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The Securities and Exchange Board of India Sebi is looking to increase the minimum capital requirement for a mutual fund company

The Securities and Exchange Board of India Sebi is looking to increase the minimum capital requirement for a mutual fund company asset management company or AMC from a current level of Rs 10 crore to Rs 50 crore.

This is being done to weed out non-serious players who have neither grown nor are investing further in the business.

Earlier,Sebi chairman UK Sinha had voiced the need to raise the minimum capital requirement and had formed a committee to look at long-term mutual fund policy and determine the minimum capital needed.

The committee is expected to submit its report over the next two to three months.

Sinhas concern also stemmed from the fact that some mutual fund companies had not opened sufficient branches and were not reaching out to investors.

A source said,The thinking is to take the minimum capital requirement to at least Rs 50 crore. Though there is a view to take it even up to Rs 100 crore.

Experts in regulatory policy say that the new capital norms will be applicable not only for prospective AMCs but even for existing players who will be asked to raise their capital base within a certain span of time.

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As per Sebi Mutual Funds Regulations,1996,a prospective player in the space should have a minimum net worth aggregate of paid up capital and free reserves of Rs 10 crore to be eligible to be appointed as an AMC.

You cant start a mutual fund with Rs 2 crore,Rs 5 crore or Rs 10 crore. You have to commit capital for long-term growth, Sinha had said at a seminar recently.

Sebi data has also pointed out that the 10 AMCs at the bottom of the ladder contribute only 1 per cent of the industrys assets under management and the percentage has not changed over the last 3-5 years.