Market regulator SEBI has said there is a case for consolidation in the asset management industry due to presence of some non-serious players, but clarity on this course will emerge only after the national mutual fund policy is put in place.

“My view on that is that asset management industry has also got some non-serious players, and one of the reasons for that is that there is a very easy entry situation here,” SEBI Chairman U.K. Sinha told PTI in an interview here.

Asked whether it is time for consolidation in the mutual fund industry as some of the funds were very small, Sinha said: “Right now, if you look at the scenario as a static situation, then perhaps there is a case for consolidation.”

Currently, there are around 40 mutual fund companies and the numbers have risen sharply in the past couple of years.

Securities and Exchange Board of India regulates a host of the segments including mutual funds. SEBI recently announced a slew of reform measures for the mutual fund industry to expand their reach across the country and also to safeguard the interest of investors.

Detailing the reasons behind the presence of non-serious players, Sinha said: “The entry barriers are not there and the capital requirement is very small. So, one of the things SEBI has decided is to develop a mutual fund policy.

“Like the Insurance policy and the Pension policy, SEBI is working on a mutual fund policy and once this policy is in place, the mutual fund industry will have clarity about the future of the industry.

“At that stage, there may be some consolidation activities,” Sinha said.

The SEBI Chairman said that the asset management business would also be guided by what will happen in the pension area.

“If the pension area opens up, then we may require even more mutual funds. If the pension area does not open up and the issues related to capital requirements and tax requirements are clarified, even then there will be some changes,” he said.

Sinha was, however, optimistic about some positive developments for the industry and said: “I believe the Government is also looking at, after we gave them our report on this issue, on the tax treatment.

“I hope there will be some more clarity on the pension front as well. Once these two things happen, then it will be clearer whether we need more mutual funds or less,” he said.

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