Focus on MF investor awareness, says RBI report

Welcoming the progress made by mutual fund (MF) players to extend their reach beyond the top-15 cities, the Reserve Bank of India on Tuesday said there was a need for more work on this and on investor awareness.

The number of folios in B-15 cities (or top-15) rose around 45 per cent, from 14.4 million in March 2014 to 20.9 million in March 2016. For the biggest 15 cities (T-15 cities), the count increased around six per cent, from 25.2 million to 26.8 million during the same period.

This indicates geographical diversification and brings stability to the sector. Efforts are needed for improving investor awareness and strengthening the integrity of market processes and investor protection, said the RBI in its Financial Stability Report (FSR) released here.

A folio is a unique number given to an investor by a fund house for investing in a particular scheme.

The sector witnessed increased activity beyond the top 15 cities, in recent years, which indicates an expansion of investor base, helped by improved distribution and regulatory changes to the fee structure. The amount of assets under management from B-15 cities, as a per cent of the industry AUM, increased in both equity and non-equity segments from March 2014 to March 2016.

The report has warned of increase in exposure of debt- oriented MF schemes to corporate bonds. The exposure of such schemes to corporate bonds as percentage of AUM increased four per cent between September 2015 and March 2016.

While investments in corporate bonds offer higher returns, the risk premium may not be commensurate with elevated corporate stress as reflected in a large number of rating downgrades, it said.