SEBI discusses ways to revive MF industry

SEBI plans to introduce entry loads on investments up to Rs. 0.5 million

May 18, 2012 9:34 IST | India Infoline News Service
According to media reports, market regulator Securities and Exchange Board of India (SEBI) is in the process of meeting all asset management companies (AMCs) distributors and banks to discuss ways to revive the waning mutual funds industry, including the issue of bringing back entry load in some form.

Almost from the past three years, India’s mutual fund industry has been experiencing tough times. In August 2009, SEBI banned entry load on fund investments which led to a severe declined in the number of product distributors. Then the direct sales agent population decreased to 6,000 from 80,000.

The reports said that SEBI is planning to introduce entry loads on investments up to Rs. 0.5 million. Another form discussed is that investors should write on the investment form if they want to pay a certain per cent as commission to the distributor by the AMC from the investor’s investment amount.

To expand the reach of mutual funds in the tier-2 and tier-3 cities, SEBI’s whole-time director Prashant Saran met the industry bodies of financial advisors — FIFA (Foundation of Independent Financial Advisors) and IFA Galaxy on 3rd May.
According to the Association of Mutual Funds in India (AMFI) data, mutual funds lost over 0.7 million folios (1.5%) over the past six months ended 31 March 2012 at 46.40 million folios. Over the year ended March 2012, the industry lost 0.78 million folios (1.7%). This implies that the number of folio closures has been comparatively more during the last six months.

At present, many fund houses are laying off their sales force, including staff from operations and information technology departments. Many fund houses are also adopting other measures such as giving no increment, bonus and cutting down on travel and other operational expenses.

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