Sebi asks mutual funds to commit capital, cater to small cities

The Securities and Exchange Board of India (Sebi) has asked fund houses to commit capital for long-term growth of the sector and move to non-metro markets.

"If you want to be an MF player you got to be serious. Serious means you have to commit capital...so some sort of regulatory disincentives to meet the larger legislative intent is needed for those, who are not serious," Sebi Chairman UK Sinha said on the sidelines of a CII-organised MF meet in Mumbai.

Sebi has appointed a committee on this matter which will submit its report in the next two-three months.

"Sebi has set up a group for framing a long-term policy for the MF industry. I do expect that in the next two-three months they are going to submit their report," Sinha said, indicating his seriouness about clamping down on the non-serious players, who unfortunately are the large majority.

The market regulator also warned non-serious mutual fund players of regulatory disincentives.

"We have given very reasonable incentives to the AMCs (asset management companies) for going beyond the top 15 cities. I am sure that in the new MF policy we are going to have disincentives for those who do not meet this requirement," Sinha said.

Noting that top 10 players from 48-odd AMCs control 77 per cent of the assets under management (AUM), and the bottom 10 control just 1 per cent of the business, while the rest 38 are sticking to the top 15 cities, he said, "if you are not keen to go to retail, who is not going to serve small towns, there are perhaps other avenues for you (and not MF business)."

Sinha also flagged the low retail contribution as a percentage of total assets, which has been going down.

In 2011, the retail contribution was 28 per cent, which come down to 27 per cent in 2012 and so far in 2013, it is just 23 per cent.

With inputs from PTI