SBI PF adopts PoP model to expand reach
SBI Pension Funds uses digital innovation to simplify subscriber onboarding process:
Mehul Dani: How has SBI Pension Funds has grown in 2019-20 and what is the yoy growth?
Na ray an an Sada nan dan: SBI Pension Funds is one of the first 3 entities entrusted with the fiduciary responsibility of managing funds for NPS Trust. We enjoy the largest market share of 38.2% with total AUM of Rs Rs153 trillion as of 31 December 2019, growing at 38.11% yoy. We are the largest player in the private sector schemes, enjoying a market share of 57.5%. Our AUM has grown in line with the industry at a CAGR of 46% in the last 5 years, despite 5 new players with strong distribution franchise entering the sector.
How did your customers base grow?
As of March 2019, our total subscriber base stood at 26.56 million, of which 20.26 million subscribers are part of private sector schemes. Our subscriber base for the private schemes has increased from 3.07 million to 20.26 million. Subscribers constantly compare us with our peers and with other investment avenues. We have on a continuous basis generated superior risk adjusted returns for our subscribers. Within limitations of investment guidelines, we have generated around 10% CAGR returns for the government schemes since inception. We charge a fee of 0.01% to our subscribers, which is the lowest across the investment tool available in India. Additionally, pension fund structure permits lowest leakage which benefits subscribers to reap benefits of compounding. The government steps of providing tax incentives to promote NPS with the intent to create social security net for citizens has also helped us grow our subscriber base.
Has pension demand across the country increased or decreased in the current FY so far?
Pension Fund Managers (PFM) until recently were not allowed to market NPS products, which was largely taken care of by PFRDA. The product was and continues t o be di s t r i buted through approximately 80 Points of Presence (PoP), which includes our sponsor, the State Bank of India. Recently the regulator allowed PFMs to act as PoP and market products and acquire subscribers.
The demand for pension tie-up has constantly been on rise among corporates. Other than from the private sector employers, we have seen lot of demand from Central Public Sector Enterprises (CPSEs) given the strong returns generated by us with a low fee structure. With changes in policies by the government, we expect the entire existing superannuation fund can also be moved to NPS.
What is the impact of slowdown?
Our company continues to grow both subscriber base and AUM. For the quarter ended 31 December 2019, we have grown by 38.11% yoy and 8.01% qoq. Our business continues to remain immune to shocks in the economy since we have a subscriber base that has been acquired over a decade, which includes both government and private sector employees.
Our portfolio was marginally impacted by the fiasco created post IL&FS Group default. In the current FY, we have further strengthened our risk evaluation process and we are selective in acquiring risk.
What have been your marketing plans to meet the targets in the current FY?
Since we have recently received license to operate as PoP, we are in the process of developing our own infrastructure to onboard retail and individual subscribers, both through online and corporate mode. Given the recent growth of our private subscribers from 3 million to more than 20 million in 5 years, we foresee huge potential which continues to remain untapped.
We have engaged one of the best development teams. Our endeavour is to have minimal human intervention and less paperwork. We are also engaging experts to best promote NPS products through digital platform. We will continue to reach out to corporates, which include both private organizations with large employee base and CPSEs, through offline marketing.
What digital tools have been introduced?
In the current set-up, we believe that with digital innovation, the existing process of onboarding subscribers can be simplified, and we can improve the overall experience of the subscribers.
We have moved a step ahead in this process by eliminating manual or physical intervention in the subscriber’s journey by integrating with various third parties to avail their services such as for KYC, payment gateway, bank account validation through penny drop functionality, etc. We are in the early stage of innovation in the industry. We expect to reap the benefits in the coming quarters with strong growth in subscriber numbers. Our proposed PoP operation will be a completely digitized and rolled out soon.
What is your medium to long term outlook?
We have seen a surge in the number of individuals coming within tax bracket in the economy. We foresee huge opportunity in the unorganized sector largely from tier 2 & 3 centers, both from self-employed and the increasing number of people coming under the tax net. With NPS providing tax exemption up to 20% of gross income, it is the most viable option being looked upon by the traders and businessmen for future cashflow support.
What are your targets and expansion plans?
We aim to achieve `1.66 trilllion of AUM by end FY2020 with strong performance and increased impetus on marketing efforts.