The states include Maharashtra, New Delhi, Karnataka,
Gujarat, West Bengal, Haryana, Tamil Nadu, and UP.
The visible divide is due to uneven financial prosperity of
people and lack of manufacturing units which are concentrated majorly in the west,
north and southern region of India.
There is a big
disparity among Indian states when it comes to contribution of assets to
country's Rs 13 lakh-crore mutual fund industry. With continued low penetration
of the mutual fund product as an investment avenue for investors in states
considered less developed, the graph is quite different in states that are
economically more developed.
Ten Indian
states contribute a lion's share of 95% or Rs 12.25 lakh crore. These include,
Maharashtra, New Delhi, Karnataka, Gujarat, West Bengal, Haryana, Tamil Nadu,
Uttar Pradesh, Rajasthan and Andhra Pradesh.
The asset
contribution from the rest two-third of the Indian states comprise a meager 5
per cent. Interestingly, out of them, there are several which are less than Rs
1,000 crore and many which contribute less than Rs 500 crore to the mutual fund
sector.
For instance,
north-eastern states like Arunachal Pradesh, Manipur and Mizoram have Rs
200 crore each as contribution of the overall assets. While, Nagaland and
Tripura, each has Rs 300 crore and Rs 700 is contributed by Meghalaya. Mutual
Fund industry gets Rs 900 crore and Rs 400 crore from Jammu & Kashmir and
Sikkim, respectively.
Industry
officials say that the visible divide is on the back of uneven financial
prosperity of people and non-uniform distribution of corporates which are
concentrated majorly in the west, north and southern region of India. Another
factor which has impacted the distribution of assets is region-specific issues
of insurgency, poor infrastructure and law & order problems.
This does not
go well with fund houses as they resist expansion by opening branches in
unstable territories which they term as "high risk centres". This has
resulted into poor penetration of the mutual funds and therefore
the lower contribution.
For instance,
out of the nearly 1,600 mutual fund branches across the country, hardly 34 are
in the north-eastern region. And only handful of fund houses which include SBI
MF, UTI MF, ICICI Prudential MF, Birla Sun Life, Reliance MF and Peerless
MF have managed to have their direct presence in the region.
Industry
executives understand the pain but they explain their helplessness. According
to them, the primary reason is the inaccessibility in the northeast which needs
to be blamed. "States like Maharashtra, New Delhi, Karnataka and others
have relatively better infrastructure and wealth is concentrated in states like
these. So, why would not we expand here when business is here. And given the
thin margin the industry is operating on, it's economically not advisable for
us to go out in troubled regions," says a chief executive of a fund house
which focuses on top states. He requested anonymity on the issue.
The states he
mentioned have concentration of corporate offices in cities like Mumbai, New
Delhi and Bangalore. Such large clients contribute heavily in the non-equity
segment of the industry.
According to
Dhirendra Kumar, chief executive of fund tracking firm Value Research,
"The MF sector can't alone be blamed for low expansion in the region.
There are various other issues such as a weak underlying economy and
insurgency. More, expansion is a commercial call. Unless it is profitable, why
would players go and expand?"
At a time when
industry and the regulator is more interested in the debate of top-15 and
beyond-15 cities, the divide among states is widening. Though the industry has
got robust flows from beyond-15 cities in the last two years, one can't rule
out the possibility that these smaller towns and cities will be from the top 10
states only.
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