Sebi says raising MFs' net worth 'in talks stage'

The Securities and Exchange Board of India (Sebi) is considering raising the minimum net worth threshold for mutual funds, a leading business channel reported today, quoting Executive Director KN Vaidyanathan. “Raising mutual funds’ net worth is in talks stage,” he said.

Current Sebi regulations say an entity cannot set up a mutual fund unless it has a minimum net worth of Rs 10 crore. There have been media reports saying the capital market regulator is likely to raise the threshold capital for mutual funds to Rs 40-50 crore. According to industry officials, the Mutual Fund Advisory Committee set up by Sebi is also in favour of this step.

Talks of the regulator mulling an increase in net worth of mutual funds has gained momentum since October last year after the industry witnessed unprecedented redemption pressure from corporate investors amidst a liquidity crunch. This could have resulted in a few fund houses winding up operations had the regulators, including RBI, not taken timely steps to ease the liquidity pressure.