A clarification from the Securities and Exchange Board of India (Sebi) asserting that units issued by the Unit Trust of India (UTI) and other mutual funds are deemed securities is set to make life uncomfortable for the mutual fund industry since banks are not allowed to sell securities directly.
At present, banks are major distributors of mutual fund units. In December last year, Sebi, in response to a clarification sought by the Association of Mutual Funds of India (Amfi) on the status of mutual fund units, had said,