The Securities and Exchange Board of India (SEBI) has given a final approval to Indiabulls Financial Services, India Infoline (IIFL) and Union Bank of India-KBC Asset Management to start their mutual fund business. Indiabulls and India Infoline had applied for a mutual fund license in 2007 and 2008, respectively. Union Bank had applied in 2009.
India Infoline will be launching the products in two months time. The company is looking to launch Index and ETF products. With a GDP of 9%, India Infoline feels that the mutual fund is a long-term business in India and it has a huge growth proposition.
SEBI is not comfortable in granting licenses to financial services companies and has expressed concerns over granting mutual fund licenses to non-serious players. Currently it has around 23 pending mutual fund applications.
The MF industry is witnessing a phenomenal 9% growth with close to asset under management of Rs 6.2 lakh crore. The new entrants in the mutual fund industry feel that India's asset management industry is underpenetrated and doesn't even constitute even 10% of the GDP. At the same time the industry is also witnessing exits by HNIs from mutual funds to other short-term investment opportunities.
The financial crisis in 2008 has seen many new entrants in the mutual fund business burning their fingers. Also the market regulator has removed the entry load barrier which many fund houses see as a boon to the MF industry.
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