Mumbai: The mutual fund industry’s representative body could become the first self-regulatory organization in India’s financial sector. The industry needs to self regulate and the Association of Mutual Funds in India (Amfi) would be “uniquely positioned to provide regulation,” said M. Damodaran, chairman of the Securities and Exchange Board of India (Sebi), India’s capital markets regulator.
At a mutual fund industry conference, organized by industry lobby Confederation of Indian Industry (CII), Damodaran said rules on self-regulatory organizations were being revisited and that Amfi would be given more autonomy to carry out its regulatory functions. Finance minister P. Chidamabaram had raised the possibility of Amfi taking on a regulatory role last year, but Amfi had resisted it.
Now, the body seems to have had a change of heart. “We have an open mind on the issue. We need to develop our own model and will get back to the regulator,” said A.P. Kurien, chairman of Amfi, while addressing the conference. The mutual fund industry, which manages Rs3.4 trillion in funds and has more than 30 million investors has been growing fast and is trying to broaden its base of investors, Kurien said.
This year, Prudential ICICI Asset Management, Reliance Mutual Fund and Lotus AMC have launched schemes requiring investments of Rs100 or less every month. Over the past 12 months, the proportion of assets under management in tier I cities has come down to 88% in May 2007, from 90% in May 2006, said Vidur Verma, country investments director, global consumer group, Citibank. This market share has shifted to smaller cities, he added.
The mutual fund industry had said growth would be affected by the finance ministry’s regulation that all new mutual fund investors would have to show permanent account number (PAN) cards, proof of being a taxpayer or assessor, from 2 July in order to make new investments. It had moved the ministry and Sebi seeking a relaxation on this deadline. At Wednesday’s conference, Damodaran said Sebi was weighing various options to relax the deadline but did not elaborate on them. Mint had reported this development in its Wednesday edition.
Damodaran also said regulations for trustees of asset management companies (AMC) could be revisited. He added that trustees need to have higher responsibility and that he would call a meeting of AMC trustees to discuss their role in regulating their firms.