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Funds welcome pension reforms

Our Bureau

KOLKATA, Feb. 28

THE Union Budget is a major booster for asset management companies that are willing to venture into pension funds.

Mutual funds today welcomed the Finance Minister's announcements on furthering pension reforms, which are expected to bolster their plans for this particular segment. In particular, the proposal to establish a separate regulatory authority for pensions is being seen as an important move.

Fund houses, felt Mr Sanjay Sachdev, CEO of IDBI-Principal MF, would now be able to roll out pension products provided proper guidelines are laid out. The Budget has done its bit to underline the significance of long-term savings in individual retirement accounts, he added.

MFs also underlined the need for quick follow-up action. Mr T.P. Raman, MD of Sundaram MF, urged the Government to bring together a pool of professionals to spearhead the pension process. Such professionals must develop a suitable road map for reforms, he noted.

Mr Dhiren Kumar, Head of Value Research, too hoped that the authorities would not wait very long to initiate real action on this front — something that weighed down on private-sector insurance companies.

As for tax sops, funds generally felt that the exemptions (dividends and long-term capital gains) are a positive step. A section of them, however, observed that the sops would not bring about extraordinary changes in the months to come.

Mr Kumar, for instance, pointed out that not too many investors would be willing to lap up dividend plans of equity schemes. "Many would still root for growth plans, and to that extent, this would be a case of much ado about nothing," he maintained.

Investment circles, meanwhile, felt that not enough has been done for followers of Unit Trust of India, the dividend distribution tax exemption to UTI-I notwithstanding. The Budget presented a major chance for the Government to empower UTI investors further, it was pointed out.

Overall, MFs felt that the Budget would help bring funds closer to the individual investor. "At the end of the day, it should channelise more household savings into the capital market through mutual funds," Mr Krishnamurthy Vijayan, CEO of JM MF, told Business Line, adding that investors' attitude on equities for the long term should improve in the process.

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