The board of market regulator Securities and Exchange Board of India (SEBI) has approved a long-term policy for mutual funds in India with the goals of mobilising household savings for economic growth keeping in view the need for financial inclusion, tax treatment, obligation of various stakeholders etc in order to deal with the public policy objectives of achieving sustainable growth and development.
The SEBI board increased the minimum net worth of mutual funds to Rs50 crore and asked all fund houses to invest at least 1 per cent of the amount raised in each open-ended scheme from their own corpus.
As of now, of the 42 fund houses only a select few invest their own money in each of the funds they manage.
SEBI wanted EPFOs to be allowed to invest up to 15 per cent of their corpus in equities and mutual funds. Further, the members of EPFOs who are earning more than Rs6,500 per month be offered an option for a part of their corpus to be invested in a mutual fund product of their choice.
At present, Navratna and Miniratna central public sector enterprises (CPSEs) are permitted to invest in public sector mutual funds regulated by SEBI. It has been recommended that all CPSEs be allowed to choose from any of the SEBI registered mutual funds for investing their surplus funds.
SEBI also made it mandatory for fund houses to disclose separately the breakup of assets under management (AuM) for various categories of schemes such as equity, debt, etc. It also asked them to disclose their AuM from smaller towns and cities, contribution of the sponsors and their associates in the AuM of schemes of each fund house, AuM garnered through sponsor group / non-sponsor group distributors, etc.
Towards achieving the goal of financial inclusion, SEBI said, a gradual approach should be taken such that initially the banked population of the country may be targeted with respect to mutual funds investing.
SEBI will work towards achieving the goal that the basics of capital markets and financial planning may be introduced as core curriculum in schools and colleges.
Also, SEBI asked mutual funds to make available printed literature in regional languages as also undertake investor awareness campaign in print and electronic media.
With the objective of incentivising and channelising savings into long term investment products, the SEBI board has recommended tax benefits for mutual fund schemes.
The SEBI board said that fund houses should launch long-term products that can serve as retirement plans (MFLRP) for investors besides giving additional tax incentive of Rs50,000 under 80C of Income Tax Act.
"Alternatively, the limit of section 80C of the Income Tax Act, 1961, may be enhanced from Rs1 lakh to Rs2 lakh to make mutual funds products (ELSS, MFLRP, etc) as a priority for investors among the different investment avenues. RGESS may also be brought under this enhanced limit," SEBI said.
In addition, the board also approved the proposal to put in place principles of corporate governance, policy on dealing with RPTs, divestment of material subsidiaries, disclosure of letter of appointment of independent directors and the letter of resignation of all directors, risk management, providing training to independent directors, e-voting facility by top 500 companies by market capitalisation for all shareholder resolutions and boards of companies to satisfy themselves that plans are in place for orderly succession for appointments to the board and senior management.
Similar to merger/consolidation of companies, the merger/consolidation of equity mutual funds schemes also may not be treated as transfer and therefore, may be exempted from capital gain taxation.
In the long run, the objective is to ensure that mutual funds achieve a reasonable size and play an important role in achieving the objective of financial inclusion while further enhancing the transparency so that investors can take informed decision.