FinMin may ask Sebi to re-introduce entry load

Concerned over the thumbs down to mutual funds by investors in the recent past, the finance ministry is looking at measures to boost the industry. The ministry, which is scheduled to hold talks with stakeholders on Monday, is considering a proposal to re-introduce entry load on the once popular investment instrument, mutual funds.

"We will meet representatives from mutual fund companies as well as Sebi officials to discuss ways to promote mutual fund schemes. One of the measures we are considering is to ask Sebi to reintroduce commission to brokers, or entry load," a finance ministry official said.

The move comes less than week after Prime Minister Manmohan Singh, who is now holding reins of the finance ministry, called for addressing problems of the mutual fund industry.

"There are issues about the mutual funds industry which need to be resolved," the Prime Minister said at a meeting with top finance ministry officials last week. The Mutual Fund Advisory Committee and the Securities and Exchange Board of India (Sebi) is scheduled to meet on July 17 and may take a call on the issue.

The issue was also recently raised by Sebi chief UK Sinha who had earlier proposed that investments in mutual funds to be made eligible for tax exemptions under the Rajiv Gandhi Equity Savings Scheme (RGESS), as a means to pep up the industry.

Significantly, Sinha has however made it clear that reintroduction of entry load is not the correct way to incentivise sales of mutual funds.

The finance ministry is of the view that pushing mutual fund schemes would also help contain investments into gold, which is turning into a problem given the burgeoning current account deficit.

Sources said that the finance ministry, which is yet to notify the structure of RGESS, is keeping all options open after Wednesday's meeting with the Prime Minister.

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