MUMBAI: The mutual funds lobby Amfi has welcomed the slew of reforms that Sebi has announced to increase the penetration of mutual funds by way of offering cash incentives to first-time woman investors as well as allowing fund houses' investments in Reits as equity.
Amfi said the new incentive structures to expand mutual fund penetration beyond the top 30 cities and among women investors align closely with its financial inclusion objectives.
“The reduction in the maximum exit load from 5% to 3% further reinforces Sebi’s commitment to investor protection and transparency, while the reclassification of Reits as equity for mutual fund investments is also a timely step that will enhance diversification opportunities and support the growth of real estate as an investible asset class.
“Taken together, these initiatives will broaden investor participation, strengthen the long-term health of the mutual fund industry, and strike a thoughtful balance between regulatory rigor, investor protection, and ease of doing business,” Amfi chief executive Venkat Chalasani told TNIE on Saturday.
He further said incentivising first-time women investors in mutual funds will go a long way in increasing their participation, which will help them build their savings as well.
Sebi after the latest board meeting held on Friday announced many steps to facilitate enhanced investor protection and financial inclusion in the mutual fund space.
The measures include a more transparent and sustainable incentive structure for MF distributors, towards which the board decided to reduce maximum permissible exit load from 5% to 3%; revise the incentive structure for distributors for new inflows from B-30 cities; and an incentive structure for distributors for on-boarding new women investors.
Sebi has provided incentives to distributors only for investment/inflows from new individual investors (new PAN) from B-30 cities.
The incentive will be provided to the distributor for the new investor at the industry level and shall be capped at 1% of the first application amount (in case of lump sum investment) or total investment during the first year (in case of SIPs) subject to a maximum of Rs 2,000.
The present norms permit MF schemes to charge a maximum exit load of 5%, which gets credited back to the scheme. However, MFs generally charge exit loads in the range of 1-2%. Hence, reducing the maximum exit load would align the regulatory requirement with the prevailing industry practice, chairman Tuhin Kanta Pandey said.
Setting the maximum cap at 3% was found appropriate so as to strike a better balance between investor protection and flexibility for schemes having exposure to less liquid securities, he added.
Considering the scope of gender inclusion in the mutual fund space, it was decided to incentivize distributors to create awareness and promote financial inclusion among women investors. Additional commission shall be paid to distributors for investment/inflows from new women individual investors (new PAN) at the industry level. The computation and payment of such commission shall be on the same lines as the B-30 incentive.
Meanwhile, the Reits Association has welcomed the Sebi move to classify real estate investment trusts (Reits) as equity for the purpose of inclusion in market indices.
This important step marks a significant milestone in strengthening the Reits ecosystem and aligns with global best practices where Reits are part of equity indices, the association said. Also, this is a step forward that will contribute to enhancing the depth of the Reits market and accelerating growth of these instruments. By enabling this, Sebi has paved way for widening investor participation in these instruments and also improving liquidity, it added.