'MF industry has scope to come out with simple products'

Mutual funds

The country's mutual fund industry has the scope to introduce simple products rather than come out with sophisticated offerings for customers, a Finance Ministry official said today.

C S Mohapatra, Advisor to Financial Stability Development Council (FSDC) at the Finance Ministry, said the industry should look at how to make mutual funds a good business proposition, especially to penetrate into smaller cities and towns.

"Solution lies in technology, innovative products but again I am not in favour of too much of a complicated or sophisticated product.

"India is a highly populous country and intervention of the financial sector itself provides a lot of scope for even introducing vanilla products," Mohapatra said at an event organised by industry body Assocham.

In recent times, the Securities and Exchange Board of India (Sebi), which regulates mutual funds and other segments of capital markets, has announced a raft of measures for benefit of mutual fund industry, including provision for a new distributor cadre and incentives for reaching out to smaller cities.

Meanwhile, he said that misselling of products has "become synonymous with the financial sector".

Regarding Rajiv Gandhi Equity Savings Scheme, aimed at attracting small investors into the capital market, Mohapatra said its success would depend on implementation.

"The objective of the scheme is to encourage flow of savings in the financial instruments and improve the depth of the domestic capital market," Sebi had said last week while announcing the framework for the scheme.

Under the scheme, announced in the 2012-13 Union Budget, new investors can avail tax benefits who invest up to Rs 50,000 in the stock market and whose gross total annual income is less than or equal to Rs 10 lakh.

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