The Securities and Exchange Board of India has said mutual funds (MFs) should cut down on the number of schemes from close to 2,000 at present, many of them dormant.
Sebi chairman UK Sinha said: ?The market regulator cannot ask or order MFs to stop introducing schemes. However, Sebi is encouraging them to float fewer schemes, which are innovative, new and chart uncovered segments. We do also encourage MFs to go for merging schemes which are similar in nature into a single one.?
Sinha said this will benefit investors ?immensely?, adding that he had merged nine schemes into one at UTI AMC. Sebi also wants equity linked savings schemes should continue to enjoy tax benefit even after the implementation of the direct tax code, expected to roll out in next fiscal. These schemes were long-term investment platforms and therefore should continue getting tax benefits.
However, Value Research CEO Dhirendra Kumar said the securities transaction tax was the chief obstruction for merging MF schemes. ?A merger essentially means closing one scheme and transferring its corpus to another. There is a tax liability there on the investors on the closure, which creates a problem,? he said.