Physical presence back in focus as mutual funds look beyond metros

New branches being added even as digitisation empowers every transaction

The mutual fund (MF) industry turned digital rapidly in the pandemic, with even non-financial transactions going online. Yet MF companies aren't pulling the plug on physical branches and many are even increasing their count.

SBI Mutual Fund leads the way by adding close to 55 new branches since January 2020. The country’s largest fund house has a physical presence in even small towns like Purulia (West Bengal), Mirzapur (Uttar Pradesh), Chaibasa (Jharkhand), and Srikakulam (Andhra Pradesh) among others.

“Covid-19 infused lockdown made online the preferred way to stay connected to investors, but we believe offline interactions are equally important to serve millions of investors who might be more comfortable with in-person interactions. Branches continue to be critical to expand our services to under-served towns in India. With this aim we have added around 55 branches since January 2020,” said D P Singh, deputy managing director and chief business officer, SBI Mutual Fund.

ICICI Prudential and Axis have also opened around half-a-dozen new branches in the last one year, according to communications issued by them.

The focus is on branches as competition shifts from top cities to the so-called beyond-30 (B-30) locations. Residents of B-30 locations, places after India’s top 30 cities, are turning to MFs as investment awareness spreads and the industry deploys distributors for them.

As of September 2022, investors in B-30 areas accounted for 17 per cent of the total assets under management (AUM), up from 16 per cent a year ago. The MF distributor count in B-30 locations increased from 40,400 in March 2020 to 54,700 in October 2022. As a result, 49 per cent of the total distribution strength of fund houses is now based in B-30 locations compared to 46 per cent in March 2020.

“Branches are important as a lot of new investors are coming in and that too from tier-II and tier-III locations,” said Saugata Chatterjee, co-chief business officer, Nippon India Mutual Fund, which has branches in some 300 locations.

According to MF executives, not all investors are comfortable with digital transactions. They also say that branches help them get visibility and win the trust of new investors. Branches also serve as a meeting point for MF staff and distributors.

Some smaller fund houses and new entrants in the MF industry also lay emphasis on physical branches despite budget constraints.

Parag Parikh Financial Advisory Services Mutual Fund (PPFAS MF) started opening branches outside Mumbai after starting operations in 2013. It is now present in all major cities and plans to add more branches.

“Our branches in metros have helped us get closer to clients and distribution partners. We plan to steadily add more branches in cities where we are seeing good growth,” said Neil Parikh, chief executive officer (CEO) of PPFAS MF at a unit holders’ meeting recently.

WhiteOak Capital Mutual Fund, another new entrant, also emphasises on physical branches. It claims to have 44 branches already and plans to add more in coming years to enhance reach in smaller towns.

Some fund houses are sticking to the online-only mode. “Physical offices become necessary if you are dealing with institutional investors. Our focus is on retail investors,” said Rajiv Shastri, director and CEO, NJ Asset Management, another new entrant in the near Rs 40-trillion MF business.