By IANS
Mumbai : The mutual fund industry should penetrate rural and lower income groups in the hinterland, says C. Rangarajan, chairperson of the Economic Advisory Council to the prime minister, extending the recommendations made in the financial inclusion committee report.
Giving the keynote address at the Fifth Annual ICRA Mutual Fund Awards function here Tuesday, Rangarajan expressed concern over the limited reach of mutual funds in rural areas.
Elaborating his argument, he said most fund houses have their sales office location in the top 10 cities, with a token presence in the remaining cities.
“And according to Invest India Economic Foundation survey, there are around 34 million people with the potential and capacity to invest in mutual funds,” he pointed out, adding that over 57 percent of such people live in rural areas.
“Thus there is great scope for both widening and deepening the spread of mutual fund industry in India. This financial inclusion of investors from other areas can be achieved through investor education, awareness building, networking and greater use of IT.”
Moreover, the expansion of the mutual fund industry is critical on account of the major role the government is expecting it to play in garnering the huge resources, required for developing India’s infrastructure, which Rangarajan pointed out, “is currently the single biggest long-term constraint on sustaining high growth rates of 9-10 percent”.
Stressing the need for expansion of the mutual fund industry, Rangarajan said that the funds also have a critical role to play in increasingly ageing societies.
“People are living longer after retirement, but pension systems world over, including India, are being overhauled by moving from fiscally damaging tax payer funded pay as you go systems to defined contribution pension systems where both employer and employer contribution systems are invested. And in this process of reform systems, mutual funds can play a pivotal role,” he said.
Lauding the growth of the mutual funds industry, he said that the future looks bright for this sector. However, he came down sharply on certain practices prevailing in the industry.
“Take for example the advertisements that carry statutory warnings regarding risks. The rapid-fire manner in which it is read out only shows that the warning is suppressed.”