In a move that could boost retail penetration in mutual funds further, the Securities and Exchange Board of India (Sebi) on Wednesday announced several measures, including allowing investments in mutual funds to be made via digital wallets. Investors will also get instant access to upto Rs 50,000 invested in liquid schemes of mutual funds.
Representative image | Reuters
It was the first board meeting chaired by Ajay Tyagi, the new Sebi chairman.
Among the major decisions taken, people can now make investments in each mutual fund up to Rs 50,000 every year via e-wallets. The e-wallets will not be able to offer any incentives like cash backs to attract people to invest in mutual funds through their platform, the market regulator said.
While one can invest in funds via e-wallets, the redemptions will be made only to a unit holder's bank account.
Separately, in what is a good news for people investing in liquid mutual funds, asset management companies can now offer, via online mode, instant access to the funds up to Rs 50,000 or 90 per cent of the folio value, which ever is lower to resident individual investors in such funds. The lower of previous day's net asset value or prospective NAV will be considered for the payouts, Sebi said.
Fund managers say this will enable more retail investor participation in mutual funds.
"It's a move in the right direction with an intent to channelise household savings to mutual funds. This is a step towards digitisation post demonetisation era," said Lakshmi Iyer, CIO (debt) and head - products at Kotak Mutual Funds.
A few mutual funds have been offering instant access to investors' liquid fund investments, and this move by the regulator will make it more universal and will offer an alternative to bank fixed deposits.
"Many investors prefer bank accounts for parking excess funds as liquidity is available almost instantly. Introducing an instant access facility up to Rs 50,000 should help investors draw greater comfort of instant access to funds in case of emergencies," said Kaustubh Belapurkar, director - fund research at Morningstar Investment Adviser India.
Mutual funds have been gaining popularity and have seen assets under management soar over the last 2 years.
The total assets under management of the mutual fund industry topped Rs 17.54 lakh crore for the year ended March 31, 2017. Net inflows in mutual funds more than doubled to Rs 3.43 lakh crore from Rs 1.34 lakh crore in the previous fiscal.
"E-wallets add another payment option for increasing popularity of online transactions in mutual funds, though there is a long way to go as majority of transactions are still paper-based," added Belapurkar of Morningstar.
