|Chennai||Rs. 24470.00 (1.37%)|
|Mumbai||Rs. 24900.00 (0.97%)|
|Delhi||Rs. 24200.00 (1.26%)|
|Kolkata||Rs. 24160.00 (0%)|
|Kerala||Rs. 24000.00 (0.63%)|
|Bangalore||Rs. 23800.00 (0%)|
|Hyderabad||Rs. 24140.00 (1.17%)|
David Gonsalves (name changed), 42, a resident of Mumbai's central suburbs, makes an irritated gesture when talking on investment in mutual funds (MFs). Not due to any losses he’s making while being invested but the fast changing Know Your Client (KYC) norms.
What has irritated not only investors but sector officials, too, is the recently added In-Person Verification (IPV) to the KYC requirement, whereby fund houses need to verify investors' physical presence.
“I never invested in stock markets and tried to escape because of the fear of losing capital. A friend of mine has been suggesting doing so in an MF, with a systematic investment plan (SIP). I submitted my all required documents last month and my first purchase of units took place in the middle of the month. But I’m now told I have to personally visit their branch and verify my physical presence. This is an irritating and painful exercise,” says Gonsalves.
The Securities and Exchange Board of India (Sebi) has mandated IPV from November 30. Any Sebi-registered intermediary (including fund houses), NISM/Amfi certified distributors which are KYD-compliant and scheduled commercial banks are eligible to do the IPV for investors. Only, the latter (including existing ones), would have to take the trouble of visiting the branch.
Many think like Gonsalves and sector executives are aware of this. “This (IPV) is a new headache for us. Though the regulator is doing it to do good for the industry, the move is not practical. Already, we have seen changes in KYC requirements in the last several quarters which has created confusion among investors,” says chief executive officer of a mid-sized fund house who did not wish to be named.
Agrees the chief marketing officer of a large-sized player, “Since it’s a regulation, we have no choice but to abide by it. But at a time when business is flat, with no fresh money coming in, physical verification will be a deterrent for investors. This is not good for a struggling industry like ours, which is finding it difficult to attract retail (customers).”
Sector officials say no one likes rapid changes in regulations. MFs continue to be push products’ and with ever-changing regulations, the industry will only earn the wrath of investors, they add.
A top official in the sector tells Business Standard: "I wonder why so many KYC norms are required. Why not a standard document, say the (tax) permanent account number (PAN) or the recently launched Aadhar Card as the base of all investments? More than half the country may not have distributors or advisors for MFs or, for that matter, even bank branches in several pockets. What would prospective investors there do? You want him to travel all the way to the branch for IPV?"
The MF sector, with a little over 40 fund houses, has been on the receiving end in terms of exodus of investors. In equity alone, the sector has seen an erosion of around six million folios over two years. Penetration of MFs as a financial product is less than four per cent, while three-fourths of the assets come from just 15 cities.