Looking to expand its reach among the rural population, the mutual fund industry may get readymade access to millions of rural consumers bought into the formal banking system. This is due to the new norms for the National Rural Employment Guarantee Act that helped 20 million workers under the scheme to open saving accounts with post offices or banks.

Workers have been asked to open accounts in order to ensure timely payments and avoid the involvement of middlemen.

According to an official from the ministry of rural development, the number of bank accounts opened due to NREGA is soaring as a massive drive has been launched across states to open accounts for each of the estimated 40 million NREGA beneficiaries at present. The number of beneficiaries would go up further with the scheme being extended across the country since April 2008.

Surprisingly, there is no independent, authoritative data on the number of mutual fund investors in the country. Dhirendra Kumar of Value Research, estimates the number of fund investors at around 6 million. That?s a mere 1.8% penetration into the country?s 321 million individual wage earners.

The rise of mutual fund industry has led to an expansion in its network of distributors. Excluding sales by banks, the number of fund agents soared to 72,108 by March 2008, compared to around 54,000 in January 2007. According to experts, the number of distributors for the 35-odd active fund houses has reached around 1 lakh now.

?For too long, we have left out rural areas for expanding our mutual fund business, the time the ripe to look towards rural belt for encouraging people in investing mutual funds,? an official with Association of Mutual Funds India said. Currently, funds to the tune of over Rs 5.68 lakh crore are managed by the mutual fund industry. ?Even if we can tap only 10% of the workers, we could mobilize a huge amount of investments,? a senior official from a multinational mutual fund active for over a decade in India, said.

Moreover, the number of saving accounts would go up even further, if states, which are currently lagging in opening accounts, speed up efforts in this regard. The ministry official said despite the spread of rural bank branches, more than 50% of rural households have been deprived of banking services for many years.

?After the inclusion in the formal banking system of so many rural workers, the next step should be to educate them about investment decisions,? a rural development ministry official said. More than 11 million savings accounts have already been added to the post offices? existing kitty of 14 crore.

During 2007-2008, Rs 10,738.47 crore was paid as NREGA wages to more than 3.3 crore households, out of the total expenditure of Rs 15,856.89 crore on the scheme. Rural development minister Raghuvansh Prasad Singh reckons more than Rs 20,000 crore have been spent under NREGA since its launch in February 2006, of which more than Rs 15,000 crore is the wage component.

Andhra leads the pack in openings accounts for wage payment with 80 lakh accounts, of which 78 lakhs is with the post offices. Other leading states in opening savings accounts are Jharkhand (21 lakh), MP (13 lakh), Karnataka (13 lakh), Orissa (5 lakh), Bihar (4.6 lakh) and UP (5 lakh).