The Hindu Business Line : Mutual funds seek level playing field in ULIPs

Mumbai, June 12 Mutual funds are not happy with the way the existing regulations are tilted in favour of the Unit Linked Investment Plans (ULIPs) offered by insurance companies, compared with the mutual fund schemes, according to Mr U.K. Sinha, Chairman of UTI Mutual Fund.

“We have already taken it up with the Government and the regulator, but haven’t got a response from them. We are saying that there should be similar regulation for similar products,” said Mr Sinha, who is also Chairman for the CII Mutual Fund Summit 2008, which is scheduled for June 18.

The summit will discuss regulatory and policy matters, ways of sustaining growth as well as its vision and road map for the period up to 2015, he said. “There are vastly different regulations for insurance ULIPs and mutual fund ULIPs. If I offer a ULIP, I can only pay you as distributor 2.25 per cent, while he can offer as insurance company 60 per cent in the first year,” said Mr Sinha.

‘Many disparities’

Besides, there are many other disparities between the two, he said: “ULIPs are vastly loaded in favour of the insurance companies. Disclosure requirements, publicity and advertisement, KYC norm requirements etc are all different for mutual fund and insurance companies.”

There is a High-level Co-ordination Committee (HLCC) on capital and financial markets, which meets quarterly to discuss such issues that fall in the realm of many regulatory bodies, but it is not known whether HLCC discussed these issues with IRDA and SEBI, say mutual fund officials.

Amidst the volatility in the capital markets in 2007-08, mutual funds in India have registered 62 per cent year-on-year growth. Moreover, despite the turbulence in the market, mutual funds have not faced any major redemption pressure, a sign of growing maturity of the investors, the officials point out.

“We are happy that industry has grown fast, but even in the current market scenario, the industry will grow. What may perhaps change is the composition of the asset classes in which investors will come in,” said Mr Sinha. More and more investors in today’s market prefer balanced products or debt products; FMPs have become very popular.

Scope for growth

“We are also noticing that SIPs are going to be more important, so we don’t see any reason as to why there should be a slowdown in the growth of this industry.”

“If you look at certain broad parameters compared with the rest of the world, then our industry is heavily under-penetrated, said Mr Sinha adding, “In a situation like this growth will happen.”

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