High inflation is a temporary phenomenon. There can’t be zero inflation & 8-9% growth, says A. P. Kurian
While markets are going down, inflation continues to hit the
roof. And under such circumstances, one of the most affected is the Indian mutual fund industry. In fact, its miserable run over the last couple of months have left investors really disillusioned. Following the AMFI data, the joint average AUM of the 34 fund houses in the country plunged to Rs.5,296.29 billion in July, compared to Rs.5,647.52 billion in June. This 6% drop in AUMs marked the second successive month of losses. However, in the meanwhile, A. P. Kurian, Chairman, Association of Mutual Funds in India (AMFI) shares with B&E’s Sunanda Roy, the initiatives taken by them & concerns that need to be addressed.
B&E: What are the industry’s biggest concerns/challenges at present? How do you plan to deal with them?
Kurian: The mutual fund (MF) is one of the fastest growing sectors of the Indian economy. It is poised to grow at a very robust rate. There are several estimates available. I think, the McKinsey report says 30-35%, there are other reports also. We would surely follow a robust growth rate for several years now. This is because currently the households that invest in Indian MFs are very low. Unfortunately there are more unique numbers but we know that the folio numbers are about 40-45 million. So if you take an indication as to how many folios does one individual holds, say two folios! Then roughly about 20-25 million people only have invested. That shows the large potential that is still available both in terms of increasing the proportion of savings invested in the MF market and the number of households that are there in the whole country. Even among households, from various instruments, the proportion of savings that is in Indian MF is comparatively less! Regulatory framework that has evolved in terms of standard and coverage is world-class. Further improvements can surely be done. Coming down to our own standard and practices, they are also reaching the world class level. In the service area, we are almost on the top of the list in terms of giving your account statement, redemptions credited to your account, buying and selling through Internet et al.
Let’s come to the product. We have the traditional ones, we have the sophisticated ones like the Quant funds which are managed through a mathematical model and implemented through a computer system. Though they are very small in numbers! We have ETFs, Gold ETFs, FMPs, Sector specific funds, SIPs (which are growing at a very high rate). So, there is product innovation always and differentiation. It is a happening industry day in and day out. This is inspite of the constraints or strict conditions in which we are functioning.
B&E: So, what constraints are you pointing at?
Kurian: One of the strict conditions is that you can’t invest in MFs without a permanent account number (PAN). Even if we accept only through bank, still we are ought to follow the know your customer (KYC) norm.
B&E: Are these constraints set to remain for a long time?
Kurian: Yes! It is set to remain. We tried our best to explain to the authorities that we should be spared of this because we are going through a bank and let the bank do all the formalities. But nothing happened! To relieve the investor from the burden of doing this again and again while investing in different funds, AMFI came into the picture. We catalysed a common platform and you have to do it only once and then you can invest in all the funds. Particularly these are not applicable to some of our competing products. You go to open a bank account; I don’t know whether a PAN is required. You just have to give the address proof and identity proof. In case of ULIP also, PAN is not required. We have to compete with the traditional products like bank deposits RBI bonds and now with ULIPs which are getting positioned as an investment product. All these are areas of concern to us. We need to have a dialogue on that; we need to get it sorted out. That’s what we are pursuing now.
While markets are going down, inflation continues to hit the
roof. And under such circumstances, one of the most affected is the Indian mutual fund industry. In fact, its miserable run over the last couple of months have left investors really disillusioned. Following the AMFI data, the joint average AUM of the 34 fund houses in the country plunged to Rs.5,296.29 billion in July, compared to Rs.5,647.52 billion in June. This 6% drop in AUMs marked the second successive month of losses. However, in the meanwhile, A. P. Kurian, Chairman, Association of Mutual Funds in India (AMFI) shares with B&E’s Sunanda Roy, the initiatives taken by them & concerns that need to be addressed.B&E: What are the industry’s biggest concerns/challenges at present? How do you plan to deal with them?
Kurian: The mutual fund (MF) is one of the fastest growing sectors of the Indian economy. It is poised to grow at a very robust rate. There are several estimates available. I think, the McKinsey report says 30-35%, there are other reports also. We would surely follow a robust growth rate for several years now. This is because currently the households that invest in Indian MFs are very low. Unfortunately there are more unique numbers but we know that the folio numbers are about 40-45 million. So if you take an indication as to how many folios does one individual holds, say two folios! Then roughly about 20-25 million people only have invested. That shows the large potential that is still available both in terms of increasing the proportion of savings invested in the MF market and the number of households that are there in the whole country. Even among households, from various instruments, the proportion of savings that is in Indian MF is comparatively less! Regulatory framework that has evolved in terms of standard and coverage is world-class. Further improvements can surely be done. Coming down to our own standard and practices, they are also reaching the world class level. In the service area, we are almost on the top of the list in terms of giving your account statement, redemptions credited to your account, buying and selling through Internet et al.
Let’s come to the product. We have the traditional ones, we have the sophisticated ones like the Quant funds which are managed through a mathematical model and implemented through a computer system. Though they are very small in numbers! We have ETFs, Gold ETFs, FMPs, Sector specific funds, SIPs (which are growing at a very high rate). So, there is product innovation always and differentiation. It is a happening industry day in and day out. This is inspite of the constraints or strict conditions in which we are functioning.
B&E: So, what constraints are you pointing at?
Kurian: One of the strict conditions is that you can’t invest in MFs without a permanent account number (PAN). Even if we accept only through bank, still we are ought to follow the know your customer (KYC) norm.
B&E: Are these constraints set to remain for a long time?
Kurian: Yes! It is set to remain. We tried our best to explain to the authorities that we should be spared of this because we are going through a bank and let the bank do all the formalities. But nothing happened! To relieve the investor from the burden of doing this again and again while investing in different funds, AMFI came into the picture. We catalysed a common platform and you have to do it only once and then you can invest in all the funds. Particularly these are not applicable to some of our competing products. You go to open a bank account; I don’t know whether a PAN is required. You just have to give the address proof and identity proof. In case of ULIP also, PAN is not required. We have to compete with the traditional products like bank deposits RBI bonds and now with ULIPs which are getting positioned as an investment product. All these are areas of concern to us. We need to have a dialogue on that; we need to get it sorted out. That’s what we are pursuing now.
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