Nilesh Shah of Kotak Mahindra AMC has called for a unified KYC process to make mutual fund investing easier in Tier 2 and Tier 3 cities. Simplifying onboarding is seen as a critical step to boost participation beyond top urban centers, where current complex documentation remains a significant barrier for new investors.
Nilesh Shah, Group President at Kotak Mahindra Asset Management Company, has strongly advocated for a unified Know Your Customer (KYC) framework to help the mutual fund industry expand its footprint in smaller Indian towns. Shah described the current onboarding process as complex, noting that it creates unnecessary hurdles for investors in Tier 2 and Tier 3 locations, often referred to as B30 and B100 cities. A single, standardized KYC process could significantly reduce the friction that currently prevents many potential investors from entering the formal financial system.
Access and Participation in Smaller Markets
Industry data highlights the untapped potential in these regions. According to the Association of Mutual Funds in India (AMFI), cities located beyond the top 30 contribute roughly 19% of the total industry assets under management. Looking even further, investors in towns beyond the top 100 cities account for approximately 10% of total industry assets and a more significant 17% to 18% of Systematic Investment Plan (SIP) assets. These figures suggest that while interest in market-linked savings is present, the reach remains heavily skewed toward major metropolitan hubs.
The Road to Mass Adoption
While a common KYC process is a major focus, industry leaders emphasize that it is only one component of a broader growth strategy. Navneet Munot, Managing Director and CEO of HDFC Asset Management Company, has frequently highlighted that investor education remains the most important factor in transforming savers into market-linked investors. For many in rural or semi-urban areas, understanding the benefits and risks of market-linked products is essential before committing capital.
Another challenge is the physical reach of financial services. Vetri Subramaniam, MD of UTI Asset Management Company, noted that establishing a physical presence in every small town is not always commercially viable for asset managers. Consequently, the industry is increasingly looking toward digital solutions and Artificial Intelligence to provide educational content and support in regional languages. Meanwhile, Ravi Kumar Jha, MD and CEO of LIC Mutual Fund, has suggested that innovative product structures, such as flexible or group SIPs, could better cater to the income patterns of rural investors, further driving industry growth.
For investors, the move toward a unified KYC and better digital access could lead to a more seamless experience and reduced paperwork over time. The primary monitorable remains how quickly regulators can align these disparate onboarding standards and how effectively asset managers can deploy low-cost digital tools to reach these underserved markets.