Mutual fund industry expects higher investment flow after demonetisation

The mutual fund industry is likely to be a beneficiary of the demonetisation of Rs 500 and Rs 1,000 notes as the funds thus unlocked may find way to their schemes, said a top official of PPFAS Mutual Fund.

"In the long-term, demonetisation will help the mutual fund industry. The banks will reduce their fixed deposit interest rates further. So people will start looking at mutual funds to park their surplus funds to earn inflation beating returns," Neil Parag Parikh, Chief Executive Officer told IANS over phone from Mumbai on Tuesday.

The central government on November 8 demonetised Rs 500 and Rs 1,000 bank notes and asked people to deposit or exchange the old notes from banks or post offices till December 30.

According to Union Finance Minister Arun Jaitley, over Rs 200,000 lakh crore was deposited in banks till November 12 afternoon.

With crores of rupees worth of fresh deposits, the banks are flush with cash now.

However, once the restrictions on cash withdrawals are removed, the banks may not be able to hold on to the cash to a major extent and it may find its way to other investment avenues.

"While it is not possible to hazard a guess as to how much money would flow into the mutual fund schemes, it will be sizeable," Parikh said.

--IANS

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