Issued for various denominations, the cheques will facilitate faster withdrawal and reduce redemption time by at least three days
06-Jun-2001 •News Desk
Returns are not the only benchmark by which you choose a fund - convenience and ease of investment has also emerged as a potent tool for serving investors. Product differentiation is the key to survival as the race to grab a share of investors' booty gets hotter by the day. In a move specifically targeted at retail investors, Zurich India AMC has launched "ZuriCheques" for investments parked in Zurich India High Interest and Sovereign Gilt funds. The cheques will facilitate faster withdrawal from the two bond funds and is expected to cut redemption time by at least 3 days. This is not the first time that the AMC has attempted at providing pre-issued redemption cheques. Kothari Pioneer had introduced a similar facility in its money-market account some time back but could not sustain it.
What are ZuriCheques?
ZuriCheques are pre-issued cheques of various denominations which will be issued in favour of the first applicant, at the time of investment. In the event of redemption, an investor just has to put the date on the cheque and submit the same in his bank. The cheques are drawn on Citibank, and the amount involved here is not large given the cap on redemption. An investor can redeem a maximum of Rs 2 lakh or 75% of the invested money, whichever is less. The AMC receives the details of transaction from the bank and adjusts the number of units to the extent of the redemption on that day's NAV. The facility is available to existing investors as well.
Times, They are Changing...
The current procedure is relatively tedious, where investors receive redemption cheque in 3 business days and it takes another three days before the amount is credited to an investor's account. Yet, this is an improvement on the earlier system when open-end bond funds were launched and took anywhere between 7-8 days before the investors received the redemption amount. Closed-end funds, especially from UTI still take a fortnight to 20 days before the redemption process is complete.
Why Quick Redemption is Important?
We save and invest, not only for the future but also for facing unforeseen circumstances. Thus, investments should be highly liquid and be there for us when we need it. While ZuriCheques are aimed at making the entire process less cumbersome and time consuming, a further reduction in redemption period will always be a welcome move. After all, a fund in need is a fund indeed!
Finally, Some Innovation for Retail Investors
So far, most innovations in the debt category have come in liquid funds, where high-networth individuals and corporates park their short-term surpluses. For instance, big-ticket investors are offered high value cheques in liquid funds, where they get redemption cheque the same day. Most liquid funds also offer Sunday NAVs, where underlying bonds continue to earn interest even on a holiday. This facility is also out of bound for retail investors, since liquid funds typically have a high minimum investment. Besides, some liquid funds offer other advantages like instacheque and liquidity sweep account with customised cheque writing facility.
On the other hand, some of the fringe benefits for retail investors include facility to buy and sell units through the network of NSE terminals across the country. Currently, Zurich and IDBI Principal AMCs offer this facility. However, the transactions on NSE terminals are yet to take off due to lack of investor awareness and brokers' focus on selling only equities.
While AMCs get large investments from high networth investors, the volume of business lies with retail investors. Further, small investors are also a stable lot and hardly churn their investments. Its time AMCs started to spruce up service standards for this set of investors, since prompt service is no less important than returns!