The appeal is obvious. Who doesn’t want to tap into India Post’s vast network—one that has nearly seven times the number of branches (1.6 lakh) as the State Bank of India (SBI), the mutual fund distributor which reaches the most people in the country. It is early days, and even though Amfi is trying to make this work, it’s an uphill task, say experts.
The main challenge is training the postmen to sell riskier products. Till now, postmen have focused on selling capital guarantee products like the National Savings Scheme and the Monthly Income Scheme, among others.
“Postmen enjoy widespread trust, reliability, and recognizability among common people. Yet, mutual funds represent a dynamic, complex domain where products are intangible and require clear explanations and calculations,” said Debasish Mohanty, chief strategy officer at The Wealth Company Mutual Fund.
Key Takeaways
- The plan targets 1.6 lakh India Post branches, significantly outperforming any traditional bank’s distribution network.
- The biggest risk is rural investors assuming MFD products carry the same sovereign guarantee as traditional post office savings.
- Success hinges on India Post’s ability to deploy a seamless, end-to-end digital KYC app for postmen.
- To prevent mis-selling, Amfi is restricting initial sales to ‘simple’ products like index and liquid funds.
- The industry is wary due to past failures where postmen pushed high-risk thematic funds for non-monetary incentives.
“Even post-NISM certification, their grasp of financial markets may remain limited, mirroring gaps among many rural clients unfamiliar with market dynamics,” Mohanty said.
Every individual has to clear the National Institute of Securities Markets (NISM) series VA exam to become a mutual fund distributor.
Srikanth Meenakshi, co-founder Prime Investor, an MF research platform, said that while it is possible to certify postmen and put them through training, it is unclear whether this would lead to meaningful mutual fund penetration.
Awareness of market-linked products among investors in tier III and beyond cities and rural areas remains low, and sending newly trained individuals with financial incentives to sell mutual funds could create negative outcomes, including loss of trust if investors face losses, he added.
Moreover, distribution is not just about selling but also handholding investors during market downturns, which is difficult to expect from postmen for whom this is a part-time role alongside their core duties, Meenakshi added.
KYC hurdle
Another AMC official, on the condition of anonymity, said that Know Your Customer (KYC) is a major challenge for new investors, and it is unclear whether postmen are equipped with digital tools to complete KYC, upload documents, and onboard investors. “Unless the process is simplified—using Aadhaar, Permanent Account Number (PAN), one-time password-based (OTP) verification, and end-to-end digital onboarding—this channel will not grow very fast,” the person added.
To solve this, India Post is working on an application to have an end-to-end digital KYC process, a senior India Post official said.
Since the initiative was announced in August, 71 employees of India Post have completed training to become mutual fund distributors (MFDs), and the organization plans to transition 50% of its employees into MFDs, the official said.
The pilot of the distribution via postmen is expected to in Mumbai first and then parts of Maharashtra before going pan-India, the official added.
Experts also argue that there may be some mis-selling that needs to be monitored. Twenty years back, when certain AMCs tried selling mutual funds through postmen, it was paused as cases of mis-selling came to light. Postmen were offered mixer grinders, utensils, radios, and other items. In smaller towns, some sold risky thematic funds simply because they offered higher commissions.
Jimmy Patel, managing director at Quantum Mutual Fund, said the biggest mis-selling risk could be investors assuming guaranteed returns. “Rural investors are used to guaranteed post office products, and they may assume mutual funds sold by postmen are also guaranteed,” said Patel. And hence, training must clearly explain that the products sold are third-party and market-linked products, Patel said.
Amfi’s plan of action
Amfi is initially helping postmen and counter staff involved in postal banking to clear their NISM VA mutual fund distributor exam and generate their Employee Unique Identification Number (EUIN).
When asked how many training sessions with postmen Amfi has done and how many EUINs have been generated from that, Venkat Chalasani, chief executive officer at Amfi said, “This is in a pilot phase one, and it would be premature to put out aggregate national numbers.” However, he added that early results have been encouraging, both in terms of participation and exam outcomes.
After clearing the exam, participants will be trained to sell simpler mutual fund categories such as liquid funds, index funds and simple hybrid funds, which are easier for first-time investors to understand and for distributors to explain.
Additionally, they will be trained on digital, platform-based onboarding to ensure seamless execution. Based on learnings from this pilot, “we will scale up and then articulate more formal targets over the next one to two years,” Chalasani said.
The rollout is likely to be gradual and region-specific rather than nationwide, said Patel. For India Post, digital adoption has improved, and postmen can now dispense money digitally. This will enable technology to become even better in the future and support mutual fund distribution, Patel said.
What else can be done?
Beyond distribution, India Post offers an opportunity for low-cost brand awareness for the AMC, where AMCs can showcase their products and run educational programmes while generating revenue for postal authorities, said Patel.