NS Venkatesh, Chief Executive of the Association of Mutual Funds in India (AMFI), recently lamented that the mutual fund industry is being vilified baselessly. In an interview to Press Trust of India, he said despite customer complaints being the lowest against mutual funds in the entire financial market space, the industry is being targeted.
His utterances are not without reason. In fact, Thunivu — a recent Tamil flick starring Ajit Kumar — has portrayed the MF industry in a bad light. In the movie, a bank owner is shown to be luring customers into investing in mutual funds that in turn invest in a handful of illegal companies and misappropriate ₹25,000 crore in cash.
Lowest complaints
According to Venkatesh, between April 2017 and September 2022, the number of complaints received by AMFI against mutual funds from investors was only 5,330. This was a period when assets under management doubled to about ₹40-lakh crore and there was a manifold increase in folios. As against this, in the banking sector, the volume of complaints received under the ombudsman schemes/consumer education and protection cells in FY22 stood at 4,18,184.
When it comes to investing, there are still some reservations among people about mutual funds.
According to him, AMFI gets complaints from investors as well as distributors directly and also through the market regulator SEBI. On the basis of the type of complaints, these are broadly classified into routine and serious complaints, he said.
Nature of complaints
Routine complaints include non-receipt of dividends, non-receipt of account statement, non-receipt of commission and non-updating of record. Serious complaints are manipulation in application forms, malpractices followed in marketing units, funds and serious deficiencies in services provided by distributors, among others. According to him, serious complaints are minuscule.
He said the global funds tracking body Morningstar Inc, in fact ranked India in the top with respect to monthly fund disclosures, among 26 countries.
So, what ails the MF industry? While the “mutual fund sahi hain” campaign might have helped them win new customers and reach MFs to new towns, to win a perception battle, the association has to go beyond this.
For that, AMFI should be more proactive in airing its views, especially when it comes to protecting its own interests. Unfortunately, most times, AMFI remains silent. It could have come out with more reassuring statements in Axis Mutual front-running case or in Franklin Templeton imbroglio.
Lessons for other associations
On this front, it can learn a lesson or two from associations of automobile or cement industry — how they close ranks when it comes to lobbying or protecting the whole industry.
AMFI should seriously consider forming internal group/groups on various themes (such as disclosures, investor protections and solving grievances and handling SEBI or other regulators on policy decisions) to form considered opinions and effectively communicate them.
It can also have tie-ups with similar global bodies to learn from their experience and share the best of its practices to them as well.
Like Investment Company Institute, an association representing regulated funds in the US, including mutual funds, ETFs, AMFI should serve as a focal point for collaboration among members in proactively addressing the industry’s most critical strategic issues and in setting robust standards that help the industry grow in a sustainable way.