The Indian mutual fund industry must make an effort to improve branding of mutual funds as an asset class, according to Securities & Exchange Board of India, Chairman, U. K.Sinha.
Speaking at the Mutual Fund summit organised by the Confederation of Indian Industry (CII), Mr. Sinha said, “the industry has never been doing branding. It is not clear in the minds of people where mutual funds fit in the hierarchy of various investment options.”
Mr. Sinha said that some mutual fund schemes were violating the 20:25 rule which mandates that there should be at least 20 investors with no investor having more than 25 per cent.
“SEBI discovered that in a number of mutual funds, there has been a violation of this rule. As a first step, SEBI has warned them for breaching the rule but if it is not stopped, we will take regulatory action,’’ he said.
Lamenting that the mutual fund industry had not sufficiently embraced latest technology, he said, “we have a lot to catch up.
Internet-based trading on the exchanges in the secondary market is about 10 per cent but for the mutual fund industry it is five per cent. So this is one major area the industry must consider.’’
The SEBI chief said mutual funds could manage funds like the Employee Provident Fund Organisation (EPFO). “The mutual fund industry has assets under management (AUM) of around Rs. 10 lakh crore. I was quite intrigued that the Portfolio Management Services (PMS) industry is around Rs 7.7 lakh crore. Of this, Rs 6.6 lakh crore is from pension fund industry of which Rs. 5.5 lakh crore is from EPFO. And this is only in debt schemes. Why do they not come to you?’’ he asked.
A report by CII-PriceWaterhouse Coopers (PwC) titled ‘Indian Mutual Fund Industry – Challenging the status quo – setting the growth plan’ was released at the summit and as per the report, the AUM in India will rise from $ 63.9 trillion to around $ 101.7 trillion by 2020.
On expectations from the Union Budget 2014-15, Mr. Sinha said, the two main points were a long-term mutual fund policy and that pension funds should come into mutual funds.
Thirdly, Mr. Sinha said SEBI has asked the government for clarity on tax benefits for products like real estate investment trusts (REITs) and Infrastructure investment trusts.
“The regulations are ready but the tax treatment is to be understood and the government has to decide.’’