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SEBI Wants MFs to Chase Retail Investors

The market regulator has said the industry must serve retail investors better

With the mutual fund industry increasingly becoming the playground of the rich and powerful, the market regulator has issued a statement that it must give adequate representation to retail customers.

Chairman of the Securities and Exchange Board of India (SEBI), C.B. Bhave, has said that the mutual fund industry must hike the retail portion of their assets under management (AUM). In other words he has indicated that the industry as such is ignoring the very people, investors who do not fall under the category of high networth individuals (HNIs) or institutional investors, for whom it should have been of the greatest service.

Bhave indicated that this would be good not just for the retail investors, but also for the industry because, “In October 2008, when the liquidity crisis almost derailed the industry, redemption pressure had come from corporates and not retail investors”.

He was addressing the CII Mutual Fund Summit in Mumbai on Wednesday.

Bhave added, for good measure, “To prevent any such re-occurrence, the industry must diversify its assets base away from those who can give a big one-time jolt. The potential of non-corporate investors is tremendous.”

However, according to U.K. Sinha, Chairman, UTI Asset Management Company, this would not be possible till the government extended further sops to the industry. He said, “Major tax incentives are a must for retail investors to come to the industry. Also, investor education initiatives must be taken up to improve participation.”

What was clear from the industry heads’ speeches was that the industry must co-operate in a better way to make sure there was greater tangible growth and benefits for all concerned. At the moment there were many cases of the industry working at cross-purposes.

However, not satisfied with just the Rs 20,000 crore bailout package that the government had extended to the mutual fund industry in 2008 to escape the redemption pressure and remain solvent, there were more calls made for greater government support to the industry for faster growth.

According Sinha, “We need support from regulators, policy-makers and the government in equal measure to generate rapid growth.”

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