The Hindu Business Line : Capital-guaranteed products: AMFI finalising guidelines

THE Association of Mutual Funds in India (AMFI) is studying and formalising guidelines to offer capital-guaranteed funds in India. AMFI has set up a committee headed by Mr Naval Bir Kumar, Managing Director, Standard Chartered Mutual Fund.

"These kind of products are very popular in countries such as the US, UK and Hong Kong. It is ideal for risk-averse people and retirees," said Mr A.P. Kurien, Chairman, AMFI.

The committee would study various issues like who would guarantee the capital and what percentage should be guaranteed to investors.

There are also issues of whether it should be an open-ended or close-ended fund. "We must also figure out whether the net asset value would be guaranteed or should it be restricted to the face value," said Mr Kurien. Most fund houses are keen on launching capital-guaranteed products as they feel the thrust of retail investment would be high in this category.

The Securities and Exchange Board of India has received applications from various funds about launching this product category.

"In India, unfortunately, there has been a bad experience with capital-guaranteed products and so this time around, we want to ensure that the guidelines are watertight," said Mr Kurien.

The committee also includes Mr A.K. Sridhar, President, UTI Asset Management Company Ltd.

The recommendations of the committee would be vetted by the AMFI management committee.

These would be forwarded to SEBI, which would make the necessary changes in regulations, said Mr Kurien.