Mutual funds have lost 22.61 lakh folios over a period of two years. There has also been a huge outflow of Rs1,365 crore from equity mutual funds in April—the highest outflow since October 2010
The total number of folios in equity-oriented mutual funds for the retail category (which was 4.03 crore at the end of financial year 2009-10), has declined to 3.87 crore at the end of 2010-11. This decline has been continuous over the past two years. The financial year 2009-10 saw an exit of 6.13 lakh folios from equity-oriented schemes. The following year witnessed an exit of another 16.48 lakh accounts. Added to this, there has been a huge outflow of Rs1,365 crore from equity mutual funds in April-the highest outflow since October 2010. New folio creation has not been up to the mark either. This just shows that retail investors are withdrawing from equity investing in a big way at a time when income and prosperity are rising.
In the past two quarters, from October 2010 to March 2011, the folio tally for equity-oriented funds increased marginally by 21,573 accounts. A week back, Moneylife analysed a report from Computer Age Management Services (CAMS), a transfer agent for mutual funds, saying that new folio creation has not been as good as it should have been (CAMS research on creation of MF new folios throws up debate). Proving this right, we see that the addition of new folios has not made any difference in the total number of folios; in fact, the total number of folios has declined over the years. In the CAMS report, we saw that the average new folio creation over a period of two years, from August 2007 to July 2009, was 4.6 lakh new folios per month and from August 2009 to July 2010, the period post the ban on entry load, it averaged just 2.8 lakh new folios per month, even when the markets were doing well.
All these symptoms point to a much deeper problem. The equity market has turned hollow and the equity cult is shrinking, instead of spreading. This is a sorry situation against the backdrop of 8% economic growth, continued new listing of companies, rapid spread of broking networks and NSE terminals and massive inflows of money from foreign institutional investors. The regulator has done nothing about it either. The preamble of the Securities and Exchange Board of India (SEBI) mentions "To protect the interest of the investors in securities and to promote the development of, and to regulate the securities market".
SEBI has certainly failed to promote the development of the stock market and that is because it has failed to protect the interest of investors. The ban on entry load in August 2009 was intended to protect investors but this left distributors with no incentive to sell mutual funds. Mutual fund sales are continuously declining-and the investor has been left stranded.
Mutual fund units don’t come as physical certificates. They exist only in electronic form. So, why is SEBI (the Securities and Exchange Board of India) hell-bent on popularising demat of fund units, ignoring more pressing issues like common account statements?
SEBI has just issued a circular making it mandatory to provide demat option for all funds effective 1 October 2011. In a circular dated 19 May 2010 on the transferability of mutual fund (MF) units, SEBI has directed all AMCs (Asset Management Companies) "to clarify by way of an addendum that units of all mutual fund schemes held in demat form shall be fully transferable." The circular says, "It has been observed that in their close-ended schemes, many mutual funds provide an option to hold units either in physical or in demat form, but offer no such option in case of open-ended schemes. In order to facilitate investors, mutual funds should provide an option to the investors to receive allotment of mutual fund units in their demat account while subscribing to any scheme (open-ended/close-ended/interval).
Therefore, Mutual Funds/AMCs are advised to invariably provide an option to the investors to mention demat account details in the subscription form, in case they desire to hold units in demat form. Mutual Funds/AMCs shall ensure that (the) above-mentioned option is provided to investors in all their schemes (existing and new) from 1 October 2011 onwards."
The SEBI circular also says that "It has also been observed that often investors' request for dematerialising their units is rejected as Depository Participants are not having/or having incorrect ISIN (International Securities Identification Number) of each option of the scheme. In this regard, Mutual Funds/AMCs are advised to obtain ISIN for each option of the scheme and quote the respective ISIN along with the name of the scheme, in all Statement of Account/Common Account Statement (CAS) issued to the investors from 1 October 2011 onwards."
All this would have made sense if currently MF companies were offering physical certificates like how companies used to issue shares. But MF units are already offered by fund companies in electronic form. Why would anyone want to demat something that already exists in electronic form? The market regulator has given this foolish idea a bigger push with a circular.
Although all SEBI is saying is that the demat option should be made clear, distributors are wondering as to why is the regulator giving a thrust continuously in this direction? Does SEBI want to encourage the fund industry to take the stock route (exchange-broker-demat)? This is what the distributors suspect, but we don't think SEBI is necessarily working for the brokers.
SEBI's decision to continuously push the demat route stems simply from the fact that the regulator is living in an ivory tower and has no touch with what is happening on the ground. It does not talk to investors or distributors.
One of the distributors argued, "What investors really need is a common account statement (as mentioned earlier). Would that serve SEBI's purpose? A CAS and an online platform to advisors would ensure more reach and reduce the expenses." But unfortunately, SEBI has no mechanism to listen to people who have actual ground-level experience.
A few months ago, NSDL (National Securities Depository Limited) came out with an ad claiming that it is 'smart' to use the demat route for MFs. But the problems of using the broker-demat route and the cost of taking this route for no added benefit will continue to keep investors away. Moneylife recommends one should make one's financial life simple-avoid MF demat as long as it is not compulsory. But the way SEBI is headed, you may be forced to demat your paperless units!
Under the ‘unioninclusions’ initiative, Union Bank has launched five financial inclusion schemes
The Union Bank of India has launched ‘unioninclusions’, an initiative to deepen the financial inclusion. ‘Unioninclusions’ is an initiative by Union Bank of India as part of the nationwide Swabhimaan programme.
Under the ‘unioninclusions’ initiative, the bank launched five financial inclusion schemes. This includes opening of 11 specialised financial inclusion branches, biometric card-to-card remittance facility for migrant labour, mobile van banking to extend banking reach to unbanked villages in Odisha, comic book series for spreading financial literacy among rural masses and solar powering of Union Adarsh Gram
Financial Inclusion branches will have one-main branch to which the allotted villages would be attached in such a fashion that a single branch would monitor the working of 20 customer service points each. The branch will drive the implementation of Financial Inclusion projects at the field level while also ensuring good customer service under branchless banking.
The Bank has also launched the facility of biometric card-to-card remittance. Under this, migrants will be able to transfer money from his card to the card of his relative in the village, who can avail cash from the BCs (business correspondents) in the village itself.
The mobile van banking will cover those villages which are remotely located and infrastructure availability is poor. Under this model, banking services would be provided through a van which will move from village to village on specified days. The Van would have the capacity to serve multiple villages each day of the week. The Van would travel to unbanked villages to provide various range of banking services.
The Bank has come out with three comic books in Hindi language ‘Surakshit Bhavishya’ on deposits, ‘Khushhaali’ on loans and ‘Swayam Sahayata Samooh Aatmnirbharta ki ore’ on SHGs.