Speaking at a mutual fund summit organised by CII, Sebi chairman UK Sinha said the share of the smaller AMCs in the total assets under management (AUM) has remained insignificant over the last few years, which makes the regulator feel that some fund houses are not serious about their business.
Nearly 77% of AUM is coming from the top 10 AMCs, but only 1% of AUM is coming from the bottom 10 AMCs. This percentage has not changed significantly in the last 2-5 years. This gives me the impression that we have got some non-serious players in the industry, said Sinha.
The Sebi chief further said that this clearly shows that there is a need for rethinking and that the regulator has already set up a group for developing a long-term policy for mutual funds. I am expecting that the group will submit its report in the next 2-3 months, he said.
Currently, there are 48 mutual fund entities in India. According to the current norms, an entity can apply for a licence to set up a mutual fund with a minimum capital or networth of R10 crore. I would expect that the committee will give us some idea on minimum capital. You cant start a mutual fund with R2 crore, R5 crore or R10 crore. You have to commit capital for long-term growth, said Sinha.
Interestingly, less than a year after increasing the incentive structure for AMCs to move beyond the top 15 cities, the regulator has hinted at disincentives for mutual fund houses that have failed to reach beyond tier-1 and tier-2 cities.
My understanding is that while genuine incentives were required, those have been provided. Now, we need some sort of regulatory disincentive to meet the larger legislative intent... The way this industry is conducting itself needs to be re-looked at a very fundamental level, said Sinha, highlighting the fact that AMCs have opened only 52 branches in areas beyond the top 15 cities.
Sinha also expressed concern on the consistent fall in the share of the retail investors in the total AUM. In 2011 it was 28%, in 2012 it was 27% and in 2013 it is 23%, he said, adding that the number of folios have also come down in the last five consecutive quarters.