PAN is hindering retail investments: Amfi chief

Association of Mutual Funds in India Chairman A P Kurian said on Saturday that canalising household money into mutual funds has become a challenge.

Income tax permanent account number requisite, know your customer norms, and lack of level playing field between insurers and mutual funds are the key reasons for the problem, he said.

"We need to see inflows increase from households into mutual funds. This is a constant challenge and struggle for the industry due to some policy framework," he said.

Kurian was referring to the PAN requirement for investing in mutual funds, and the absence of the same requirement in the insurance industry.

From July 2, the Securities and Exchange Board of India has made it mandatory for existing as well as potential investors to submit a copy of the PAN or an evidence of having applied for the same until the year-end.

From January, no mutual fund applications without a copy of PAN card will be accepted. This has led to slowdown of retail participants in the equity funds and also hit the systematic investment plans and micro SIPs that are targeted at the lower end of the economy.

Amfi head said lack of financial literacy was a hindrance in reaching out to retail investors in remote areas. He voiced concern of low penetration of mutual funds in the country, saying only 4-5 per cent of India's gross domestic savings go into mutual fund investments compared with as much as 50 per cent in other countries.

Kurian said there is a need to look into the huge churning of mutual funds investments done by distributors.

There have been many instances of distributors advising investors to shift from existing schemes to new funds. Distributors do this with the intent of earning more commission.

Reacting to SEBI's proposal on entry load waiver for direct MF applications, Kurian called for changes in the distributor model to reach out to remote areas.

SEBI is likely to come out with norms on entry fee waiver in case of direct applications received by mutual funds within 15 days.

Earlier, in August, SEBI came out with a proposal to waive out entry load on mutual fund units that are directly applied for and are not routed through any distributor, agent or broker.

Mutual fund industry had lamented concerns on a big slowdown in their business and in turn the growth of mutual fund industry, if the Securities and Exchange Board of India waives off the entry load for direct investments in mutual fund schemes. End

MF direct application entry fee waiver norm in 15 days

Mutual fund entry fee waiver norms on direct applications is likely to be announced by the Securities and Exchange Board of India in 15 days, said T C Nair, whole-time member, SEBI.

"There is a need to look at the rationalisation of entry cost on direct applications," he said.

In August, SEBI proposed waiver of entry loads on mutual fund units that are directly applied for and are not routed through any distributor, agent or broker.

Mutual fund industry had raised concerns of a big slowdown in business if Sebi waives off entry load for direct investments in mutual fund schemes. Nair was speaking on the sidelines of the fourth International Mutual Fund Summit, organised jointly by the Associated Chambers of Commerce and Industry of India and Association of Mutual Funds in India.

He also emphasised on the need for tap investors in rural areas. With more global mutual fund entering Indian markets, he cautioned that increased competition will make growth difficult for local mutual funds.

"Future is not all rosy for existing mutual funds due to global MF entry," he said.

Many global asset management companies are eyeing the domestic market as they are upbeat on Indian equities in the medium to long term due to robust economic growth.

The latest entrants in the domestic industry are AIG Mutual Fund, JP Morgan Mutual Fund, while Dawnay Day AV is likely to start its Indian operations in early March.

Aegon, Bharti-AXA, UBS, Mirae Asset Management, Vanguard, American Capital, T Rowe Price, and Schroders are also eyeing the India market. Japanese fund houses such as Shinsei, Daiwa Asset Management, Nikko Asset Management, Nomura, and Sumitomo Mitsui Asset Management are also considering their foray into India. French Credit Agricole Asset Management is also in the early stages of its India foray.