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To understand the way forward to achieve the Rs. 100 lakh crore mark, Cafemutual Confluence 2022 held an exclusive panel discussion titled, ‘The new frontier - how will the industry reach the Rs. 100 lakh crore mark?’. Prem Khatri, Founder & CEO, Cafemutual moderated this discussion.
Apart from the opportunities, the panel also spoke about policy changes that could support industry growth further.
Here are the key recommendations that the panel made.
Doing away with daily NAV and reconsidering tax provisions: Ajit Menon, CEO, PGIM India MF
Everything that can shape good investor behaviour is where policy can focus.
The simplest things could be doing away with daily NAV and correcting the taxation between equity and fixed income funds. While we are talking of a long term industry, the NAV is printed daily. This gives rise to speculation. Also, we have taxation on equity at one year while for debt it is three years, why isn’t it the reverse?
Such changes can nudge the desired investor behaviour to get into mutual funds and be long term rather than making it speculative.
Offering special commission on bringing new clients and yearly ranking for AMCs: Kailash Kulkarni, CEO, L&T MF
The objective behind B30/T30 was to bring new investors to the industry. With the rise in investor count from 1.7 crore to 3.5 crore, this has been largely achieved. I think we can now reward new investors irrespective of MFDs location. There could be special commissions here along with a defined pay-out mechanism.
Also, there could be yearly rankings to show which AMC is adding the maximum number of new investors.
Continuing the path of increasing transparency and trust: Navneet Munot, MD & CEO, HDFC MF
Mutual funds are the most cost efficient, customised and convenient way of participating in the market. The industry along with the regulator has worked very hard to bring transparency and trust into the product and industry. I think if we continue on this path and as investors have more comfort and trust, we will continue to grow.
Taking steps for increasing trust and faith in the MF Industry: Nilesh Shah, Group President & MD, Kotak MF
One thing that I want from the regulator is to take steps so that the trust and confidence in our industry keep on increasing. We came out with the ‘Mutual Fund Sahi Hai’ campaign by putting two basis points on AUM and we have seen the benefits. Do whatever it takes so that trust and confidence of investors in the MF industry keep on increasing.
Introducing MFRDA, an overarching regulator and yearly recognition for MFDs: Sunil Subramaniam, MD, Sundaram MF
With the industry growing from Rs. 6 lakh crore to Rs. 40 lakh crore, there could be a specific regulator like an mutual fund regulatory and development authority (MFRDA) to iron out issues and manage assets.
Also, there could be an overarching regulator for ensuring a level playing field across financial products.
Further, there could also be an annual ranking and public recognition for MFDs bringing the largest number of new clients.
Introducing common KYC and reviewing GST provisions: Vishal Kapoor, CEO, IDFC MF
Once KYC is done by one regulated industry, doing it all over again leads to a bit of unnecessary friction. While we have come a long way in simplifying KYC, it is also costly. Inclusion and micro SIPs do suffer because the cost of getting a new client is high. I think there is some work happening here and hopefully, that will help us.
Additionally, I do think that investors paying GST and MFDs also paying GST and then paying income tax on that may also be a bit excessive. Commission earned by someone in the value chain, again paying GST and then paying tax on that makes the effective tax rate for sizeable MFDs very high. So I think this economics could be reviewed. It will encourage more distribution.
