The Securities and Exchange Board of India (Sebi) has proposed to do away with the "entry load" fee for investors if they buy mutual fund schemes directly from fund houses.
A Sebi concept paper put out today for feedback from the public said investors buying mutual fund products need not pay entry load for applications filed online or through collection centres of asset management companies (AMCs).
Mutual fund houses generally charge fees from investors as "entry load" to pay distributors' commission. If implemented, this proposal would be a severe blow to the distribution business, since it would encourage investors to buy directly from AMCs. Distribution channels play a major role in popularising fund schemes and making them accessible for investors.
Industry executives say the move may be designed to promote online transactions. "There is a need for distribution channels and online platforms to co-exist. As we move towards an environment of paperless transactions, this is a much-needed step," said Jayajit Bhattacharya, chief marketing officer, UTI Mutual.
"It is good for those who can take decisions themselves and do not need a financial advisor. But there is a flip side for the distribution business. We will study and formulate our response to the Sebi," said A P Kurian, chairman, Association of Mutual Funds in India.