‘There shouldn’t be any restrictions on investments in mutual funds’

Today,when a bank is investing in a mutual fund scheme,it’s investing because it has liquidity and in a position to get better returns. No bank is dictating mutual funds where to invest or not. When banks invest,they do it for commercial reasons. The returns they are getting are much better. We’re conscious of the fact that as when credit offtake takes place,a lot of bank money which is there in the system will go out.

Do you think there should be restrictions on investments by big investors like companies and banks in MF schemes?

I don’t think there should be any kind of restrictions. The key is mutual funds are supermarkets. We have everything for everyone. At the same time,one of the most important things for a mutual fund is to focus on retail. We should not get our eye off retail business. As an industry,we’ve been working in that direction. Today,in Reliance MF,we have 75 lakh investors against 40,000 investors earlier. All these things clearly tell you that the focus is on retail business. We reduced the SIP minimum ticket size to Rs 100. It’s a loss-making thing. The transaction cost is more than that. The idea of launching this product is to take MF to the common man so that the entry barrier is not there. Anybody and everybody should be allowed to invest in mutual funds.

Is there a case to tighten MF capital requirements?

Yes,I clearly believe the net worth criteria should go up. Now it’s Rs 10 crore. It should be linked to asset under management (AUM). The more money you manage,it should be going up. Even though the net worth requirement is Rs 10 crore,today with the way the MF industry functions,you can’t start a mutual fund with Rs 10 crore. The commitment has to be much more to be a serious player. The MF industry is a scale game.

What’s the impact of the Sebi move to allow buying and selling of MF units on stock exchanges?

With the mutual fund penetration of 3 per cent,this move will help us to take mutual funds deep into the system. It’s a welcome move. It’s also a question of transaction engine. The investor can directly go to a terminal and buy mutual funds. Now it has the dual benefit of both reach and reducing transaction cost. The regulator is trying to take mutual funds to the common man. We are at the tipping point where the mutual fund industry will take off. It’s something like what happened in the telecom industry. Even a common man on the street now holds a mobile. Our aim is that each and every household should own mutual funds.

Though the stock markets are bullish,new offers from MFs have come down. Why?

I don’t think it is anything to do with regulations. The investor has matured. He’s going for existing products and fund houses which have a track-record. If there’s a new NFO which is unique and investors have not invested before,there will be a lot of appetite for it. We clearly see a trend where we see investors moving towards schemes and fund houses which have a brand and track-record.

Now MF asset base has crossed Rs 8,00,000 crore. Will it cross Rs 10 lakh crore next year?

No point in putting any figure. Direction is more important than speed. The industry is going to double and triple from here…. and whether it’s going to happen in five years or eight,that’s not the important thing. Mutual fund is the best product for investors. The MF industry is here to grow.

Investors seem to be confused about investing in the right scheme. There are around 1,000 schemes in the country…

Never undermine the intelligence of retail investors. Retail investors are very well aware of what’s important. The classic thing is that during the crisis last year,retail investors gained more money than big ‘informed’ investors. Distributors and advisors also play an important role. Investors should pay 1 or 2 per cent to them to get the right advice and put the money in the right scheme.

What’s your assessment about the macro-economic picture,especially India Inc’s performance,GDP and interest rates?

We are happy to see the GDP number of 7.9 per cent. India has not been badly impacted by the turmoil. We are well off when compared to others. We are excited about this. India remains strong as a domestic consumption story. Interest rates can harden somewhere down the line. It may not happen immediately. Going forward,we expect a lot of credit offtake. Our view is that the economy will do well. We think fiscal deficit is one thing that needs to be addressed.