The size and scale and the productivity benefits are something which are visible for AMCs and it should be their fiduciary duty to pass part of that to the unit holders. Everything cannot be passed on, but some part needs to be passed on. What do you think that middle path could be where AMCs are happy and mutual fund investors are delighted?
What you say is right, I think the way the regulatory framework has been evolving all these years the industry definitely has to attain a scale and as a result of that today what we are seeing in the marketplace that 40 lakh crore industry size, about 20 lakh crore equity size is a function of how the industry has been expanding the base and building a scale. So, naturally the scale benefit should accrue to the ecosystem in general which essentially the investors benefit. And if you look at the higher the size, lower the fees have already been given as a roadmap about three years back like it was given in the year 2019. In fact, if one looks at the AMC growth versus the profitability, the growth would be far higher than the profitability.
I think profitability has to be looked at from two angles. One is the operating profit versus the cash that gets accrued over a period of time, therefore, you get other income as well.
So, if one goes by that, definitely the scale benefit has been accruing to the investors but the question is how much incrementally you want to do and when do you want to do and so on and so forth given the fact that industry is still only about 20% or 19% of the banking industry size on an overall basis.
If we have to take equity as an asset class alone, it is only about 12% of the banking industry size. We still have a long way to go. And second is, if one looks at the AMC industries in terms of expanding across different parts of the country in order to get more number of customer base, we are only about 3.6 or 3.7 crore unique investors and we still have a long way to go in terms of adding more customer base. Therefore, the question always remains that what point you want to take that position in order to consider any further reductions. The very fact that SEBI chairperson during the press meet have given an acknowledgment for the engagement that we had with SEBI at multiple levels, I would like to thank SEBI chairperson for this, for having heard us, for having listened to us in terms of the data that we had presented which was different from what they had in their calculations, which of course, she has acknowledged in the press conference itself, for which we would like to thank her and also given the guidance that she had given on the basis of which our engagement that we had clearly highlights the kind of data that the industry has been building over a period of time by way becoming one of the most transparent in the industry. So, keeping that in mind, the middle path will always be doing a fine balance between the need for expansion of the industry further, need for increasing the customer base, the need for increasing the footprint and getting more and more people to actually buy into the mutual fund in order to create a healthy capital market in the country.
I think all of that have to be taken into account keeping in mind the whole ecosystem including the need for building the distribution community to the next level of growth.
So, all of that are extremely important in building the business that is what I think I believe that SEBI is looking at on an overall basis, how the ecosystem can actually get built as one of the most powerful, respectable industry by of course keeping the large responsibility that we have, the fiduciary responsibility not just only for managing the risk, fiduciary responsibility is also for expansion of the industry.
