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2024 was quite an eventful one for the Rs.68 lakh crore MF industry.
While the industry reached many new milestones in terms of net equity inflows, gross SIP inflows and AUM, there were many developments and announcements that can significantly change the MF industry in the future. Let us look at a few notable highlights from the year gone by.
Specialized investment fund is all set for launch
SEBI recently introduced a new asset class called Specialized Investment Fund (SIF). SIFs are a product class that has more flexibility than a regular mutual fund scheme and lower ticket size than PMS and AIFs.
The minimum investment amount for investors in SIF is Rs. 10 lakh. This asset class will have TER structure like mutual funds and will be subjected to single issuer limits.
Entry of more passive players
SEBI notified the "Mutual Fund Lite" (MF Lite) regulations, which aim to make the entry of passive fund players easy. Simply put, entities who want to launch only passive products need not comply with the entire MF regulations.
SEBI said that companies that deal with MF Lite will be known as Mutual Fund Lite AMCs.
MF Lite means a fund house having index funds, ETFs, fund of funds or other MF schemes as specified by SEBI.
Offering digital KYC now becomes compulsory
Fund houses started facilitating digital KYC or eKYC facilities on the homepage of their respective websites. Through this facility, fund houses basically redirect investors to their respective KYC registration agency (KRA) website based on their PAN details.
Soon uniform KYC will be a reality
SEBI asked KYC registration agencies (KRAs) to upload verified KYC details of all capital market investors in Central KYC Records Registry (CKYCRR) starting from August 1, 2024.
While KYC data of new clients has to be uploaded within 7 days of validation of the KYC status, details of existing clients will have to be uploaded in CKYCRR system within six months i.e. January 31, 2025.
Currently, insurance companies and pension fund companies use CKYCRR to verify KYC details. This opens the door for mutual fund distributors to use CKYC data of insurance and pension funds.
Banks are yet to upload KYC details in CKYCRR. If they start uploading KYC details of their customers, only a bank account will be sufficient to invest across all financial products.
Tax googly
The government increased the short-term capital gains (STCG) tax on equity funds from 15% to 20% and the long-term capital gains (LTCG) tax on equity funds from 10% to 12.5%.
However, the government increased the exemption limit on LTCG from Rs.1 lakh per annum to Rs.1.25 lakh per annum. That means, LTCG is applicable on gains exceeding Rs.1.25 lakh per annum.
Also, in equities, long term will continue to be 12 months and more. However, for non-equity assets like real estate, gold and other, the duration of long term is reduced from 36 months to 24 months.
There is no change in debt taxation. It continues to be taxed at a marginal rate of taxation irrespective of holding period.
Standard process to deal with transmission of units on death of MF investors
AMFI issued common standard operating procedure (SOP) for AMCs, RTAs and RIAs to streamline the process of transmission of units on death of MF investors.
With effect from January 1, when a nominee reaches out to a mutual fund company or a registrar to report the demise of an investor, it will get updated across all fund houses. There will be no need to reach out to another RTA or AMCs to update the demise of an investor.
No more junkets and sales contest
AMFI asked fund houses not to conduct training programs for MFDs in exotic locations like foreign countries and popular tourist destinations. Instead, AMCs should look at doing such programs in centrally located and logistically convenient locations within the country.
AMFI also clarified that such training programs cannot be done for MFDs based on achievement of sales targets like SIP contest or NFO contest.
AMFI reiterated that AMCs cannot pay any fee or consideration to MFDs other than trail commission that too in monetary terms only. In addition, AMCs cannot offer any gift voucher or electronic gadget to their distribution partners for achieving sales targets.
New players in the MF Industry
While OldBridge MF has started its operation in 2024, two new fund houses Angel MF and Unifi MF have received the final approval in 2024.
