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| Banks park Rs 17,291 crore in MFs |
| Chandan Kishore Kant / Mumbai Aug 30, 2009, 00:17 IST |
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Investments came in fortnight ended Aug 14 on low credit offtake
Banks’ investments in mutual funds increased by Rs 17,291 crore during the fortnight ended August 14 to Rs 1,56,910 crore, which is over 20 per cent of the total asset under management of the industry in the period.
With credit growth falling in recent months, banks have resorted to large-scale investment in liquid schemes of mutual funds that offer 4.5-4.75 per cent return, while the reverse repo window earns 3.25 per cent only.
According to data released by the Reserve Bank of India (RBI), bank investments in mutual funds have shot up 7.35 times from Rs 21,348 crore a year ago. At that time, the year-on-year growth in bank credit was estimated at 25.8 per cent, which has now dropped to 14.9 per cent.
In its annual report released on Thursday, RBI has raised concern over high dependence on corporate and institutional investment as one of the problems affecting the mutual fund industry.
But the industry said that they could do little if companies were keen to invest in schemes floated by fund houses to earn good returns. “We are just like an investment vehicle and favour all, whether it is an individual, bank or an institution, with different products,” said AP Kurian, chairman of the Association of Mutual Funds in India (Amfi).
On the other criticism faced by the industry regarding their low penetration outside big cities, the domestic mutual fund industry said that rural areas were the future of the industry but added that it still had a long way to go to generate substantial investments from Tier II and Tier-III cities.
“We accept the fact that we still have to go further, but that does not mean fund houses are complacent with the situation (in which most of the money is coming from institutions and corporates). It is not that the industry is doing nothing. It takes time, efforts and investments to reach out to households, and we are extremely conscious on this front. The RBI’s review does not represent the full truth,” Kurian said.
“However, we have continued to open branches outside the urban centres in Tier II and III cities. Though investments from rural sector is not significant, but it is gaining reasonable size,” said the chief marketing officer of one of the leading fund houses in the country.
Nimesh Shah, chief executive officer of ICICI Prudential Mutual Fund, said, “Though most of the business comes from the top eight cities, but we see future is in the rural sector. That is why we have increased our presence from below 100 locations a year ago to around 200 at present, and are concentrating on these newer towns, going forward.”
Past few years have shown a positive trend in investments coming from Tier II and III cities and their share of investment was rising, said Sandeep Dasgupta, CEO of Bharti Axa Investment Managers. According to him, apart from the institutional segment which comprises 65 per cent of the assets under management, a reasonable share of 15-20 per cent of the balance investment was coming from rural areas.
N K Garg, CEO of Sahara Mutual Fund, said that there was an absolute need to reach out to retail investors. As of now, over 85 per cent of the investments came from the top urban centres, he added further.
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