FinMin gears up to make MF industry attractive

The DEA secretary met representatives from the mutual fund industry and the finance ministry is concerned about the fact that gross asset mobilization under mutual funds have been on a decline since 2009-2010. Now, the objective is to increase and reenergize the industry. They have categorized the steps that will be taken into immediate and medium term steps.

On the immediate front, they are looking at reenergizing the distribution network. However, sources within the finance ministry say that entry load provisions are unlikely to be brought back. The other immediate step that they are looking at is giving AMCs more flexibility to manage the total expense ratio.

Mutual fund representatives have asked for the ratio to be taken up to 225 basis points for the total expense. Apart from that, in the medium term, they are going to consider allowing insurance in pension funds to be managed by AMCs. However, this has been a long standing demand. It remains to be seen whether finally, a call will be taken on this or not.

Speaking about the developments, H N Sinor, Chairman of AMFI said, "Just now we have not discussed anything about entry load, only a reference about the entry load was made by the distributors federation, representatives those who were there and not from our side. More importantly I think what we suggested as long term structural changes, which is very critical, is whether something similar to 401K can be introduced in India."

Mutual fund representatives also wanted the service tax to be borne by the end consumer and they wanted the mutual fund pension schemes to be under the exemption category. Other tax representations have also been made by them. However, on the tax front, the finance ministry has asked the industry to submit a detailed report after which they will take cognizance of it.