Business Standard / New Delhi Sep 02, 2009, 00:20 IST
The decision to remove the entry load that mutual funds charge customers is a good one as the loads were too high and discouraged users. But while removing the entry load, the government has allowed the mutual funds to charge an exit load unless the money is kept with the funds for a longer period of time. So the mutual funds will get more liquidity now.
The Reserve Bank of India has made several useful comments on how the mutual funds industry has not really grown in the retail segment but has been concentrating on just getting large corporate depositors. This is a short term strategy as corporate investors are the first to get out when they get a higher return whereas smaller retail investors tend to stay with the mutual fund. For this, the government also needs to rationalise commissions across the industry since, with much higher commissions in the insurance sector, banks prefer to sell these products to their customers.
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