Capital markets not ready yet for financial inclusion: Bhave

"We must first understand the term financial inclusion, as defined by the Reserve Bank. It is different for banks and mutual funds. When we talk of banks, it means to include the poorest of the poor...but that can't be same for MFs," SEBI chief CB Bhave told a mutual fund summit in Mumbai on Wednesday

Even though financial inclusion is the new buzz word in the financial services sector, Securities and Exchange Board of India (SEBI) chairman CB Bhave feels that the country is not ready yet for the same in the equities markets, reports PTI.

"We must first understand the term financial inclusion, as defined by the Reserve Bank of India (RBI). It is different for banks and mutual funds (MFs). When we talk of banks, it means to include the poorest of the poor...but that can't be same for MFs," Mr Bhave told a mutual fund summit in Mumbai on Wednesday.

Taking a dig at MFs, Bhave said MF players should not get involved in a rat race to sell or mis-sell their products and should first understand who their target customer is.

"Financial inclusion is a noble goal and everyone should be working towards achieving it, but one must keep in mind the target customer. A person whose lifetime saving is a mere Rs50,000 can't afford to invest in MFs. If the market crashes tomorrow, he cannot take that kind of risk. You will only give him what the net asset value (NAV) is at that particular time," Bhave said.

Meanwhile, global advisory firm PriceWaterhouseCoopers (PWC), in a report has stressed that there is tremendous growth opportunity for mutual funds as the penetration level in smaller towns is lagging behind urban centres.

Quoting the National Council of Applied Economic Research (NCAER) 2008 Survey, PWC said as much as 65% of the savings are with banks or post offices, 23% are invested in real estate and gold, only 12% are channelized towards financial instruments.

"Only 12% of the savings are invested in financial instruments. This manifests tremendous opportunity for growth in mutual funds," it added.

It also attributed the growth opportunity to rising disposable incomes in Tier II and III cities.

It also stressed that the industry should come out with better plans and innovative products that would offer a higher rate of return, transparency and freedom to select products of their choice.

User

Monsoon 11% below normal: IMD

The southwest monsoon, which is nearly 10 days behind its normal schedule over north India, is expected to strengthen with the formation of a low-pressure area in the Bay of Bengal

India received 11% less rains than normal for the June 1-23 period even as the south-west monsoon, which has been virtually stationary for the past week, showed signs of advancing northwards, reports PTI.

The weather office said that the country received 97.4 mm rainfall for the June 1-23 period as against the normal levels of 109.6 mm.

However, weather scientists have said that there was no need for alarm as there was still hope for improvement in rainfall across the country.

The southwest monsoon, which is nearly 10 days behind its normal schedule over north India, is expected to strengthen with the formation of a low-pressure area in the Bay of Bengal.

"Conditions are becoming favourable for further advance of southwest monsoon into parts of Bihar, Chhattisgarh, Madhya Pradesh and some parts of east Uttar Pradesh during next 3-4 days," the weather office said.

Since their onset on 31st May, monsoon rains have made staggered progress and stopped in the tracks due to cyclone 'Phet', delaying their advance by at least 10 days to the breadbasket northern region, as well as central and north-western parts of the country, which mainly grow oilseeds.

User

Fuel price hike move likely tomorrow

The eight-member EGoM is unanimous on bringing about market-linked prices for petrol, a fuel generally used by the well-off, but it remains to be seen if the Rs3.73 per litre hike would come into effect immediately or in two equal instalments

An increase in the rates of petrol and, possibly, diesel looks imminent with a panel of ministers set to meet tomorrow for deciding on the fuel pricing policy, reports PTI.

An Empowered Group of Ministers (EGoM) may go with oil minister Murli Deora's proposal to free petrol prices from government control, which would trigger a hike of Rs3.73 a litre, official sources said in New Delhi.

There was near-unanimity in the eight-member EGoM on bringing about market-linked prices for petrol, a fuel generally used by the well-off, but it remains to be seen if the Rs3.73 per litre hike would come into effect immediately or in two equal instalments.

However, sources said that freeing diesel prices was out of the question because the fuel was used by the transport and agriculture sector and, therefore, had close links with the inflation rate.

Railway minister (TMC leader) Mamata Banerjee and agriculture minister (NCP supremo) Sharad Pawar are said to be against decontrolling diesel rates, and the EGoM may settle for a nominal hike instead.

Diesel prices may be raised by Rs2 per litre instead of the Rs3.80 hike needed to make it market-linked, they said.

Also on the cards is a Rs25 per cylinder hike in domestic liquefied petroleum gas (LPG) rates and a marginal increase in kerosene prices, but these would have to pass the muster of Ms Banerjee and Mr Pawar.

The two party leaders, who provide crucial support to the United Progressive Alliance (UPA) government, had skipped the first meeting of the EGoM on 7th June. This led to the panel head, finance minister Pranab Mukherjee, postponing the decision.

Sources said that DMK leader and fertiliser minister M K Alagiri has agreed to an increase in auto fuel prices.

With global crude oil trading at below $80 a barrel, Mr Deora is seeing this as the last opportunity to usher in reforms in the sector which, otherwise, would need Rs74,300 crore in doles to bridge the gap between retail prices and import costs.

Freeing of petrol prices would reduce the Rs74,300 crore deficit by about Rs5,000 crore. A Re1 per litre hike in diesel prices would cut losses by Rs3,800-Rs4,000 crore.

Mr Deora had, on more than one occasion, briefed the prime minister Manmohan Singh and Mr Mukherjee on the crisis that would befall oil PSUs if no decision was taken in this regard.

But the UPA government seems wary of freeing fuel prices as such a move can add to the already-high inflation.

In May, WPI-based inflation provisionally entered double digits at 10.16%.

State oil firms currently lose about Rs215 crore per day on selling fuel below the imported cost. At present, petrol is being sold at Rs3.73 a litre below its cost, diesel at a loss of Rs3.80 per litre, kerosene at Rs18.82 a litre and domestic LPG at a discount of Rs261.90 on every 14.2-kg cylinder.

User

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)