Converting 99% of SBI's 530 million customers into investors

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As SBI Mutual Fund prepares for its Rs 12,000-crore initial public offering, India's largest asset manager is firmly focussed on market expansion as its top priority.

Its biggest growth opportunity, the fund house says, is not selling to the affluent or attracting foreign capital, but converting millions of State Bank of India customers—who currently keep most of their savings in deposits—into long-term mutual fund investors.

Today, only around 5.5 million of SBI's 530 million banking customers invest in mutual funds, leaving nearly 99% of the bank's customer base untapped, according to the fund house.

"We're just on the surface," Managing Director and CEO Debasish Mishra told Moneycontrol in an exclusive interview. "India is still at a very early stage of mutual fund penetration. Increasing retail participation and expanding our market reach will remain our key priorities over the next two to three years."

The opportunity is particularly significant because SBI enjoys the country's largest banking franchise, reaching almost every corner of India. Mishra said the institution that once led the country's banking inclusion drive is now aiming to play a similar role in expanding investment participation.

"Before Independence, the Rural Credit Survey led to the creation of SBI to take banking to the hinterlands. Similarly, SBI Mutual Fund will take investments everywhere—and I must emphasise, everywhere. This is an inflexion point," he said.

The distribution network remains a formidable advantage, but the next phase of growth is expected to be driven less by physical branches and more by digital channels.

Joint CEO DP Singh said the implementation of Universal KYC could be a game changer by allowing customers to invest through SBI's YONO platform as easily as they open a fixed deposit.

"The biggest opportunity now is digital distribution," Singh said. "Once Universal KYC is in place, customers should be able to invest through YONO as seamlessly as they open a fixed deposit. Given SBI's customer base of over 530 million, including around 21 million salary accounts, we believe the SBI channel has significant headroom for growth and could easily double the SIP book."

SBI Mutual Fund currently receives monthly SIP inflows of around Rs 4,000 crore, of which about Rs 1,300 crore, or roughly one-third, comes through the SBI distribution network. A similar proportion is sourced through intermediaries, suggesting the fund house has already diversified beyond its parent bank even as significant cross-selling opportunities remain.

The asset manager also believes encouraging customers to invest strengthens banking relationships rather than competing with deposits.

"Customers who hold investment products such as SIPs tend to have a much stronger relationship with the bank," Mishra said. "Our internal assessment suggests that a savings account with digital banking and an investment product such as a SIP is around four times more valuable than a standard savings account."

Singh said the bank's leadership is fully aligned with the strategy despite intense competition for deposits.

"The Chairman of State Bank of India consistently tells us that we cannot shy away from offering investment products to our customers. If we want customers to remain with us, we have to provide them with investment products in a structured manner. Whatever assets we garner from the bank ultimately create value for the bank anyway."

Beyond its core mutual fund business, SBI Mutual Fund is also looking to accelerate growth in alternatives, portfolio management services, GIFT City and international operations. Backed by partner Amundi, the fund house's international business has grown to around $2.5 billion, and it aims to double that over the next two to three years.

For India's largest asset manager, however, the biggest opportunity remains much closer to home: converting millions of savers into investors as the country's financialisation gathers pace.