India's Leading BFSI Companies 2016

India's Leading BFSI Companies 2016

What are your views on current scenario of the Indian mutual fund industry?

The Mutual Fund industry has recorded a CAGR of around 23% in the last 10 years to reach an AUM of 13,400 bn this year comprising of 4400 bn in equity, 6,000 bn in debt and 3,000 bn in liquid assets. The total folio of the industry stood at 460 mn and accounted for mere 3% of the population.

We expect the Indian mutual fund industry to touch 20,000 bn in the next three years. We believe that the industry has immense scope to grow and benefit the vast majority of population that has not been able to participate in the India growth story.

Can you please elaborate on your company’s performance during FY15? And what is your outlook for FY16?

Reliance Capital Asset Management Ltd (RCAM) is one of the largest asset managers in India in terms of AUM, managing over 2,600 bn as of Dec 2015, across mutual funds, pension funds, managed accounts and offshore funds. The company displayed good performance by registering a good growth and achieving several key milestones in FY16. In the first three quarters, Reliance Mutual Fund’s (RMF) AUM grew faster than Industry average and crossed 1,570 bn.

With continued focus on retail investors and penetration in smaller locations, RMF (a part of RCAM) has achieved the highest growth of 24% among the Top 5 AMCs in retail assets. We have also surpassed UTI MF to become the largest AMC in terms of assets in B-15 locations. RCAM has also gained new grounds in several other spaces like international business, portfolio management and alternate assets. In 2016, we have also received the Coal Mines Provident Fund Organisation (CMPFO) mandate, which is another milestone in RCAM’s portfolio alongside the Employees’ Provident Fund Organisation (EPFO) and Pension Fund Regulatory and Development Authority (PFRDA) mandates.

For FY17, the company’s focus areas are ‘Investor Awareness and Service Quality’, ‘Distributor Servicing’ and ‘Market Expansion’. As part of our business objectives, RCAM would be looking to scale up new categories in the Industry and expand the size of the market itself. Rather than focusing solely on market share, we plan to take a look at the asset sub-categories from the investors’ pointof- view to achieve market expansion.

What are the attributes which differentiates your fund house from other fund houses? What kind of benefits do you provide so that an investor would channelize his money into your fund?

RCAM stands for wealth creation and we can create wealth for all kinds of investors across the country. Another attribute which differentiates us from other fund houses is that we provide superior customer service experience and have one of the best risk management framework in the Industry. So we always endeavour to provide both wealth creation and security of investments to our investors.

With financial inclusion as the key agenda of the new government, according to you, how can mutual fund businesses enhance its reach? Do you think investor awareness programmes yield any tangible results?

We work with the mission to create a mutual fund investor in every household and to achieve it, we are focusing on the investments from retail investors. We are trying to change the investment behaviour of the people in small cities and towns and giving them an exposure to new ways of investing.

We are conducting a lot of investor education and awareness programmes, and trying to launch products that are simple for investors to understand. We are also trying to get a lot of new investors into other asset classes such as debt.

What are the major challenges faced by the mutual fund companies in tapping the rural markets? What can be the additional measures to be undertaken by the regulator / government to support mutual fund businesses in achieving the same?

Some of the key challenges faced by our Industry are lack of awareness, need for more brick and mortar branches of AMCs and need for more on-ground distribution channels to help the industry grow. Another challenge lies in communication, where it is important to drive out the myths regarding mutual fund investment which exists in urban areas as well.

From the regulatory point-of-view, E-KYC and possible opening up of e-commerce platform for MFs will help expand the Industry. Tax breaks for certain category of schemes would also go a long way to attract new investor to the Industry.

Kindly provide key initiatives undertaken by your company to make your products and services more accessible to the customers through digital mediums?

RMF comprehensively offers product information, ease of transactions and wide range of online self-service options through the integrated digital channels to its customers and distribution partners. With a key focus on making customer experience simple and paperless, we follow digital investment solution approach for engaging with our customers rather than the traditional product centric approach.

Some of initiatives undertaken by us to help our customers to engage with us digitally are –

How will the adoption of digital technologies transform the BFSI sector over the next ten years?

With the advent of digital technologies the consumer behaviour in the BFSI sector will be transformed in the following areas:

  1. Mobile as the primary mode for transaction: With the increasing usage of mobile, we see more and more customers transacting on mobile using mobile app or mobile internet.
  2. Innovative products: Technology will create demand for innovative product offering propositions that are dynamic, instant or have a targeted solution of multiple customer needs.
  3. Customer service: Real time customer services would be the key and expectations of customers would grow significantly towards getting the information and being serviced.
  4. Data analytics: Customers would expect financial services brands to reach out to them with specific and pre-disposed recommendations to fit into their consideration criteria.
  5. Digital marketing: Product consideration criteria for the customers would be largely driven by the digital outreach.

Wider availability of internet and mobile will enhance participation of customers from remote areas in financial systems which will ultimately increase the value and volume of transactions multi-fold. Increased focus on smart phones, Aadhar infrastructure and emergence of payment banks will further provide impetus to the banking sector.

In your opinion, what are the major data security threats for the mutual fund businesses? What strategies are being adopted by them to safeguard against such threats?

With majority of business moving online, data security and cyber threats have become important risks that need to be managed and mitigated. A lot of transactions are now being done over mobile phones, which require protective measures that extend to these devices too.

To protect the data leakage from within the system, we have implemented comprehensive data leak protection (DLP) software which allows us to define file formats of the data that we do not want to go out of the system (e.g. investor reports / trade data) and then blocks these if someone tries to send them out. The software also blocks and alerts the BISO if anyone tries to upload data into a file sharing website (that is not already blocked systemically).

To prevent leakage of data, we have also blocked file sharing websites / popular email sites, and all computers to USB / CD drive copying facilities. With respect to investor data (which is contained in the system maintained by our Registrar and Transfer Agent), we limit the access of sales personnel to account data of investors from their region, so that they cannot access unrelated customer accounts.

For cyber threats, we continuously update our firewalls and anti-virus systems to prevent hackers from accessing our data. We also conduct regular reviews (occasionally with the help of external experts) to enhance network and server security features.

To prevent information on trades being leaked out, we bolster these systemic controls with manual / procedural controls. We restrict cell phones into dealing rooms, record phone lines and track conversations and Bloomberg chats on a surprise (and random sample) basis, and have a strict personal securities trading policy (PSTP) for all employees having access to trading data or senior functionaries, who might use position to access the data.