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Sachin Bansal’s mutual fund ambitions run into Sebi wall

Flipkart co-founder’s fintech plans appear to face delays because of the strict regulatory framework imposed by the capital markets regulator.

May 31, 2020 / 02:50 PM IST

Flipkart co-founder Sachin Bansal’s plans to enter the mutual fund space appear to have run into trouble as the Securities and Exchange Board of India (Sebi) is likely to reject his request for a licence as it has not acquired a no-objection certificate (NoC) from the Reserve Bank of India (RBI), people familiar with the matter said.

Bansal, who has made no secret of his aggressive expansionary ambitions in the fintech sector, applied for a mutual fund licence with the Sebi through Chaitanya India Fin Credit Private Limited, a non-banking finance company (NBFC) he acquired in September 2019.

Bansal’s Navi Technologies, the erstwhile BAC Acquisitions Pvt Ltd, is the joint applicant but as the company is not even a year old, it doesn’t meet the conditions for the licence, one of the people privy to the matter told Moneycontrol on condition of anonymity.

"Sachin Bansal's company, which is an NBFC, has not taken an NoC from RBI for commencing mutual fund. So, Sebi may not proceed with its application,” they said.

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Bansal declined to answer Moneycontrol’s queries. Moneycontrol sent a questionnaire to RBI and this article will be updated with its response.

Under Sebi’s rule, the sponsor firm, which is Chaitanya in this case, needs the approval of the sector regulator (RBI) to back a mutual fund. NBFCs are regulated by the RBI and they require the central bank’s nod to launch a mutual fund, for which the licence is given by Sebi. A company requests the regulator to be designated as an Asset Management Company, which allows it to offer mutual fund services.

The delay may also hit the acquisition of Essel Mutual Fund by BAC Acquisitions Pvt Ltd.

The Competition Commission of India (CCI) had in October, through its “green-channel” route, allowed the acquisition of Essel Finance Asset Management Company and Essel Mutual Fund by BAC Acquisitions.

The green channel allows on-the-spot automatic approval for certain categories of merger and acquisitions.

Still, a licence is mandatory to launch operations. It is like having a car but without a driving licence, another person said, explaining the situation.

At present, Essel Mutual Fund is registered with Sebi but with Essel Finance Wealth Zone Private Limited as its sponsor.

"Sebi should have a transparent and open process for granting mutual fund licence. In the past, also, we have seen Sebi imposing additional restrictions on entities seeking mutual fund licences which are beyond the prescribed rules and regulations," said a corporate lawyer who did not wish to be named.

Sebi should have a clear regulatory framework, highlighting its key policy concerns, especially on eligibility, he said. “While there already exists a high-entry barrier of Rs 50 crore net worth and a track record of over five years, Sebi should not impose further barriers and hurdles, which eventually impede the creation of a dynamic and competitive mutual fund industry in India,” he added.

Earlier this year, Chaitanya India Fin Credit also applied for a universal banking licence and the request is pending with the RBI."Building a universal bank is a reflection of our commitment to provide financial services to those who need them most," Bansal had said.

In recent years, RBI has had reservations about its regulated entities entering the mutual fund space. The central bank is also of the view that all PSU banks must exit MF businesses.

The 38-year-old Bansal got more than $1 billion after he sold his 5.5 percent stake in Flipkart which he had set up with fellow IITian Binny Bansal when it was acquired by American retail giant Walmart in 2018.

Tarun Sharma
first published: May 31, 2020 01:24 pm

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