MFs neglect north-east India, want safety and accessibility

Poor connectivity, bad infrastructure and fear of insurgency do not let expansion, say officials

The northeast region remains neglected by the country’s Rs 12 lakh-crore mutual fund sector.

Only 34 of 1,606 MF branches are in these eight states. And, SBI MF, UTI MF, ICICI Prudential, Birla Sun Life, Reliance MF and Peerless MF are the only ones from the 40-plus fund houses to have branches in the region.

More, nearly two-thirds of these branches are in a single state, Assam. Tripura has five and Meghalaya comes third with four branches. Arunachal Pradesh, Nagaland and Manipur each have a single branch. Mizoram and Sikkim have none.

The region is eight per cent of the country's total area and in the 2011 census had a population of about 40 million, a little above three per cent of India's total.

Against an all-India average of one MF branch for every 750,000 citizens, the northeast has one branch per 1.18 million.

No surprise, then, that assets under management from the region are less than 0.5 per cent of the country total, at about Rs 5,400 crore. The region's collective contribution is far lower than what Odisha, Goa, Madhya Pradesh or Bihar each contribute.

Dhirendra Kumar, chief executive of fund tracking firm Value Research, says: “The MF sector can't alone be blamed for low expansion in the region. There are various other issues such as a weak underlying economy and insurgency. More, expansion is a commercial call. Unless it is profitable, why would players go and expand?”

“Primarily, it's the inaccessibility of the northeast states which should be blamed, whether you look at the road or rail connectivity or air flights. Over and above, the continuous fear about insurgency makes it challenging to do business in these regions,” said a senior official with a fund house.

He said Assam was better covered as the state is relatively easier to access.

May be that Modi's special attention for the northeast can give lift the sentiments. He sees the region as "Natural Economic Zone" and also went to the extent of describing it as India's capital of organic agriculture. His government has earmarked Rs 53,000 crore for the development of the region; besides, Rs 28,000 crore has been earmarked for construction of new railway lines to boost connectivity. If the government's plans, as proposed, are fulfilled fund managers may not have excuses to be not in the northeast.