Plea for making open-ended plans part of RGESS ignored in Budget
The mutual fund industry is disappointed that the Budget has made no mention of allowing open-ended schemes under the Rajiv Gandhi Equity Savings Scheme (RGESS) platform and that nothing has been done to tackle the inherent complexity of the scheme.
According to industry observers, several fund houses have schemes that meet the RGESS criteria, but cannot be brought under the RGESS ambit as they are not listed. SBI MF, for instance, had filed an offer document with capital market regulator Sebi for an open-ended RGESS scheme, but has not received approval for it till date. Another big fund house, ICICI MF, had to shelve plans to bring open-ended schemes under the RGESS platform, according to sources.
Fund houses had lobbied the market regulator to allow open-ended schemes to be made a part of RGESS. Their hopes were raised after finance minister P Chidambaram promised to make the scheme attractive to retail investors at an event to launch the RGESS logo and awareness drive in Mumbai just a few days before the Budget. Under existing guidelines, only ETFs and close-ended schemes qualify under RGESS.
One of the disadvantages with close-ended schemes is that they have to be launched every year under the RGESS banner. So, existing investors who want to invest R50,000 in the first, second and third years will have to invest in three different schemes. Another negative is that investors have to invest a lump sum in a closed-ended scheme. “It’s like fund houses have to start afresh every year,” said the
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