Entry load ban not hurting MF inflows, says Bhave

More than a year-and-a-half after the Securities and Exchange Board of India (Sebi) barred mutual funds (MFs) from charging entry load, it remains the regulator’s most talked about move. Today, Sebi Chairman C B Bhave again found himself being grilled on the ban and its impact.

“People like to combine the ban with inflows into the fund industry. This is just to confuse, as the ban on entry load has nothing to do with the (recent) exits,” said Bhave, brushing aside criticism that the ban has affected inflows into the industry.

Bhave said public perception about distributors not selling mutual funds was “not true”. While he acknowledged that subscription in existing equity schemes was a concern, he clarified there had been no “decline”.

“The numbers tell us a slightly different story. Subscription figures have increased in existing equity schemes in 2010 than in 2008-09. Money has gone down only in new fund offers (NFOs),” he said.

The Sebi chairman also advised fund houses to analyse the performance of distributors who had generated inflows after the entry load ban. “Analyse distributors who succeeded and draw lessons from them. One has to adopt a successful model,” he said.

The Sebi chief also criticised mutual funds for launching similar schemes under the guise of NFOs. “Fund houses are launching schemes that are a replica of old ones. Distributors sell NFOs due to high commissions,” he said.

Bhave reiterated the regulator’s thrust on a separate platform for small and medium enterprises (SMEs). “We are keen on that (SME exchanges)...We have initiated the process.. finally it is in the hands of exchanges to decide whether they want to create a separate platform for SMEs,” he said.