One in five mutual fund distributors active in India

Over last few years, mutual fund sector has lost close to one crore equity folios, mostly retail

India’s mutual fund (MF) sector has only 15,000 active distributors, far less than the number registered with the industry body Association of Mutual Funds in India (Amfi). At a time when the insurance sector, one of the fund industry's top competitors in financial products, has close to 2.5 million agents, such a small number of active MF sellers is proving a setback for the fund houses.

According to Amfi, the sector on date has 83,000 MF distributors registered with it. But the number of active distributors on ground is only 18 per cent of the total. No wonder penetration of MF products remain at less than five per cent.

Not long ago, the MF sector had only 50,000 registered distributors. Thanks to a free registration drive by Amfi, which began in this February, that number of MF sellers could see an increase of 65 per cent.

According to Amfi’s top executives, though many new distributors have joined, the bad economic situation is not letting these new individuals start their business.

“These distributors may have got themselves registered with no fees. They might start selling when the tide turns and the situation improves,” said a top Amfi official.

More alarming is the fact that against earlier expectations, the free registration drive received a lukewarm response. That’s why Amfi had extended the waiver to September against the earlier deadline of June. Sector sources said there was a little possibility of further extension.

“There is no point in giving any further relaxation if people do not turn up," added the official. Over the past few years, fund houses have lost close to 10 million equity folios, mostly retail. Many individual financial advisers are still opting out from distributing MFs, as they feel the commissions earned are nowhere compensating their expenses.

Amfi recently has launched a voluntary district adoption scheme. In the first phase, of the country’s over 600 districts, the scheme is targeting to cover 200. Sector officials expect the move will help bring in more investors from the hinterland and also help the local youth be a part of the fund sector.