Cobra Post's recent revelations on money laundering involving several banks and insurance products has given an opportunity to mutual fund sector officials to raise their collars.
Sector officials, told Business Standard in private, that with stringent know your customer (KYC) guidelines currently in place, it's virtually impossible for any incident of money laundering.
With Life insurance Corporation of India (LIC) also figuring out in the Cobra Post operations, mutual fund industry, which always is adverse to the high commissions structure of Unit-Linked Investment Plans (ULIPs), got an excuse to showcase their products as better than other financial products.
"So far, there is not a single case where mutual fund is involved. That's a big positive for us. Insurance and physical gold are at the receiving end," says a marketing head of fund house.
Fund industry executives have been unhappy with lot of money going into gold buying. Investors' mindset for holding physical gold has somehow dented interest in buying mutual fund products, they say.
"This is yet another development which I would say is a blessing in disguise for the industry. Mis-selling has been the case across the financial products category. Even mutual funds were among them till a few years back. But today, with tight regulatory control and impetus on KYC, no customer can invest without proper KYC," explains vice president at a large-sized fund house.
Interestingly, these officials were crying foul when the capital markets regulator or Securities and Exchange Board of India (Sebi) was busy in tweaking the KYC guidelines every now and then.
"You tell me, can I process even a micro Systematic Investment Plan (SIP) of Rs 500 or Rs 1,000 without having the permanent account number (PAN) of the investors?. Forget the transactions which are above Rs 50,000 (as was the case in many of the allegations made by Cobra Post)," says a national sales head of private bank sponsored AMC, who did not wish to be named.
