Sebi unhappy with fund houses' efforts to increase reach

Regulator also mulls ways to infuse life in RGESS scheme

Securities and Exchange Board of India (Sebi) has raised concern over lack of efforts shown by mutual fund houses to penetrate beyond the top cities, despite the extra incentives provided by the regulator.

UK Sinha, chairman, Sebi today pulled up asset management companies (AMCs) for failing to open more branches and for drop in equity assets from beyond the top 15 cities.

"In last 15 months, industry has opened only 55 branches beyond the top 15 cities...the initial hopes and expectations of Sebi has not been fulfilled. Number of systematic investment plans (SIPs) are not increasing,” said the Sebi chief at an event organised by SBI Mutual Fund.  

The regulator, since October 2012, has allowed AMCs to charge additional expense ratio of up to 30 basis points for assets garnered from beyond the top 15 cities. The bulk of asset under management (AUM) of MF houses continue to come from the top 15 cities.

Sinha said that the Sebi briefly felt that the incentive it had provided for higher penetration was working well as the assets from smaller cities had touched almost 3.5% of the total AUM, however, they have again fallen to 2.63%.

As on December 2013, the total AUM of MF houses stood at around Rs 8.25 lakh crore, out of which equity assets were Rs 1.58 lakh crore. Top 15 cities contributed over 87% of the total AUM.

Sinha also highlighted the decline in retail participation in mutual funds. “Of the equity assets as on March 2012, retail contributed 66%, which fell to 61% in March 2013,” he said adding that Sebi and industry body Association of Mutual Funds of India (AMFI) would be closing monitoring the situation.

The Sebi chairman also asked AMCs to send their demands and suggestions for increasing the participation in the Rajiv Gandhi Equity Savings Scheme, a tax-saving equity investment scheme.

"RGESS schemes have garnered just Rs 53 crore. We will engage with the industry on the issue, " he said.