The first meeting of the recently constituted International Advisory Board (IAB) feels there is a need to widen the reach of the industry.
SEBI had constituted IAB last year in September to guide SEBI by bringing in global experiences and emerging developments and challenges. The eminent experts are Prof. Viral Acharya (Professor of Economics at New York University Stern School of Business) , Ms. Jane Diplock (independent director of Singapore Exchange Ltd), Prof. Mark Maletz (Senior Fellow at Harvard Business School), Prof. Maureen O’Hara (Professor of Finance at Cornell University), Prof. Arvind Panagariya (former Chief Economist of the Asian Development Bank), Dr. Andrew Sheng (Chief Advisor to the China Banking Regulatory Commission) and U K Sinha, Chairman SEBI for of the industry.
According to a SEBI press release, “In its first meeting, IAB deliberated on several important issues which are currently relevant for the Indian securities market. The IAB took note of the initiatives taken by SEBI for enhancing the retail participation and for increasing penetration beyond top-10 cities and discussed the issues and challenges faced by SEBI in this regard. The IAB observed that there is a need to widen the reach of the mutual fund industry in the country, both horizontally and vertically. The IAB emphasized that in order to enhance the participation of households, the mutual fund industry has to educate the investors of the attractiveness of mutual funds in terms of returns and cost effectiveness, compared to other financial products. The IAB stressed the need for the mutual funds to offer life cycle products along with plain vanilla products. The IAB underscored the need to have in place an effective framework for regulation of distributors.“
Further, the board has advised SEBI to explore risk-based customer due diligence processes without granting any sort of exemptions to any category of investors.
Also, it looked into the ways to pull in domestic savings into securities market and recommended the development of a vibrant corporate bonds market and explore the introduction of securitized debt instruments and real estate investment trusts with appropriate risk management.
Iindustry experts feel that the observations and suggestions made by IAB will definitely help mutual fund industry to penetrate beyond top ten cities and bring in more participation from different categories. “All the recommendations are pragmatic and if these recommendations are taken into practise by all participants, it will definitely lead to the growth of the industry,” said a top official from UTI Mutual Fund.
