Real
growth to come from the untapped Tier 2 and 3 towns and rural India,
says SEBI Chairman
The Mutual Fund Industry has seen considerable growth in the last few years. Yet, the industry is still a long way from tapping into the huge potential for growth that exists in the country. The ways and means to do this was discussed at the Confederation of India Industry – CII’s flagship event, the ‘9th Edition of CII Mutual Fund Summit, 2013’ with the theme: Indian Mutual Fund Industry: Unearthing the Growth Potential in Untapped Markets’.
“The market has immense growth potential. But for the Mutual Fund industry to really take advantage of the same, it needs to shed its despondency and the habit of looking outside for solutions and instead start exploring possibilities in the existing structure,” said Mr. U K Sinha, Chairman, Securities and Exchange Board of India (SEBI).
“All of us have to work very hard to tap into this potential and SEBI extends its full cooperation in this endeavour,” Mr. Sinha said.
He also added, “All of us together have to look at the industry and its business at a fundamental level. There are indications that we have some non-serious players in the industry. SEBI has created up a group for setting up a long term policy on Mutual Funds to deal with them and address other issues. I expect that the group will submit its report in the next 2-3 months.”
He outlined how the industry can adopt a much more positive outlook. “It was mentioned that pension money should be allowed to be part of the asset management industry. The point is that it is already allowed. Under the Employment Provident Fund act, employee contribution is mandatory only when they are earning Rs. 6,500 or less per month. What is stopping asset management companies from going ahead and marketing to the employees earning more than this amount? How many of them have made presentation to companies and their groups of employees?”
Mr. Sinha said that instead of waiting for the government to pass legislation, the industry must put on their thinking hats to exploit the market in the existing conditions. “So many great investment vehicles have been created in this country. This is money for asset management companies to go and take. People too are willing to experiment with new products as evident from the huge amount of money raised by unauthorized entities. The industry will have to work hard and reach out to them,” he said.
Mr. Sinha informed the gathering that SEBI will accept applications from interested entities from the distribution industry for converting into a self regulatory organization (SRO). It has set a cut off date of 31st July for the same. Mr Sinha also clarified that SEBI will allow only one SRO for the distribution industry.
A report by CII and PWC tilted: “Unearthing the growth potential in untapped markets” and AMFI – CRISIL report on Mutual Fund Investment Performance was released by Mr. U K Sinha. The report outlines that 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 74% of the entire pie, with the remaining 26% distributed among other cities, according to the report.
Mr A. Balasubramanian, Chairman – CII Mutual Fund Summit 2013 and CEO – Birla Sun Life Asset Management Co. Ltd, said, “Post regulatory changes in the last two years, the MF industry witnessed significant growth in assets under management and Fixed Income space has shown significant growth adding more customers to the MF Industry. Given the current scenario of market volatility and uncertainty, these are challenging times for the mutual fund industry, where investor education and creating awareness will be the key to success going forward. It is also of immense importance that the distributor fraternity is adequately trained and regulated so that the mutual fund product is sold to large number of investors for the right purpose.”
Mr. H N Sinor, Chief Executive, Association of Mutual Funds in India (AMFI), stressed upon the need for investor awareness. He said, “32 crores were spent last year on Investor awareness programs with almost 75% of such programs in B and C tier towns of this country. This movement away from the top 15 odd town to the interiors of the country is a healthy trend for the industry.”
Cafemutual is the Online Partner of CII Mutual Fund Summit 2013.
