The Hindu Business Line : `MFs growing faster in small cities'

MUTUAL funds as an investment option are growing in popularity in smaller cities and towns in the country, signalling that investors outside metros have also started to look beyond bank deposits.

"The top 6-7 cities in India today account for 70-80 per cent of mutual fund assets and the rest by others. But the smaller cities are growing much faster," said Mr Ravi Mehrotra, President of Franklin Templeton Asset Management (India) Pvt Ltd.

"If the growth (of mutual funds) in bigger cities is say 20 per cent, the others are growing at 1.3 times faster than that," Mr Mehrotra told Business Line here.

He said the appetite for mutual fund is growing in Kochi, Mysore, Surat and Ludhiana as awareness about alternative investments increases and companies add more service networks and points of presence across the country.

For Templeton, Kochi is one of the fastest growing branches in the country, he said. "People in these places are also looking beyond bank deposits these days as interest rates have fallen," Mr Mehrotra said.

Interest rates on bank fixed deposits have come down to 5-6 per cent from 10-11 per cent around three years ago. Many banks have started distributing mutual fund schemes, and this step too contributed to the growth of the industry in smaller cities.

Mr Mehrotra said the private sector mutual fund industry has grown faster than software exports at about 50 per cent annually in the past five years. Today, Indian mutual funds have Rs 1,50,000 crore in assets. Private sector funds account for 80 per cent of this amount.

"The growth can be attributed to various factors such as performance of funds, more players, new schemes, product innovation, service standards and transparency," he said.

On the consolidation in the mutual fund industry in the country, he said more acquisitions of and mergers between funds are on the cards. "In the past 2-3 years, about half-a-dozen funds were consolidated and we may see a few more," he said, adding Franklin Templeton too is open to acquisitions.