Sebi should allow bundling of MF with loans, other financial products: Industry body

Sebi should allow bundling of mutual fund schemes with other financial products like loans as it can help in creating financial discipline in low income households, an industry body has suggested to the markets regulator.

Bundling, in market parlance, is a marketing method that comprises firms selling several products as a single combined unit mostly for a lower price than they would charge customers to purchase each item separately.

"Mutual fund products mainly through systematic investment plans (SIP) route should be available to investors along with other financial products like insurance and loans. This will help benefit all the parties concerned and create financial discipline in low income households," FIA Global CEO Seema Prem said.

Prem, who met officials of the Securities and Exchange Board of India (Sebi) a couple of months ago, has suggested this to the markets watchdog.

In addition, the fintech company has suggested that the regulator should explore setting up a separate mutual funds channel structure for distribution of mutual fund schemes in underserved areas akin to banking correspondent industry defined by RBI in 2006 for deepening penetration of bank accounts.

"A mutual funds correspondence channel riding on the existing bank mitra network will ensure rapid penetration of the product," suggested FIA Global, a leading fintech company that provides last-mile digital payments and distribution systems to enable financial inclusion in India and Nepal.

Also, it has been recommended that asset management companies (AMCs) should be encouraged to come out with a zero to low-risk, variable SIPs with amounts as low as Rs 100 for investors in villages and smaller towns.

Further, there should not be any charge on default and, flexible payment options with auto debit facility should be provided to such investors.

The suggestions, if considered by Sebi, are expected to increase mutual funds penetration in the country, which is currently at 2 per cent level.

Sebi should come out with framework for e-KYC to be enabled for folio enrolment which will reduce the time of enrolment by 70 per cent. Besides, redemption processing should be made paperless and e-KYC enabled.

The regulator should allow for AMCs to give promotional expenses per folio enrolled to the intermediary since the efforts involved in educating low income households on complex investment products is significant.

When zero frills accounts were opened, banks paid intermediaries a one-time account enrolment charges. On the same lines, it has been recommended that AMCs should be allowed to pay a one-time enrolment charge to distributors or financial intermediaries for enrolling customers for the first time.

At present, 44-player mutual fund industry manages assets to the tune of over Rs 27 lakh crore at the end of January.