MFs' tie-ups with India Post fail to take off

Fund houses' tie-ups with the postal department for marketing their schemes through post offices are yet to take off in a bigger way. UTI MF, Principal PNB AMC, Prudential ICICI and SBI Mutual Fund have such arrangements with the department.

MF officials say post offices failed to sell schemes in rural areas due to a lack of proper understanding of the schemes among its officers.

Contribution of post offices to the total sales of all the four MFs has been negligible. "Number of people visiting post offices has come down drastically. Further, MFs have to invest a lot in educating and training the officals in post offices," said an official in a fund house.

Postal departments in other countries have managed to leverage their traditional positions to provide a wide range of services in financial services areas. In India, however, the exercise seems to be holding no water.

Principal PNB AMC was the first to tie up with the postal department in 2002. Prudential ICICI, SBI Mutual Fund and UTI Mutual Fund followed.

Fund houses are looking to enter into the yet-to-be-tapped rural segment as at present distribution channels in these areas are weak compared with the penetration level of other financial services products.

Rajan Krishnan, business head - asset management, Principal PNB AMC, said: "It is a labour intensive and difficult channel, which requires long-term investment. Its contribution has been negligible."

UTI MF started selling 15 schemes through post offices initially, which was increased to 22 later on. Only those products that are easily comprehendible are being sold through this channel.

"A lot of investment goes into building up and training sales force in this segment. Contribution from post offices is very low compared with other distribution channels," said Nilay Kumar, vice-president, head postal channel, UTI MF.

Fund houses are aggressively considering newer routes and innovative ways in order to tap markets that are still untapped.