The domestic mutual fund industry will not have to provide unique folios of investors, as suggested by the Securities and Exchange Board of India (Sebi), following the capital markets regulator’s decision to retract from its earlier view.
Fund managers said the number of investors’ folios are already dwindling and such an exercise would have resulted in at least 30-40 per cent reduction in retail folios. According to latest statistics, the folios in the equity segment continued to slide in the June quarter. The industry lost more than half a million folios during the period, compared to the March quarter, while overall folios declined by 231,850.
H N Sinor, chief executive officer of industry body Association of Mutual Funds in India (Amfi), said: “Sebi has realised the difficulty in getting the number of unique folios and has asked the industry to continue with the old formula.”
Since the beginning of the current financial year, fund houses had been providing their unique investors count. “Earlier, if an investor had invested, say, in two schemes in a fund house, it was counted as two folios. However, as asked we counted it as one folio and provided the details to the regulator,” explained a top industry official. However, another top official said that it did not mean that an investor had investment only in one fund house. “An investor who has investments in more than one fund house, Sebi wanted that to be counted as only one folio (unique customer). And that was not an easy task and we conveyed our feedback to Amfi.”
Fund managers, Business Standard spoke to, said data sharing among fund houses was not common and counting unique customers was not possible and that resulted in the regulator’s opinion meeting its natural death.
“Even if fund houses provide their unique customers, it will still have multiple duplication and the system is not yet ready to get it out. Rather, the registrar and transfer agents like Karvy and CAMS are better placed to show the unique customers instead of fund houses,” said the chief marketing officer of a medium-sized fund house.
Things were confusing and the industry could not ascertain the unique customers in mutual funds. The confusion over this was evident from the fact that Sebi did not publish May’s folios after making statistics available till April. Industry officials said the penetration may not be even what it seems like from the retail folio number, which is close to 40 million. Roughly, they say, the number of investors may not be higher than 25 million. This could be a setback for the regulator which has been pressing hard for deeper penetration of mutual funds in the top 10 cities in India.