Sebi mulls allowing mutual fund purchases on mobile wallet platforms

Posted On: August 15, 2016

NEW DELHI: With the number of smartphone users in the country increasing every day, electronic payment applications or mobile wallets are creating the next wave of change in the way people make payments.

Capital market regulator Securities and Exchange Board of India (Sebi) is planning to cash in on this opportunity and has initiated efforts to broaden investor participation in the equity markets. The capital markets regulator is mulling allowing the purchase of mutual fund units using digital wallets or e-wallets.

While the Securities and Exchange Board of India (Sebi) is in talks with the Reserve Bank of India to sketch out the ways in which this could be done, analysts are welcoming the move.

Jitendra Solanki, a Sebi certified investment advisor said, "What Sebi has done is to bring growth in the mutual fund's industry by tapping these users. Digital wallets will increase their penetration significantly since it will bring the ease of investing which Gen Y demands. The growth of direct plans has seen the maximum participation from tech-savvy investors and digital wallets will bring even the non-tech savvy to the mutual fund's industry."

Digital Wallets have been a significant game-changer in the country, especially among youth. According to research by 6Wresearch, India has around 135 million wallet users and Paytm alone has more than 100 million on its platform. This is double the quantum of users Visa and Maestro have combined.

It is estimated that the digital wallet industry will grow at a 68 percent compounded annual growth rate (CAGR) and is expected to touch $11.5 billion by 2022.

In India, around 70 percent of domestic savings go into bank fixed deposits and the mutual fund industry sees huge scope for growth. However, experts believe that the low demand for mutual funds from the public outside major cities is due to low levels of financial literacy, cultural attitudes towards savings, and investments. Banking correspondents should also be engaged to provide basic knowledge of investing and savings to tier 2 and 3 cities to see growth in mutual funds.

At present, with declining rates on fixed deposits and more investors opting for systematic investment plans to invest in equities, assets under management (AUM) of equity mutual funds have grown at a record high to Rs 4.5 lakh crore at the end of July, according to Association of Mutual Funds in India (Amfi) data.

According to the RBI, there are three kinds of wallets - closed, semi-closed, and open wallets. For financial transactions, companies that have been established as open and semi-closed wallets alone are eligible.

Oxigen Services India Private Limited, Citrus Payment Solutions, and Paytm offer semi-closed wallets.

Anil Rego, chief executive officer and founder, Right Horizons said, "We do not believe that this will have a substantial impact on inflows to mutual funds as the KYC processes, and investor education needs to be followed. The digital wallets would be an additional feature, but however, this is a positive and welcome step."

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Media Courtesy : New Indian Express