A Balasubramanian, chief executive officer (CEO) of Aditya Birla Sun Life MF, says, “It is the outcome of the efforts that are being undertaken by the industry in increasing the penetration of MFs beyond big cities. This growth would continue to do well, given the high focus. We aim to ensure MFs become part of the daily conversations among individuals.”
Sector executives say India’s smaller towns and cities have huge amounts of money. Due to lack of awareness about MFs and good financial advice, these could not be brought into the folds of the fund sector in a bigger way. Which, they say, is changing fast. And given the fact that other traditional investment avenues like gold, realty, land and banks’ fixed deposits (FDs) are fast becoming unattractive from a returns’ perspective, B15 will play the next role of higher growth of the MF sector.
Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon MF, says: “Growth of B15 highlights that MFs are no more a big city phenomenon. It’s just a tip of the iceberg; there is tremendous potential to tap. As awareness and experience of investors improves, the industry would see much higher growth from these regions. Also, I am confident that post demonetisation, the flow of money into banking will find its way into funds.”
Already, interest rates on bank FDs are trending down. On savings’ balances, too, rates of interest are being cut to as low as 3.5 per cent. These developments have made investors search for avenues where returns are relatively better.
G Pradeepkumar, CEO of Union MF, says: “B-15 has a lot of potential to grow. In terms of number of retail folios, B-15 matches the top 15 cities but I believe the ratio can be 2:1 in favour of B-15 in the next three to four years."
The existing additional incentives to distributors if investors from B-15 are brought in have played a role. Further, several online innovations, much easier Know Your Customer (KYC) processes and advertisement campaigns have helped MFs to grow.
Currently, the top five cities — Mumbai, Delhi, Bengaluru, Chennai and Kolkata — contribute 71.5 per cent of all assets under management (AUM) of the fund sector. The next 10 cities, part of the Top-15, contribute nearly 13 per cent. These are Pune, Ahmedabad, Hyderabad, Baroda, Jaipur, Surat, Kanpur, Lucknow, Chandigarh and Nagpur.