MFs, finmin agree on need to incentivise distributors
Those who had lobbied for mutual funds to come under the ambit of the Rajiv Gandhi Equity Scheme, however, were in for a disappointment as there was no indication from finance ministry officials to this effect and the Bill under consideration was still worded in favour of direct investment into equities.
“The focus was on what can be immediately done. The government has not assured anything as yet but there is a clear sense of urgency,” said the CEO of a top fund house. According FIFA chairman Dhruv Mehta, there was consensus on the need to incentivise distributors in some form or the other to facilitate the industry’s growth.
One of the ways of doing this, felt participants, was to increase the total expense ratio (TER) and allow fungibility in the way expenses are accounted for within the overall limit of TER. However, there was no agreement on the quantum of increase in the expense ratio and the final call is expected to be taken by market regulator Sebi. The MF industry has been pushing for Sebi’s permission to increase expense ratio from 2.25% to 2.5%. There was also talk of linking the fees paid to distributor with the kind of returns that the investor
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