NEW DELHI
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India had 162 million demat accounts as of June, and 93 million SIP (systematic investment plan) accounts as of July—a strong indicator of increasing financialization in the country. Still, there are places where terms like “Sensex” or “Nifty” are foreign to people.
Kargil, in the Union territory of Ladakh, over 200 kilometres from Srinagar, is one such place. Neither an asset management company (AMC) nor an insurer has yet set up a branch here. The vacuum is filled by an agent of Life Insurance Corp. of India, who has earned himself the “LIC Mansoor” moniker.
“I have been selling insurance policies in Kargil for over two decades. But lately, there has been a mistrust in financial products since the ‘paisa double’ scam surfaced in which a company fled after taking people’s money a couple of years ago,” said Mansoor Ahmed, aka LIC Mansoor.
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FD is the preferable financial instrument
As far as banking activities are concerned, most people prefer fixed deposits (FDs) with Jammu and Kashmir Bank, which has multiple branches in Kargil. The city has a couple of branches each of State Bank of India (SBI) and Punjab National Bank. Private lenders HDFC Bank, Axis Bank and ICICI Bank are also present.
“Some mutual fund (MF) business happens via bank branches. I have seen people investing in new fund offers of SBI Mutual Fund via SBI, but the awareness is low,” said Mohammed Amin, accounts manager and tax consultant at B.R. Sobti & Co. Chartered Accountants.
J&K Bank, however, does not focus on MF distribution. “Some private banks and SBI do pitch MF investments, but there are hardly any takers. People tend to run fixed and recurring deposits with us. Real estate investment and taking loans for it is popular,” said Mohammad Hussain, chief manager at J&K Bank in Kargil.
There are only 12 AMC branches in Jammu & Kashmir with an average assets under management (AAUM) of ₹9,245 crore as of July 2024—only 4% of gross state domestic product (GSDP), according to Association of Mutual Funds in India (Amfi). The MF penetration is the highest in Maharashtra at 92% of the GSDP. Data for Ladakh or Kargil is not available separately.
Awareness needed
To be sure, many financial services firms conduct financial awareness campaigns for army personnel in the region. Financial consultants based here seek similar efforts for residents.
Amin highlights it is a misconception outside Kargil that people living here do not have a surplus for investments. “Although people fear financial fraud, they want to explore other investment avenues beyond FDs and real estate. Awareness campaigns from trusted financial services firms are needed so that real financial knowledge can reach here. We shall be happy to take a lead as point persons for such firms.”
Hussain of J&K Bank said even women have bank accounts and save money. “Mahatma Gandhi National Rural Employment Guarantee Act has helped women get jobs. We see a consistent flow of money in their bank accounts. People in government jobs or those running their own businesses also buy insurance policies. Most of them tend to buy land or houses even on loans.”
The tribal residents of Kargil are exempt from paying taxes under Section 10(26) of the Income Tax Act on any income arising or accruing from any source in the scheduled areas and the entire income from dividends or interest on securities. This means that rental income or capital gain on real estate is not taxable as long as the property is in Kargil. However, properties bought elsewhere or incomes from businesses outside scheduled areas are taxable. Capital gains accrued through investing in the stock market or MFs are also taxable.
“People have a perception that everyone living here is exempt from taxes, which is wrong. Moreover, hardly anyone files an income tax return (ITR) here. We try to educate them that even if they do not have to pay taxes, they should still file an ITR. Now that private banks have started asking for ITR records when giving loans, more people have started filing ITRs,” said Amin.
The opportunity exists. AMCs must come forward to take the initiative as they do for defence and army personnel.
“We aim to expand our distribution via Union Bank branches as a priority, followed by having our own branches. We also work with individual MF distributors, digital platforms and other banks. It will help increase awareness and customer penetration in far-off places. Ultimately, expansion in any region must make business sense,” said Madhu Nair, chief executive, Union Mutual Fund.