A giant leap has been taken toward financial inclusion in the country since people have been railroaded into banking and cashless transactions. The mutual fund sector has a major part to play in the formal savings and investment structure, which millions of Indians will now be able to access.

The events of the last few weeks illustrate both the challenges and the tremendous opportunities, which have opened out to BFSI in India. Nearly ₹12 lakh crore has entered formal banking channels, suggesting that banks are now playing an increasingly outsized role in registering and handholding many first-time users to the benefits of banking.

As large segments of the non-banked population will move to the banking system (previous estimates suggest about 55 per cent of the population has access to banking), financial inclusion figures will grow and, sooner or later, reflect the continuing efforts to broaden the cashless economy.

With this will arise the much-greater need to generate awareness and educate the large number of first-time bank-account openers on the investing options available.

Here, mutual funds could be the automatic first choice. While we know that mutual fund products are for all kinds of investors, the message is still not out as yet. In terms of penetration, the sector has barely scratched the surface with just 3 per cent Indians investing in mutual funds. True, efforts in investor education are beginning to show immense advancement. The sector has climbed to ₹ 16.5 lakh core in assets under management, with almost ₹2 trillion inflows in the last two years alone.

Still, an enormous challenge now lies ahead. Fresh entrants to banking channels must be encouraged to embrace mutual funds. The core aspects, future security and means to achieve financial goals have to be communicated even more than before. Here’s how the mutual fund sector can roll out the red carpet for investors.

Make people ‘invest ready’: Mutual funds have adopted several investor education initiatives. The more known methods such as investor meet-ups, published literature, online education platforms (besides advertising) have no doubt helped create the readiness in the masses to invest. However, we need to make people ‘invest ready’. Making use of biometric devices to register first-time investors in tier-2 towns would widen reach, setting up camps at corporates, using e-KYC and helping them start SIPs immediately are some of the steps the sector can take to make people open to fund investments.

Make SIPs the first choice: A systematic investment plan is an amazing product, rendering it unbelievably easy for someone to invest in mutual-fund schemes of their choice. But the present number of just about one crore SIP folios leaves much to be desired.

Because SIPs encourage wage earners to invest, gradually and easily, through digital means with automatic facilities such as the electronic clearing system, the convenience of the tool as a digitally-advanced product should be encouraged.

Strengthen digital distribution channels: As digital will be the way ahead, the sector will have to invest in digital technologies that facilitate easier transfer of money. There’s no doubt that digital technologies will not only help lower costs, but also drive and deepen mutual-fund penetration in the country.

Right now, there are just about four crore folios, simply not justified for such a large population.

An encouraging beginning has been made by the stock exchanges toward digitalisation, providing robust online platforms for investments in mutual funds.

The next step, now, is to see how initiatives such as The Universal Payments Interface and digital-payment technologies can be harnessed to make mutual-fund investments the first choice for many.

Make e-KYC simpler: E-KYC process can go a long way in initiating new investors to the mutual-fund sector.

One of the benefits of e-KYC is that it will make investing paperless and swifter for the ordinary person, and spearhead the task of taking mutual funds to the masses. Hence, if e-KYC best practices are taken up at various centres across India, the process of enrolling investors into the mutual fund sector will become far easier. With e-KYC, it will become second nature for ordinary people to invest in mutual funds.

The writer is ED & CMO, SBI Mutual Fund

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