Further to the announcements made during its board meet last week, market regulator Sebi has come out with more details outlining the long-term policy for the mutual fund industry.
Sebi has proposed that the minimum net worth of AMCs be increased to R50 crore and a reasonable time period of three years may be given to existing AMCs having net worth less than the proposed minimum net worth requirement for compliance. No new schemes shall be allowed to be launched or managed by such AMC till the net worth has been raised to R50 crore.
The paper says the sponsor/AMC would have to maintain this seed capital in all schemes, except closed ended schemes.The seed capital is 1% of the amount raised in the NFO subject to a maximum of R50 lakh, which the sponsor/AMC would have to invest and keep invested during the lifetime of the scheme. The seed capital would form part of the net worth requirement.
The Sebi paper notes that about 94% of the total MF industry AUM is contributed from the 26 AMCs having net worth more than R50 crore. Further, the MF industry is yet to spread its reach in B15 cities as the top 15 cities contributed around 87% of the total AUM of the MF industry as on December 31, 2013. Also, only 14 AMCs were profitable in each of the last 3 completed financial years, which may reduce the net worth of AMCs.
Sebi has suggested that the Employees’ Provident Fund Organization be allowed to invest up to 15% of the corpus into equity or equity-oriented schemes. Also, CPSEs be allowed to choose from all the Sebi-registered MF.
Sebi has also suggested the introduction of a mutual fund linked retirement plan (MFLRP) with tax incentive akin to 401(k) plan of US. “A long term product can play a very significant role in mobilizing household savings to the capital markets and can bring greater depth in capital markets,” the Sebi paper notes.
It has also proposed that the limit of section 80C IT Act, 1961, be enhanced to R2 lakh from existing R1 lakh to