As an ever-growing number of consumers flock to e-commerce websites for their shopping needs, regulator Securities and Exchange Board of India (SEBI) is considering allowing sale of mutual funds through these platforms to deepen this market.
The mutual fund industry has been growing considerably over the last few years and currently has assets under management of over Rs 13 lakh crore, but it has been felt that a huge growth opportunity remains untapped especially among the retail investors.
To make it easier for investors to buy mutual funds in a cost-effective manner, SEBI is now looking into suggestions to allow sale of these schemes on e-commerce platforms, sources said.
SEBI chairman U K Sinha, who himself was heading leading fund house UTI Mutual Fund before becoming chief of the capital markets watchdog in 2011, recently met representatives from e-commerce and other technology platforms.
The meeting was also attended by Nandan Nilekani, former UIDAI chairman and co-founders of IT giant Infosys, along with representatives from Flipkart, PolicyBazaar, BankBazaar, Scripbox, FundsIndia, Perfios and Eko, among others, as also by some fund houses and senior SEBI officials.
SEBI is of the view that a greater use of Internet as a distribution channel can help increase the penetration of mutual funds, especially among the young investors, and also reduce the cost of buying mutual fund schemes.
Currently, investors can buy mutual funds directly or through distributors or agents. Investing directly is cheaper than going through intermediaries as customer is not required to pay fee to the distributors.
While, fund houses also allow sale of their products online through their own websites.
A number of fund houses are already focusing on ‘direct plan’ mode to sell their schemes, a move that may maximise the returns for the investors as against regular plans involving distributors.
Since no fees need to be paid to distributors, expense ratio gets lower in direct plans, which eventually leads to higher returns for the investors.
Besides, SEBI discussed measures for simplifying the on-boarding process of retail investors. It noted several ideas to remove in-person verifications (IPVs), speeding up the KYC (Know Your Customer) processes via KRAs’ (KYC Registration Agencies).
To streamline the distribution model for increasing the retail investors’ base, SEBI is looking into measures to enhance investor trust, lower cost of customer acquisition and provide for an online only distribution model.
Furthermore, the markets regulator is in talks with fund houses to allow investors to invest in mutual fund products by using the Aadhaar number.