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2022 was quite an eventful one for the Rs.40 lakh crore MF industry.
While the industry saw a lot of high numbers in terms of net equity inflows, gross SIP inflows and AUM, there are lot of events that can significantly change the MF industry for a better tomorrow. Let us look at a few notable highlights from the year gone by:
MF industry presents a lot of opportunity
The penetration of the Indian mutual fund industry is very low. India’s MF AUM to GDP ratio is significantly lower at 15.9% in March 2022, compared to the world average of 75.
In fact, India’s AUM to GDP ratio is much lower than many developed economies such as the US. at 148.9% and the UK at 74.8%.
Nomination is compulsory
Mutual funds have to compulsorily take a declaration from investors if they opt for nomination by filing it with the MF application form or skip it. Mutual funds can also take the declaration online by using e-Sign facility.
Stringent KYC norms
KYC Registration Agencies (KRAs) stopped accepting scanned copy of KYC documents. Further, the KYC application form has to have the wet signature of the applicant.
Also, bank statements and passbook copy cannot be used as a valid proof of identification or proof of address for doing KYC.
From November 1, KRAs are not accepting copy of Aadhaar. They insist investors to submit eAadhaar or Aadhaar XML or virtual ID (VID), which requires them to follow a due process to download. Further, the downloaded Aadhaar must have QR code in it which can be scanned by KRAs.
Two factor authentication
SEBI implemented two factor authentication for MF redemption. With this, investors need to key in OTP to invest in mutual funds through online mode. Soon, the two-factor authentication will also be implemented for subscription of mutual funds. Currently, it is applicable at the time of redemption.
Launch of apprentice MFD program
In an effort to increase the number of individual distributors and promote financial inclusion in the country, AMFI introduced an internship plan to bring in new individual MFDs.
Under this initiative, fund houses can have exclusive partnership with an individual MFD and pay them a monthly stipend of up to Rs.15,000 for the first 12 months. During this period, fund houses will be responsible for training and development of the individual MFD.
Passives in new avatar
Quite a few steps like putting a cap of Rs.25 crore on unit creation through AMCs, giving recognition to market makers and asking AMCs and AMFI to launch passive focussed IAPs can give a much-needed boost to the passives in India.
Also, SEBI has allowed fund houses to launch index funds/ETFs focussing on corporate bonds, government securities and ELSS.
Bundling other products with MFs no longer allowed
SEBI discontinued the practice in which mutual funds bundle insurance or any other financial product with their mutual fund schemes. Many fund houses were offering 'SIP insure' plans that came with free term life insurance for SIP investors. Also, there were couple of schemes which were similar to ULIPs.
Temporary ban on industry to launch NFO
SEBI restrained mutual funds from launching new schemes between April and June due to mutual funds’ failure to comply with pooled account norms.
Consolidation among existing players
Year begin with the announcement of Sundaram Mutual Fund completing the acquisition of Principal Mutual Fund.
This was followed by merger between Baroda Mutual Fund and BNP Paribas Mutual Fund. The new fund house is named Baroda BNP Paribas Mutual Fund. Another key development was entry of new player WhiteOak Mutual Fund through acquisition of YES MF.
Later in the year, HSBC MF joined the party with acquisition of L&T Mutual Fund. Also, a consortium led by Bandhan Financial Holdings, the promoter of Bandhan Bank acquired IDFC AMC.
Many new players showing interest in MF Business
Flipkart-Walmart backed digital payment service provider PhonePe, Emkay Global, Abira Securties applied for mutual fund license with SEBI.
Meanwhile, Samir Arora's PMS firm Helios Capital received the in-principle nod from SEBI to start mutual fund business in India.
Concept of swing pricing introduced
SEBI introduced the swing pricing framework for mutual fund schemes. Swing pricing is a concept which allows AMCs to change NAVs when there is heightened redemption or massive inflows. They can lower the NAV by a certain percentage in case of big outflows and increase it when they see high inflows.
The purpose of swing pricing is to preserve value of debt funds during tough times. A reduction in NAV demotivates investors who are looking to redeem and attracts fresh inflows during difficult times. Hence, it ensures stability for the debt fund.
Prashant Jain bids adieu to HDFC MF after 28 remarkable years
Prashant Jain quit HDFC Mutual after 28 years of service. Notably, Prashant was the CIO of the fund house for the last 19 years.
Delay in settlement to attract penalty
SEBI directed fund houses to transfer the redemption/repurchase proceeds to the unitholders within three working days from the date of redemption/repurchase. However, the timeline in the case of permissible overseas investments is five working days.
