Securities and Exchange Board of India (Sebi) chief UK Sinha said on Monday mutual funds that weren’t able to cobble together a minimum fund size might have to quit the space. It’s also likely the capital markets regulator will favour a bigger capital base for an asset management Company (AMC) and will raise it from the current level of R10 crore, in its long-term policy on mutual funds.
“There will be some obligations on AMCs in terms of the size of assets since there can be no place for non-serious players. If the value of the assets is small, they may as well run PMS schemes,” Sinha observed, speaking at The Indian Express’ Idea Exchange programme. The regulator also recommends that fund houses merge schemes.
Asked if entry loads for mutual fund schemes, which were withdrawn in August 2009, would be re-introduced, Sinha said: “It’s hard for a regulator to make a commitment. But we have given funds some incentives in terms of allowing them higher expense ratios for sales beyond the top 15 cities and we should wait for a while till the investment climate improves, before taking a call.”
Sinha conceded, however, that banning entry loads may have hurt the industry but believes the incentives are working with the share of assets from these areas having gone up. “If you look at it, they add up to almost the same benefits that were given in the form of entry loads,” he said.
Sinha said the assessment of whether an individual complied with the ‘fit and proper’ guidelines would be made on the basis of Sebi’s guidelines, which had been framed after the Jalan Committee submitted its recommendations. He, however, added that if any other regulator declared someone unfit, Sebi would acknowledge that. “We would be guided by such considerations,” Sinha said. The capital markets regulator has reassured that there would be no spillover effect of the R5,600-crore payments problem on the National Spot Exchange Limited (NSEL) on the equity markets. He, however, felt that that exchanges needed to be strengthened and said the regulator was re-looking the systems.