Markets regulator The Securities and Exchange Board of India (Sebi) has given a final approval to Indiabulls Financial Services, India Infoline and Union Bank of India-KBC Asset Management to start their mutual fund business, said two people familiar with the development.
Indiabulls and India Infoline had applied for a mutual fund licence in 2007 and 2008, respectively. Union Bank had applied in 2009. "We have received an approval from Sebi to start the mutual fund business," said Nirmal Jain, chairman India Infoline. "We will be launching our products in the next two months. We will be looking to launch index and ETF products," added Jain. Currently, Sebi has around 23 pending mutual fund applications with Sebi.
On March, ET had reported about pending mutual fund licences with Sebi. According to people familiar with this matter, the regulator was not comfortable in granting licences to financial services companies. It is understood that Sebi's whole-time director Prashant Saran has expressed concerns over granting mutual fund licences to non-serious players.
The mutual fund industry is currently seeing a 9% growth with close to Rs 6.2 lakh crore of assets under management. The new entrants in the mutual fund industry feel that India's asset management industry is underpenetrated and doesn't even constitute even 10% of the GDP. But companies are also witnessing exits by HNIs from mutual funds to other short-term investment opportunities.
Many new entrants in the mutual fund business had burnt fingers in the 2008 financial crises. Regulatory challenges, like the entry load barrier, were also seen as deterrents. But this March, new Sebi chairman UK Sinha had removed the entry load barrier which many fund houses see as a boon. But companies, like India Infoline, feel that the mutual fund is a long-term business and India, with a GDP of 9%, is a huge growth proposition.
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