The market regulator’s meeting with banks to discuss strategies to boost volumes on online MF platforms has failed to achieve a breakthrough

As it stands now, the market watchdog's pitch to the bankers for using their distribution network to boost sales on the struggling mutual fund platforms on the stock exchanges has failed to elicit a healthy response from the banking community.

The Securities and Exchange Board of India (SEBI), in its high-level meeting with bank sponsored AMCs (asset management companies) and their respective retail banking heads, made a passionate case for tapping the banks' existing infrastructure and consumer reach to boost volumes on the Bombay Stock Exchange's (BSE) StAR MF platform and National Stock Exchange's (NSE) NEAT Mutual Fund Service System (MFSS). However, this meeting, which lasted for more than an hour, has not gone the way of the regulator.

The meeting was attended by senior officials from both the stock exchanges, namely, NSE's deputy MD Chitra Ramakrishna and BSE's deputy CEO Ashish Chauhan. The banking community was also represented by some banks like Union Bank of India, State Bank of India, HSBC, Canara Bank and others. Surprisingly, however, a lot of senior level management from the banks and AMCs were not present for the meeting, despite SEBI's push for a high-level participation.

In the meeting, SEBI tried to persuade the participants to take the stock market route to funds by asking them to look at the long-term opportunity for the mutual fund industry, one which has seen an unfortunate reversal in fortunes since the regulator's controversial alterations in the structure of the industry. Pitching the stock market route as an attractive option, SEBI argued that since most of the KYC (know your customer) procedures were already done, there would be no further need for it.

Sources have revealed to Moneylife that most bank AMCs listened patiently but kept quiet throughout. An official representing one of the banks argued that if banks were to accept applications and process them (currently being handled by the registrar and transfer agents CAMS and Karvy), it would entail extra responsibility upon the bankers while offering little opportunity for remuneration.  

One of the participating bankers told Moneylife that the meeting ended like any other called by SEBI in the recent past, adding that no breakthrough was achieved. Surprisingly, none of the stock brokers who actually use the NSE and BSE systems were present for the meeting. A source within the industry confided to us, "It is like asking road builders to drive on the road and not the car-owners for whom it is actually meant."

Moneylife had earlier written (http://www.moneylife.in/article/81/5841.html) how this plan to enlist banks to help boost sales of mutual fund schemes is unlikely to work. And so far it has not.