D P Singh takes us through two landmark events which hold the potential of taking this industry to the next level. The maiden investment by EPFO (Employees Provident Fund Organisation) into equity index funds has huge implications in terms of business opportunities for distributors and fund houses, which D P Singh spells out very clearly. The forthcoming simplified KYC process will shortly create several crore "mutual fund ready" prospects, who can be very effectively brought into the fund industry through simple savings propositions like the SBI Savings Fund. Read on to understand the huge market opportunities that D P Singh sees ahead of us, and sharpen your business plans to make the most of both opportunities.

WF: What prompted you to rename your SBI Magnum Income - Floating Rate - Savings Plus Bond Fund into the simple new name SBI Savings Fund? Is there more to the move than just a simpler name?

D P Singh : This scheme was one of our very old schemes positioned as a short term debt fund and as the name suggests, it was bit confusing for investors and distributors to understand and at the same time, there were hardly any floating rate papers available in the market. This prompted us to re-position this product. SBI Savings Fund is a simple product where investors can park their temporary surpluses for a very short tenor and earn a return above the call money return. The name has more wider acceptance among the distributors and investors and investor are actively using this product to switch their saving to equity funds in a gradual way by way of Systematic Transfer Plan (STP)

WF: Given the vision you have to grow this fund, which distribution channels do you see contributing significantly in its growth?

D P Singh: We would like all channels to promote it actively, but do recognize that banks may not promote it very actively, as it competes with their own CASA targets. We are seeing a lot of interest among IFAs and NDs to promote our SBI Savings Fund. Having said that, we also recognize that SBI Savings Fund competes with products from other fund houses in the same space. We believe that the SBI brand for a savings oriented proposition is a strong pull among distributors as well as investors and that if we work in a focused manner with our distribution partners, there is no reason why this fund should not scale up to Rs.10,000 crores.

WF: You have been a strong advocate of onboarding first time MF investors through products like your SBI Savings Fund. Yet, we see a lot of investors coming into the industry in recent months into equity funds, attracted by the market's performance. What can we do to encourage investors to move up the risk spectrum a little more gradually, in order to get a better experience from mutual funds?

D P Singh: Yes, this is a challenge for all of us. When there is a positive sentiment, investors are ready to write out larger cheques for equity allocations, and it becomes a huge challenge for distributors and everybody to then say no. This is exactly what we are discussing with our distributors now - on how to help investors take caliberated exposure into equity markets and avoid the pitfalls of over-enthusiasm, beyond their risk taking capacity.

So, even when clients are willing to invest larger amounts into equity funds and as distributors, you don't want to miss out on the opportunity, we are strongly advocating staggering the investment into our equity funds via STP route rather than investing lumpsum investment and making use of SBI Savings Fund for setting up these STPs.

WF: Simplified KYC has been a key initiative you have been pursuing for long. What can we expect on this front in the near future and how can this impact our retail efforts?

D P Singh: I believe very strongly that we will see this implemented within this calendar year itself. There is a lot of work happening under the guidance of MoF, RBI and SEBI and we will see action very soon on this very important growth oriented initiative.

I would like all our distribution partners to become fully aware of the huge opportunity that simplified KYC presents to all of us. Once this happens, several crore savers will have instant and easy access to mutual fund investments rather going through the cumbersome existing KYC procedures. Coupled this with transaction convenience through mobile and internet platforms, one would have a whole new set of market opportunities that's opening up.

Every Indian saver can be approached to conveniently commence his mutual fund experience through superior savings vehicles like SBI Savings Fund. As they become familiar with mutual funds, distributors can gradually take them up the risk spectrum, as per their risk profile. Today, operational hassles in KYC are a big impediment in this effort, and make the whole sales proposition unviable. That will go, very shortly, and a much bigger market opportunity will soon be available to all of us.

WF: EPFO's maiden investment in your index funds marks a historic occasion for retirement savings allocation towards equity markets. What are the bigger implications you see of this move, beyond the immediate inflows into index funds?

D P Singh: It is indeed a historic moment for our industry, and we at SBI MF are truly humbled and privileged to have been chosen as the fund manager for EPFO's maiden equity investment. There are some very important perspectives that I would like to share with our distribution partners in this context.

1. Our industry has around 4 crore folios and serves around 1 crore unique investors. In one stroke, with this EPFO investment into our industry, our industry is now serving 4 crore investors! There are now 4 crore salary earners in India for whom our industry is playing a small role in shaping their retirement savings. Our role will only grow, now that the beginning has been made.

2. EPFO is one of the 3 PF vehicles. In addition to EPFO, we have in the country, a large number of regulated PF trusts and exempt PF trusts. These are far more evolved in their financial decision making, and are managed by companies themselves. The EPFO investment was made after very clear guidelines came from both MoF and the labour ministry, explicitly approving investment in equity funds. On the back of EPFO's investment, I expect many PF trusts to now seriously consider actively managed equity funds. This is a big distribution and fund management opportunity for all of us. Between these 3 types of PF entities, the total market opportunity for the fund industry, in my opinion, is around Rs.50,000 crores in 2 years time.

3. Every distributor must take one strong message to retail investors: EPFO's decision to invest retirement savings of the aam aadmi into equity funds is a strong vote of confidence in Indian equity markets and in Indian mutual funds, and in our ability to help the aam aadmi save and invest wisely to secure his future. With EPFO giving its vote of confidence, every retail investor in the country should feel much more confident about participating in Indian equity markets through equity funds. This message should be spread far and wide by distributors. Floodgates can open for retail investments, if we are able to communicate this effectively.

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