In September 2012, the capital market regulator, Securities and Exchange Board of India (Sebi), formally pushed theRs.13-trillion Indian mutual fund (MF) industry to go the hinterlands of India and sell their schemes. To make such a move lucrative, it allowed fund houses to charge an additional 30 basis points (bps) on daily net assets of the scheme if the new inflows from beyond top 15 (B15) cities were at least 30% of the gross new inflows of the scheme or 15% of the average assets under management (AUM) of the scheme, whichever was higher. Has this incentive yielded results? Is the MF industry getting significant inflows from B15 towns?
Typically, MFs have been sold more in larger towns and cities than elsewhere. After Sebi’s move in 2012, the MF industry got together and classified postal codes and towns across India that they thought were top 15 cities (T15). And all other pincodes were classified as B15 locations and distributors in these places ended up getting extra commission if they got investors from such areas. It has been three years since the start of this effort.
According to the data by the Association of Mutual Funds of India (Amfi; the MF industry’s trade body) and Computer Age Management Services Pvt. Ltd (CAMS), fund houses seem to have penetrated into the interiors of India.
As per Amfi, the number of retail folios (this also included high net worth individuals) from B15 locations stood at 22.9 million as on end of January 2016, up from 18.3 million folios at the end of March 2013. At present, B15 retail folios account for about 50% of the overall retail folios. Almost 22% of AUM under retail folios are from B15 locations.
In terms of gross inflows (without accounting for money that went out) in newly-launched equity mutual funds, about 23-27% came from B15 locations.
