CII Report For Active Mutual Fund Regulations

Mumbai: While the mutual fund industry is well ruled, with a spate of reactive regulations, it's now time to introduce more proactive, growth-enhancing regulations, according a CII-PricewaterhouseCoopers report on the Indian mutual fund industry. An example of reactive regulation is the recent circular issued by the Securities and Exchange Board of India (Sebi) urging the mutual fund houses not to park more than 15 per cent of their corpus as bank deposits at any point of time. The amendment to mutual fund regulations was made to introduce standard practices in the industry. Due to the absence of any regulations, the fund houses were parking their funds in short-term deposits. The introduction of new instruments such as commodity funds and real estate mutual funds (REMFs) demands that the regulatory body has the relevant regulations in place. While the Sebi is doing an excellent job at present, regulations to foster the the growth of Indian mutual fund sector and ensure a level playing field between the mutual funds and other players such as banks and insurance companies are the kind of proactive regulations. The report further points out that the growing competition in the industry may lead to consolidation, with smaller players being taken over.