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Drawing from the successful use of the banking network as a distribution channel by insurers, capital markets regulator Securities and Exchange Board of India (Sebi) has pitched for public sector banks (PSBs) to play a greater role in the sale of mutual fund (MF) products.
Apart from the traditional banking products, PSBs have been very successful in distributing third-party insurance products. However, this is not reflected in MFs.
Sebi has suggested all PSBs be encouraged to distribute schemes of all MFs.
PSBs would need active support from asset management companies (AMCs) to enable the distribution of MF, Sebi said.
Sebi has sought to make MFs more appealing as a long-term investment product by proposing tax and other benefits.
These proposals were approved by Sebi's board and would be notified soon. Recently, a Sebi study had noted banking channels were underutilised for MF distribution and suggested AMCs focus on their bank distribution networks and build robust information systems to take advantage of the coming opportunities from new banking licences.
Financial inclusion is set to receive a big push as the Reserve Bank is set to roll out new licences by this financial year. Nearly 45 fund houses manage assets of Rs 9 lakh crore in India, but fund mobilisation has been a tough task in the past few years.
One of the biggest reasons is the lack of active participation from a large part of the country. The study said MF presence in India was heavily skewed in favour of the top-60 districts of India. A lion's share of the presence is in Mumbai.
