CII-PWC report recommends major reforms of mutual funds industry

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New Delhi, Jul 12 (UNI) A CII-PricewaterhouseCoopers (PWC) report on the Indian mutual fund industry today asked the government to re-consider the net worth criteria for obtaining a mutual fund licence, bridging the human assets gap, and adopting best practices relating to compliance, outsourcing and accounting.

The study makes out a case for hiking the criteria for a mutual fund licence from the present Rs two crore to Rs 10 crore. It argues that this is necessary in view of the high-cost of operations in the initial years and a relatively longer gestation period.

The report says this would ensure that only major and serious players who are committed to the industry and are capable of sustaining over the long term would be able to operate as mutual funds.

Entitled 'Indian Mutual Fund Industry: Sustaining growth in a mature market', the report calls for imposing a cap on expenses that can be charged to a scheme.

With an increasing number of players entering the industry and intensifying competition, fund houses would seriously consider outsourcing as fee rates drop.

Also, with the advancement of technology, some of these functions could be moved to locations where operating costs are comparatively lower and the benefit of which could be passed on to investment management companies.

The report suggests the demand and supply gap of human assets be bridged and the industry players should come together on a common platform and through AMFI tie up with universities and colleges to offer programmes dedicated to the financial services industry in general and the mutual fund industry.

The report highlights the challenges of mounting costs of operations in the country. With real estate prices at an all-time high, this will dent the operating margins severely as lease rentals and staff costs contribute the bulk of operating costs.


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