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Q. Too many rules in Mutual Funds: Comment on too many rules in mutual fund regulation.
Jan 24, 2017 Related to : GS Paper- 3

Ans :

Introduction-

Mutual Fund is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed. Indian mutual fund industry has built up a credible performance record in the lst thirty years. But mutual funds garner a mere 7% of the household financial savings, as majority of players are yet to attain viable scale and profitability. 

Issue-

Though there are many reasons for the lack of popularity of this investment vehicle, but the restrictive regime of the Securities and Exchange Board governing the advertising and brand-building are main cause of concerns. 

What can be done-?

  • SEBI must ease norms for mutual funds and make them easier for asset management companies (AMCs) to advertise, promote and sell their schemes.
  • Several existing restrictions and standard practices meant for advertisements by AMCs or their schemes are somewhat unnecessary and these should be either removed or relaxed.
  • AMCs should be made to save costs on advertisements, promotions and campaigns, and attract more customers, without compromising the interest of the investors at large.
  • Similarly Mutual funds should simplify their products, use simple nomenclature and explain investment objectives with the risks in simple language at the point of sale.

Conclusion-

Mutual funds promote investment regimes in the economy and also bear reasonable profit to investors. In India mutual funds regulation are very strict, hence it garn only 7% of household saving.  Hence there is an need to bring reforms in the mutual fund regulation by easing the norms.


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