Synopsis
As India’s mutual fund industry grows, blockchain can revolutionize unit ownership, offering real-time settlements, transparency, and security. With rising digital participation and SIPs from smaller towns, blockchain adoption faces scalability, privacy, and regulatory hurdles. Strategic pilots, regulatory clarity, and user-friendly platforms are key to driving future transformation.
A large part of the tax-paying population in India is highly tech-savvy and familiar with digital investment platforms that offer the convenience of investing from one’s living room. With zero income tax on income up to 12 lakh rupees, a part of the disposable income will be channelised into the mutual fund market through systematic investment plans (SIPs).
As per the industry data, the average assets under management of the Indian mutual fund industry stood at Rs 72.20 trillion as of May 2025.
The stocks of companies like BSE and CDSL, providers of investment services in India, are touching new highs in the current financial year. DIIs and FIIs are betting on the growth of these companies as India’s large middle class population is moving towards capital markets to achieve their financial goals and create generational wealth. The total number of mutual fund accounts stand at 23.83 crore while accounts under equity schemes stand at 18.84 crore as of May 2025 (source AMFI).
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View Details »As per RBI data, India is currently sitting on 1.3 lakh crore rupees of unclaimed assets. If these assets were on blockchain guided by smart contracts, it would have empowered the rightful heirs to reap the full benefits of these investments that were made by family members, which now sit idle in the vaults. 
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As India becomes the world’s 5th largest economy, we need to ask a vital question: can blockchain technology transform how mutual fund ownership is tracked and transacted?
In this article, let’s explore the potential of blockchain to transform the mutual fund industry.
Benefits
Tokenization of mutual fund units: Each mutual fund unit can be represented as a digital token and these tokens can be stored in a digital wallet giving complete control of the assets to the investor. By using smart contracts, activities like, compliance, distribution of dividend can be automated reducing cost of operations.
Real-Time settlements: The fund houses can reduce their overhead costs by automating record keeping and tokenized mutual fund units on blockchain can enable instant-transfers as compared to T+1 or T+2 cycles.
Tamper-proof investor data: Every transaction, once recorded on blockchain, is time-stamped and cannot be altered. By deploying blockchain for investment ownership Investors, fund managers, governing authorities could view a live, tamper-proof record of ownership. Blockchain will completely eliminate backdated entries and illicit ownership transfers.
Challenges
Scalability: Given that the total number of mutual fund accounts in India stands at 23.83 crore (as of May 2025), we are looking at extremely high volumes of daily transactions. Public blockchains may find it challenging to handle large transaction volumes, and private blockchains with selected validators may be required to manage the network.
Regulatory hurdles: A clear policy framework on tokenizing securities which includes mutual fund units is required to clear legal and compliance roadblocks and drive mass adoption of the technology.
Data Privacy: Public blockchains are accessible to all and highly transparent. To protect sensitive user data, we will need a layered or hybrid model of data storage while retaining its decentralised nature.
Conclusion
The success of blockchain technology largely depends on adoption in the Tier 2 and Tier 3 cities. With the rise in disposable income and ambition to improve generational wealth, we are witnessing a wave of investors entering the capital markets from smaller towns. According to the industry data, more than 50 per cent of systematic investment plan (SIP) accounts come from semi-urban and rural areas. We should aim at designing intuitive blockchain interfaces to boost financial inclusion beyond metro cities.
Some of the immediate vital steps which can be taken to put the mutual fund industry on-chain are regulatory support, small pilot projects, and investor awareness campaigns across the country.
(The author, Devika Mittal is the Regional Head at Ava Labs)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
