 lakh crore. Hence, the net financial savings of Indian households was at Rs.26.22 lakh crore in FY 2015-16.
Indian households have invested Rs.31,850 crore in mutual funds in FY 2015-16 Deposits such as bank FDs and postal deposits followed physical assets with investments of Rs.6.63 lakh crore.
Financial assets of Indian households in FY 2015-16
|
Assets |
Total Investments (in Rs. Crore) |
% to Net Investments |
|
Physical assets |
15,39,110 |
54 |
|
Deposits |
6,62,815 |
22 |
|
Pension funds |
2,76,854 |
9 |
|
Insurance |
2,66,063 |
8 |
|
Currency |
2,00,518 |
7 |
|
Government securities |
66,639 |
2 |
|
Mutual funds |
31,850 |
1 |
|
Shares and debentures |
9,467 |
0.3 |
|
Total |
30,53,316 |
100 |
Source: National Account Statistics 2017 data
Cafemutual sought views of a few industry experts. Here is what they have to say.
Radhika Gupta, CEO, Edelweiss MF believes the penetration of mutual funds has been increasing at a healthy pace. “In India, equity mutual funds is equal to 4% of GDP versus the 60% of GDP in USA. It is not very surprising that the mutual fund penetration in our country is low but it is definitely increasing. Assets have been historically concentrated towards physical assets like real estate and gold. However, this is set to change with demonetisation and awareness campaigns.”
Swarup Mohanty, CEO, Mirae Asset attributed cumbersome KYC process for low acceptance of mutual funds among households. He says, “People do not need to furnish PAN card details to put money in bank FDs and insurance. On the other hand, it is mandatory for retail investors to provide their PAN details while investing in mutual funds. However, if the number of mutual fund folios is compared with the number of PAN card holders in the country, it would be clear how well the MF industry is penetrated.”
Seconding his view, Nikhil Naik of Naik Wealth believes that our country is underserviced and requires more advisors and distributors to increase mutual fund penetration. He said, “There was a brief time period where real estate was doing well and the real rate of interest was high. Post 2008 era, this has changed gradually with people now shifting to financial assets.”
He further added, “Any financial product or investment needs a push. India is home to 1.32 billion people and we don’t have enough distributors to service this large population.”
Currently there are around 46,000 active mutual fund distributors which means that there is only one advisor for 27,000 people. Clearly, the MF industry needs to empanel more distributors to maximize its outreach, Nikhil said.
