Skip to main content

MF Industry welcomes Sebi move to abolish extra commission for distributors

By
MF Industry welcomes Sebi move to abolish extra commission for distributors
The Securities and Exchange Board of India’s (Sebi’s) decision to abolish the extra commission for mutual fund distributors in 15 more cities and towns — from Guwahati in Assam to Raipur in Chhattisgarh — has been received well by India’s Rs 22-trillion mutual fund industry.
According to sector officials, the move will help to bring 30 cities on a par and arrest the churn rate in these regions. Further, they added the 15 cities were not small ones and mutual fund distribution could grow on its own without additional incentives.
Effective from April 1, 2018, mutual fund distributors (MFDs) in cities such as Ranchi, Jamshedpur, Patna, Coimbatore, Rajkot, Indore, Bhopal, and Varanasi will not be given an extra 30-basis-point (bps) commission.
Sundeep Sikka, chief executive officer (CEO) of Reliance Nippon Life Mutual Fund, said, “The special incentives for B-15 cities had certain objectives to help penetrate mutual funds. I believe the objective has been well achieved and sops withdrawal should be later extended to 50 cities. Such incentives can't be permanent at a time when all stakeholders are fast realising that total expense ratio (TER) has to come down.”
According to Sikka, the move means that the industry should go now deeper in the country. “These cities can take care of themselves for further growth, now the need of the hour is to concentrate more on India's hinterland towns."
Other executives echo similar views.
The CEO of a mid-sized fund house said: “It is true that the additional commission has worked but at the same time we observed there was a big churn happening in B-15 cities. Investors did not complain as they made good money. The extra commission was nothing but a subsidy to smaller cities at the cost of big cities' investors. I think, gradually, it should be abolished altogether.” When asked about the impact of this move on the sector's growth, sector officials say it will not have any significant impact, if any.
According to Sikka, “I don't think there will be any impact on the industry's growth. These are big cities, investors and distributors are educated, and know why mutual funds are important.”In the past five years, since 2012, when B-15 incentives were announced, assets under management in B-15 cities as of December 2017 stood at Rs 3.59 trillion against Rs 0.77 trillion in 2012. This means a robust annualised growth rate of 36 per cent. During the same period, assets from T-15 (top 15) cities grew 24 per cent on an annualised basis from Rs 6.14 trillion to Rs 17.7 trillion. What is interesting is the growth of systematic investment plans (SIPs) in B-15 cities. It grew from a mere Rs 4.2 billion to Rs 23.11 billion — an annualised growth rate of 41 per cent.
It grew from a mere Rs 4.2 billion to Rs 23.11 billion — an annualised growth rate of 41 per cent. Total SIP amounts from T-15 cities grew from Rs 7.4 billion to Rs 38.1 billion — an annualised growth rate of 39 per cent.
The business Standard, New Delhi, 06th February, 2018

.....

Comments

Post a Comment

Popular posts from this blog

Govt’s gamble on GST cuts: What do the bond and currency markets signal?

By
  It’s not just humans who suffer from cognitive biases; markets do too. Interestingly, different financial markets exhibit distinct biases, each interpreting events through its own prism of prejudice. Take the recent announcements on GST reforms: equity markets have chosen to view them through the lens of growth, while bond and currency markets are focusing on potential macroeconomic risks—fiscal pressures and current account challenges. So, which lens captures the true pulse?Equity markets may be right in expecting GST reforms to revive consumption, which has remained lacklustre for a while. But the key question remains—will this revival come at the cost of broader macro stability?It is well known that consumption stocks have rallied since the GST rationalisation announcement. But what about bond markets? What signals are they sending since this rejig was announced from the ramparts of the Red Fort?The signs aren't encouraging. Bond prices have slumped and yields have surged sinc...
Post a Comment
Read more

Luxury carmakers urge clarity on GST rates to boost festive season sales

By
  A clear picture regarding new GST rates at the earliest will help the overall auto industry, including the luxury car segment, to regain momentum in the ongoing quarter, which generally sees enhanced sales on account of the festive season.The high-powered GST Council, chaired by Finance Minister Nirmala Sitharaman, will meet on September 3-4 to discuss moving to a two-slab taxation.In an interaction with PTI, BMW Group India President and CEO Hardeep Singh Brar said the recent speculation about the change in GST rates has caused uncertainty in the minds of consumers.Consumer interest and demand is strong, but they (prospective buyers) have adopted a wait-and-watch approach, and this delayed decision-making is impacting new vehicle sales at a certain level, he noted."Expediting clarity on GST rates is essential to get back to speed and ensure the auto sector's contribution to economic growth during this quarter is robust," Brar stated.He also hoped that the sustainable p...
Post a Comment
Read more

Sebi proposes tighter norms for green bond third-party reviewers

By
  Sebi on Friday said it has proposed to tighten the norms to appoint independent third-party reviewers or certifiers for green debt securities to align them with requirements for other ESG-linked bonds.In a draft circular, Sebi said that the current norms for green bonds, introduced in February 2023, lack detailed requirements around reviewer independence, conflict of interest mitigation, and disclosure standards that are now in place for other ESG-linked securities under a June 2025 circular.The regulator's latest proposal seeks public comments on a revised framework that would bring parity by incorporating comprehensive criteria for third-party certifiers of green bonds on non-convertible securities.Under the proposed norms, issuers of green debt securities will need to appoint reviewers who are independent of their management, directors, and key managerial personnel. These reviewers will be remunerated in a way that prevents any conflicts of interest and possess relevant expert...
Post a Comment
Read more