Mutual fund assets at 15% of GDP is very low compared to US, says SEBI

Indian stock exchanges gradually shifted to the T+1 settlement cycle starting February 2022. Initially, 100 stocks and then 500 stocks per month, based on ascending market value, were shifted to the new regime.

The total assets under management of the Indian mutual fund industry stand at about Rs 46 lakh crore, which is 15 percent of India's gross domestic product (GDP). "This is very low compared to developed countries," Securities and Exchange Board of India's (SEBI's) whole-time member Amarjeet Singh has said.

Speaking at the Global Fintech Fest 2023, Singh said MF AUM as a percentage of the US GDP is 80 percent. "A few years back, the number was 8-9 percent for India. Now, it is at 15 percent. When compared to the US, the runway for the mutual fund industry's growth in India is huge," he said on September 7.

"SIP (systematic investment plan) inflows into equities is about Rs 15,000 crore per month. It seems like your conventional recurring deposits are being substituted," he added.

Emphasising the need for regulation as fintechs innovate more products for capital markets, Singh said innovation always front-runs regulation and it has to be a fine balancing act.

"We have to keep a close watch on the risks from new products. It is our mandate to protect investors against risks arising out of innovation," he said. Calling for more people to innovate, he asked start-up founders to check for eligibility criteria and apply for the 'Innovation Sandbox'.

Talking about the T+1 settlement cycle, which was implemented in January, Singh said that it has made the market more efficient, more liquid and has reduced the risk in the system.

"There were concerns on the part of foreign institutional investors, who pointed out issues regarding different time zones, currency conversion and so on. But, we ironed all that out," Singh said.

Indian stock exchanges gradually shifted to the T+1 settlement cycle. Initially, 100 stocks and then 500 stocks per month, based on ascending market value, were shifted to the new regime.

"The entire process will be implemented very smoothly. Shanghai Stock Exchange also has T+1 settlement cycle, but that is very limited," Singh said.

SEBI is also planning to launch the Application Supported by Blocked Amount (ASBA)-like model for the secondary market by January 2024.

"We first started talking about ASBA in 2009-10. We now plan to take it live for secondary markets in January 2024. Clients' money will directly go to clearing corporation, it will not go to broker which is a big step for regulation and innovation," Singh said.

The regulator had given the nod for the same in its March board meeting.