The minimum capital requirement for mutual funds (MFs) to operate within the industry is set to go up by 2.5 times from Rs 10 crore to Rs 25 crore. The Mutual Fund Advisory Committee set up by the market regulator Securities and Exchange Board of India (Sebi) has proposed to raise the minimum capital for asset management companies to Rs 25 crore.
Not only the capital will go up, but asset management companies (AMCs) will also be required to have a seed capital of Rs 50 lakh in every scheme that they launch.
Two sources close to the development told The Indian Express that the committee in its meeting held on Monday in Mumbai has decided to raise the minimum capital to Rs 25 crore. The move will raise the entry barrier for MF players.
“Sebi wants only serious players in the industry and therefore the committee has proposed to raise the minimum capital. AMCs will also be required invest a minimum of Rs 50 lakh in the schemes they launch as that will put more onus on the fund managers to perform as the AMC’s money will also be at stake,” said a source who did not wish to be named.
A high minimum capital, Sebi feels, will act as a deterrent for non-serious players.
Sebi chairman UK Sinha had said that 77 per cent of the industry’s assets under management come from top 10 AMCs while the bottom 10 contribute only 1 per cent of the industry AUM.
“You can’t start a mutual fund with Rs 2 crore, 5 crore or 10 crore. You have to commit capital for long term growth,” Sinha had told the mutual fund industry.
Industry insiders feel that this move may lead to a consolidation within the industry as some non-serious small players may decide to move out.