Mumbai: To ensure that only serious players with a long-term view enter the mutual funds space, market regulator Sebi should enhance the networth limit for companies seeking MF license to Rs10 crore from the present Rs 2crore, a report said.
“With the high cost of operations in the initial years and a relatively longer gestation period, there is a case for re-consideration of Rs10 crore networth criteria set from the present Rs two crore for obtaining a mutual fund license,” Confederation of Indian Industry and PriceWaterHouseCoopers said in their joint report.
This would ensure that only major players who are committed to the mutual fund industry are capable of sustaining over a long-term would be able to operate in the industry, the report said.
With more players entering the industry, the fee rates are likely to drop in the period ahead and may prompt the fund houses to seriously consider outsourcing, it said.
Moving ahead, MF players would also have to bridge the demand-supply gap of human-assets needs and the companies should tie-up with educational institutions to offer programmes dedicated to the financial services industry, the report said.
Similarly, there was a case for re-consideration of cap on the maximum amount of expenses that can be charged to a scheme, it said.
“Charging additional expenses would enable the fund houses to invest more on expanding the investor network and improvise on delivering quality services to the investors,” it said.
In the longer-term, MF players will also have to enhance their association with other sectors such as banking and telecommunications to achieve deeper penetration in Tier-II and Tier-III cities, the report said.
“A few fund houses with deep pockets may be able to make necessary investments in the required technology. But in the long term, it is indeed necessary to join hands with other sectors of the economy such as banking and telecommunications for the long-term benefit of all players in the industry,” it said.
Meanwhile, mounting cost of operations, including the lease rentals and staff costs are likely to pose the biggest challenges before MF players, the report said.
Besides, the industry players should also actively come out to enhance the investor education activities as it would help them to enable the overall expansion of the domestic mutual funds market, it said.