Capital market regulator SEBI today asked mutual fund companies to come out with simple and less riskier products to enhance retail participation, even as it considered increasing investor awareness about mutual fund investment as the biggest challenge for the industry.
"We are trying that the Mutual Fund companies should launch easier, cheaper and less riskier products to transact ... to involve more people in Mutual Fund segment," SEBI Executive Director KN Vaidyanathan said while delivering a talk on 'Mutual Funds: Opportunities and Challenges'.
The total assets size of Mutual Fund sector in the country is pegged at over Rs 6 lakh crore, constituting 40 per cent of retail investments, while the rest is with institutions and large investors.
Noting that there was enough headroom for Mutual Fund segment to grow, Vaidyanathan said creating investor awareness about the mutual fund sector has been the biggest challenge before the regulator.
"Not many people trust MF segment... it is the biggest challenge before us," he said.
Vaidyanathan said banking sector gets 55 to 60 per cent of total savings in the country, the insurance industry attracts 30-35 per cent, while Mutual Funds segment gets only 10-15 per cent of savings.
According to the SEBI Executive Director, about 3-4 lakh crore was annually pumped into banking, followed by Rs 1.5 lakh crore in insurance (excluding ULIP) and just Rs 25,000 crore was invested in to MF sector.
While dwelling upon steps taken by the SEBI to make MF as investor-centric industry, Vaidyanathan said that abolition of entry load on MF products had yielded Rs 2,500 crore to the investors in just 20 months.
"Amount of entry load saved is Rs 2,500 crore in just 18-20 months...this is possibly the biggest benefit investors have got," he said.
SEBI abolished entry load on MF products varied between 2-5 per cent in August 2009, much to the discomfort of the distributors.
Later when asked if SEBI was framing any guidelines for regulating the wealth management business after the much publicised Rs 450 crore-Gurgaon Citi Bank fraud, he said, "the work is in progress", but refused to put a timeframe in this regard.
When asked about allowing foreign investment into MF industry, he said, "rules are being worked out and that should not be too far away."
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