Dear Comrades,
Majority
of fund houses want to leverage the nationwide network of India Post to
distribute their mutual fund schemes, said a recent report on mutual fund
penetration published by SEBI. India Post has 1.5 lakh branches across the
country.
The
SEBI survey showed that 68% of fund houses feel distribution through post
office would increase penetration whereas 18% of fund houses had a neutral
view. Only a few fund houses are of the opinion that such move may not be of
much help.
“If
the distribution is carried out through post offices, it could be a positive
step towards increasing the penetration of mutual funds. If this could be
started, this would be a significant step considering the recent push by India
Post of the post office saving schemes. Since India Post is a loss making enterprise,
an introduction of such mutual fund sales through India Post could also help
them in reducing their deficit and this could be a highly beneficial move for
both parties,” stated the SEBI report.
Many
fund houses are of the view that the nationwide network of post offices could
be leveraged for mutual fund distribution. DP Singh, Chief Marketing Officer –
Domestic Market, SBI Mutual Fund believes that it will increase penetration of
mutual fund industry. However, he opined that only simple products should be
distributed through these networks so that both post office employee and
customers can easily understand the products.
A
senior fund official from the fund house which already sells its schemes
through post offices feels that the post office network will help AMCs to expand
their footprint in B-15 cities without incurring much money on distribution and
marketing costs.
Earlier
in 2001, India Post along with IDBI Principal had initiated a pilot project in
which they distributed mutual fund schemes in Delhi, Mumbai, Kolkata and Patna.
Later, they started operations in other cities and offered products of many
fund houses like UTI, SBI, Principal, Franklin Templeton and Reliance.
Recognizing its efforts, in September 2009, CNBC-UTI gave a special
commendation award to India Post for effectively utilizing its network to
promote financial inclusion in small places. However, after entry load ban, it became
unviable for India Post to carry out distribution business.
“India
Post found it difficult to sustain its business model only on trail commission
after abolition of entry load,” says Dhirendra Kumar, CEO, Value Research.
The
fund official quoted above added that India Post generated a decent number of
folios for AMCs. However, due to regulatory constraints and increasing
instances of mis-selling, they discontinued distribution of mutual fund schemes,
he added.
http://www.cafemutual.com/News/Fund-houses-want-post-offices-to-distribute-mutual-funds~3014~New~Industry~21
