How did equity fund sales for the retail investor category beyond the top 15 cities grow 16.38% in H1FY14 over H1FY13, when all other investor categories reported a decline?
Mutual fund houses have been consistently reporting the fall in gross sales of equity mutual funds over the past few months. Equity mutual fund sales fell by 8.48% to Rs16,544 crore in H1FY14 compared to Rs18,077 crore in H1FY13, according to CAMS MFDEx data. However, the gross sales for beyond the top 15 cities (B15 cities) rose a staggering 8.83% to Rs4,590 crore in H1FY14 from Rs3,942 crore in H1FY13, while equity mutual fund gross sales for the top 15 (T15) declined by 15.43% to Rs11,954 crore in H1FY14 compared to Rs14,135 crore in H1FY13. This leads us to the question we had asked a year back— Are some fund houses taking advantage of SEBI’s sloppiness to pick investors’ pockets? Here we had mentioned that some mutual fund houses are re-routing applications of the top 15 cities through other cities to claim the additional expense ratio at the expense of retail investors. On analysing the data further, it could also mean mutual fund houses are paying a higher upfront commission to national distributors for sales in B15 cities.
Retail equity mutual fund sales growth for the B15 cities rose an astonishing 16.38% for H1FY14 over H1FY13, while all other investor categories in the B15 cities reported a decline in equity mutual fund sales over the period analysed. All investor categories, even for the T15 citites, registered a decline in equity mutual fund sales. What led to a boost in mutual fund sales? Was it aggressive sales by the mutual fund houses? If it was, why did the sales of the other investor categories register a degrowth in sales. Effective marketing should lead to a growth in other categories as well. So is it true that mutual fund houses are rerouting applications? Is the regulator watching?
Is it possible to know which mutual fund distributor category led to a sharp increase in sales in the B15 cities? On analysing the mutual fund equity gross sales by distributor category we find that for the B15 cities national distributors reported a sharp 62% rise in sales. The category of other distributors reported a 59% growth in sales. Both these category of distributors reported a declined in sales in T15 cities.
We have mentioned in the past how mutual fund houses promote their schemes by paying a high upfront commission to distributors. Mutual fund houses usually pay 0.70% to 6.5% as upfront commission to distributors to push their equity schemes. This is an additional amount of money which mutual fund houses pay from their own pockets to distributors. After the new regulations, it has been reported that many mutual fund houses have revised their commission structure for distributors in B15 to incentivize them to get more retail investors. Influential mutual fund distributors are also said to get a far higher upfront commission than what a small mutual fund distributor gets. Is this a reason for the sharp increase in sales for national mutual fund distributors?
Before this regulation came in force from 1 October, Moneylife had mentioned that the calculation is complicated and there is low accountability. (Read: Mutual funds to be expensive from 1st October). The Association of Mutual Funds in India (AMFI) refused to divulge any information on this when we had contacted them last year.
It is also pertinent to note that sales of direct plans for both T15 and B15 cities more than doubled. For the T15 and B15 cities, direct plans brought in Rs1,678 crore and Rs424 crore respectively in H1FY14 compared to Rs771 crore and Rs198 crore in H1FY13.
Maharashtra SIC has ordered BMC and all other local bodies not to disclose building plans under the RTI Act, used by activists to expose illegal and unauthorised construction activities
The Maharashtra state chief information commissioner (SIC) has directed all local bodies in the state not to disclose building plans or other document (like interior plans) to anyone under the Right to Information (RTI) Act, citing security concerns.
Ratnakar Gaikwad, the SIC, in his order on 26 September 2013 issued using powers vested under Section 19(8)(c) and 25(5) of the RTI Act, said, "All municipal corporations, municipalities in the state are directed not to provide building plans or other related documents of public buildings including government and semi-government offices, hotels, gymkhanas, hospitals, malls, IT and commercial buildings. Similarly, in case of private buildings, interior plans will not be provided under RTI unless it is proved that the information sought is in public interest."
This order has come as shock to several RTI activists such as Shailesh Gandhi (who served as Central Information Commissioner) and Bhaskar Prabhu, who are working on placing all permissions granted, approval plans and concessions for several buildings on the website of BrihanMumbai Municipal Corp (BMC). Both, Gandhi and Prabhu are part of the BMC's technical advisory committee (TAC). The TAC was on the verge of ensuring suo moto disclosure of all building plans, and related documents by BMC.
"This is an unprecedented order muzzling information from being provided. The order of the SIC is bad in law and contrary to the spirit and preamble of the RTI Act. The SIC should withdraw this order. Citizens should ensure that all details should be available on the website to safeguard their interests and prevent builders from fooling them," said Gandhi.
RTI activist Anil Galgali, in a letter sent to Maharashtra governor K Shankarnarayan, chief minister Prithviraj Chavan and chief secretary Jayant Banthiya has questioned the issuance of the order by Gaikwad. "...the order is bad in law, without application of mind, illegal, unconstitutional and against the RTI Act. The Information Commissioner has to pass orders within the purview of RTI Act on a case which is presented before it. It has no powers to pass any general orders/law, which is vested with either the government or the Legislature," Galgali said.
He said, "It must be noted that almost 52% of buildings in city like Mumbai do not have occupation certificate (OC). Such order (by the SIC) will ensure that the illegalities committed by the builders in collusion with corrupt babu’s and neta’s are always buried. The common man will never ever get to know about illegalities committed in a building in which he proposes to buy a flat or shop that in future may become another Campa Cola building."
Several activists have exposed illegal constructions across the country using the RTI Act. In one of orders, the Central Information Commission, stated, “The information that 65 illegal buildings have come up in a single zone has been exposed through a citizen’s use of right to information. In other RTI applications, the appellant has been given evidence of another 54 illegal buildings and he claims to have brought to the notice of the authorities another 90 buildings. A clear modus operandi which emerges in this case is that an illegal building is constructed in three to six months and during this period neither any cognizance of any complaint is taken nor any information provided under the Right to Information Act. After the whole building is constructed it is probably claimed that this is an old building and needs to be regularised”.
While the security concerns raised by the Maharashtra SIC needs to be addressed by authorities, blocking access to important information like building plan would deprive buyer a chance to verify the authentication of the building. The recent case of Campa Cola compound building only highlights the need for transparency from local public bodies, without which buyers would continue to be duped.
Speaking with Times of India, Gaikwad has said that there is a difference between a prospective buyer and any other information seeker. "A builder must disclose to a prospective buyer all facts, plans, costs etcetera and can also insist on information under RTI if he feels cheated," he told the newspaper.
Here is the order passed by the SIC…
Mahila Bank is apparently giving “kitchen loan” as per the initial press reports. Kitchen is the place where most of the women in India spend their maximum time. Surely, we want to break that paradigm, not reinforce it
“What's in a name? That which we call a rose by any other name would smell as sweet” wrote William Shakespeare. But he would have definitely changed his thoughts had he visited India, a country obsessed with not just name, but names which very rarely deliver what they are supposed to do. This obsession with names is very well entrenched in the financial services industry. We don’t just sell financial products by catchy names; now we also have financial institutions being promoted by names. Latest to join the series is “Bhartiya Mahila Bank”.
A bank is supposed to be for women of this country, where men can not only be employees, but also have an account opening facility. So what is that differentiates this new bank with other banks that we have in India? Sounds funny but to start with it is “kitchen loan” as per the initial press reports. After all, kitchen is the place where most of the women in India spend their maximum time. This kitchen loan is the start up USP of this bank which must make our Finance Minister happy who was completely wrong to think that all banks were just clones of each other and were offering the same products and services much to his disappointment.
Jokes apart, the most important question that we need to debate now is not whether India needs a “ Mahila bank” or not, as we have created one, but to see what can this bank do to transform the country. There are many things that this bank can do which other banks have failed to do till now, though the concept exists on paper for long. The first and the most important objective of this bank should be to promote financial inclusion. Important thing to note here is that financial inclusion is not something which rural India alone needs. We need financial inclusion in the financial capital of India i.e. Mumbai. There are several maid servants, women vegetable vendors and other women doing small businesses etc., who do not have access to bank accounts and find it difficult to open accounts because of various constraints. These constraints include proof of residence not available, unawareness about the process of account opening etc. There is an RBI circular to handle this scenario in the name of financial inclusion but banks rarely offer the account opening facility to those who don’t matter to them. So this new bank for women can work wonders in ensuring financial inclusion.
The next significant contribution that this bank can do is to promote entrepreneurship among women in India. We have a huge pool of human resource in form of non-working women, which can contribute to economic growth if capital is arranged and hand-holding for starting a business is done. Banks can definitely ensure the first one and contribute substantially to the second one. There is a scheme by the government to promote start up businesses which do not have capital of their own and is called as CGTMSE. Why not make the new bank deliver capital support to woman entrepreneurs through this scheme or any other new idea, if possible? Of course, due diligence process and control points cannot be compromised by granting loans to anybody but an attempt can be made in this direction by targeting the right group.
Of course, a bank cannot financially be viable by promoting financial inclusion and promoting entrepreneurship alone; hence it needs to work on general banking concepts of mobilising deposits and lending to the needy. This is to say that this new bank should continue with old bank practices to remain viable but should always focus on financial betterment of women to make its name and objectives more relevant.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)