After much pleading and cajoling, the government has finally agreed in-principle to let small investors park their savings in mutual funds without the mandatory requirement of quoting one’s permanent account number (PAN). However, investors will have to invest the money through systematic investment plans (SIP) of mutual fund houses, the limit for which has been fixed at Rs 50,000 per year.

“It is a good thing, it will let the industry grow. There is a strong need to harmonise statutory and regulatory norms for the mutual fund industry,” said Association of Mutual Funds of India (AMFI) chairman A P Kurian. The industry had for long been persuading the government to relax know-your-customer (KYC) norms to elevate its reach. Though it comes as a welcome step for the industry, market regulator Sebi is not too keen on relaxing KYC guidelines any further.

“I am a bit perplexed," said Sebi chairman C B Bhave on Wednesday, reacting to the industry's continued demands to relax KYC. Bhave stressed on increasing retail participation in the industry and said KYC was in the interest of both investors and MF houses. Reacting to a question on whether MFs should emphasise less on corporate investments and take more measures to increase retail participation, Bhave said, “We do not want to drive away corporate investors. However, the industry will have to take proactive measures to bring in more retail investors”.

“MFs went through a tough time in September-October last year as it faced redemption pressure only from corporates. Retail investors, who remained invested in all equity schemes, emerged as a good support for the stability of equity schemes. The Sensex came down from the 21,000- to 9,000-level, but there were no blips of redemption from retail investors' side,” Bhave pointed out.

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