Page 21 - Banking Finance August 2017

MUTUAL FUND

$600 billion to flow into financial products in five years Mutual fund Equity in-

Helped by regulatory and policy initiatives, a whopping USD 600 billion worth of flows jump 3-fold to Rs
savings is likely to flow into financial instruments,
including equities, mutual funds and insurance 28,000 crore
products in the next 5 years, said a report by
Ambit Corporate Finance. This is three times the
amount (USD 200 billion) of savings into the finan-
cial sector compared to the past 5 years.
According to the report, "opportunities from the
reset in financial services sector in India', assuming that 60 per cent of house-
hold savings shift to financial savings, nearly 40 per cent of this would flow into
capital markets, MFs and insurance, resulting in estimated result in investments
of about USD 600 billion over the next five years.
The equity mutual funds have seen
No steps taken in India for launching Sharia-compliant an inflow of over Rs 28,000 crore in
mutual funds: Reserve Bank April-June 2017, a surge of nearly
three-times from the year-ago level,
Reserve Bank of India in a reply to RTI application has informed that no steps
have been taken for the introduction of showing the increase in investor con-
Sharia-compliant mutual funds in India. fidence. "Inflows in equity mutual
RBI said the Government of India had fund schemes have been robust of
late as investors chase higher returns
sought its comments on the launch of
in the wake of lower yields from fixed
Sharia-compliant mutual funds by State
Bank of India. income instruments and poor perfor-
mance by realty and commodities
The RBI submitted its reply the same (gold)," Bajaj Capital CEO Rahul
month, it said. The Islamic or Sharia-com- Parikh said.
pliant financial system is based on the prin-
ciples of not charging an interest on deposits, as it is prohibited under Islam. "Besides, the higher inflows can be
attributed to the shift of flows from
"The Reserve Bank of India has not taken any step for introduction of Sharia- income funds and money market
compliant mutual funds in India," the reply said. The State Bank of India in 2014
funds to equity, equity-linked saving
had announced the launch of the same. However, it was deferred to make it a
schemes (ELSS) and equity-oriented
better and more attractive fund in the future, according to an official intima- balanced funds, due to low yields on
tion. H Abdur Raqeeb, General Secretary, Indian Centre for Islamic Finance - an
such segments at present. A year
NGO trying to introduce members of the Muslim community to the Sharia-com-
back, they were higher, a gap of al-
pliant banking system, said the initiation of such special mutual funds for a se- most 75-125 basis points," he added.
lect group of people would be a much-desired and welcome step.
Parikh further said the spurt in in-
"It is a misconception that Sharia-compliant mutual funds are beneficial to a
flows in equity schemes can also be
particular community. These funds will benefit the economy and ensure finan- linked to rise in new issuances or New
cial inclusion of those who avoid such investment for religious reasons," he said.
Fund Offers (NFOs) during the quar-
Raqeeb has been coordinating with various government and regulatory authori- ter under review as compared to the
ties for the introduction of the Sharia- complaint banking system in India. "When year-ago level and optimistic inves-
the launch of Sharia mutual fund was announced by SBI, some of the gulf coun- tors' sentiments. Money raised from
tries were very enthusiastic for investment. It is high time the RBI and the fi- NFOs focused on equity schemes was
nance ministry instructed SBI to relaunch the same," he said. at Rs 4,908 crore in April-June 2017,
SBI had rejected an RTI application seeking details on the relaunch of Sharia- much higher than Rs 173 crore gar-
compliant mutual funds , saying the "query is vague and not specific". nered in the same period last year.

BANKING FINANCE | AUGUST | 2017 | 21

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